urance last March. "That's when we decided to pay for medical costs ourselves. We expect to save $35,000, and employees don't even see a difference."
Another reason companies are eager to try self-insurance, says Joel F. Levy, a partner in the New York office of the accounting firm of Coopers & Lybrand, is that fringe-benefit costs now equal about 40% of payroll, twice the 1950 rate. To make matters worse, health care costs are escalating dramatically. In 1982 alone, they jumped 11.9%, compared to a modest 3.9% rise in the consumer price index.
The inflationary pressures of Medicaid and Medicare, hefty malpractice claims, expensive new medical treatments, and the fact that people are living longer all contribute to the increasing costs. But so does business. "The group health insurance identification card," says Niels H. Nielsen, president of Princeton Management Consultants Inc., in Princeton, N.J., "has become like a credit card which allows employees and their dependents to spend money at hospitals, doctors' or dentists' offices, and drug stores."
With regular insurance, only 75% to 85% of every premium dollar goes to pay employees' medical claims. The remaining 15% to 25% is earmarked for a grab bag of other fees -- profits, administration, and risk and pooling charges. There is even a premium tax levied at the state level (usually about 2%) that is passed on to the customer by the insurance carrier.
With self-insurance, many of these charges are eliminated. Premium taxes, for example, are cut out entirely, and so is the profit or contribution to surplus. Administration fees continue, however, and there is the cost of stop-loss insurance to consider. Also, money must still be set aside as claims reserves (which differ somewhat from the reserves that an insurance company must set aside), but interest on those funds is paid to the company rather than the insurance carrier. In its 1982 fiscal year, Growth Enterprises pocketed nearly $1,000 in interest on its claim reserves.
The most extreme form of self-insurance is 100% self-funding. In such cases, companies pay all the claims and assume all the risks. But that isn't practical, even for the largest employers, because of the hefty medical claims that result from "catastrophic" illness.The best option for small and medium-size companies is limited self-funding, coupled with outside administration -- in short, the type of program in place at Growth Enterprises.
How large does a company need to be to benefit from self-funding? Robert P. Brook, director of Ernst & Whinney's National Alternative Delivery System Consulting Group, based in San Francisco, and Richard E. Freiburger, a vice-president of The Equitable Life Assurance Society of the United States, suggest that corporations should have 400 to 500 employees. But others argue that companies with as few as 100 workers can successfully institute a limited form of self-insurance.
Another issue for debate is how self-insured companies should handle claims. Companies can pay the claims themselves, hire an insurance company to pay them, or employ a third-party administrator. Small and medium-size businesses, experts agree, should not handle their own claims.
"This kind of work requires special expertise," says Nielsen of Princeton Management Consultants. "Employees have to be recruited and trained, and inevitably there is turnover. There [also] is the danger that employees who are handling the claims will be subject to pressures from their fellow employees to bend the rules. [And] there is the problem of confidentiality." Green of Growth Enterprises agrees. "We're not experts. There's no way I could look at a $12,000 hospital bill and determine if the charges are appropriate."
Which is best? An insurance carrier or an administrator? Green of Growth Enterprises, Tallman of Rosenbluth Travel, and Nielsen of Princeton Management recommend a third-party administrator. "You can establish a much closer working relationship with a third-party administrator. It's not a large conglomerate, like an insurance company," says Green. Notes Nielsen: "[Third-party administrators] do most of the things that insurance companies do -- but often better. They have staffs of claim specialists who in the insurance companies would be supervisors rather than clerks. Some use registered nurses as claims processors and doctors as supervisors."
The cost of employing a third-party administrator varies, but the key elements in the formula are the number of people participating in a company's health plan and the type of coverage provided. A company that covers 275 workers' medical, dental, and eye care costs most likely will pay more per employee for administrative services than a company with 400 workers and a more simple plan.
As a rule, though, fees are levied on a monthly, per-employee basis. Generally, companies with 50 to 250 workers pay $4.50 to $6 per month per employee, says Richard J. Cusack, a marketing consultant with C. W. Burke & Co., a third-party administrator in Philadelphia. Businesses with more than 250 employees usually pay a lower per-capita fee. Growth Enterprises pays $5 a month for each of its 190 covered employees.
Whether you hire an administrator or an insurance carrier to handle your medical claims, you should insist on timely, complete monthly reports. Additionally, ask for information on claims, eligibility, diagnoses, the length of hospitalization, costs, and providers (the names of hospitals, doctors, and dentists rendering services). "This information gives management the facts it needs to make decisions on how to tighten up costs," says Nielsen. "Even more significant, these data are among the most important facts needed to make objective decisions on what changes to make in stop-loss insurance and in plan design."
Also, consider using a 501 (c)(9) trust for your self-insurance plan, as Growth Enterprises did. 501 (c)(9) refers to a subsection of the Internal Revenue Code and is similar to a trust set aside for a pension plan. Money deposited in a 501 (c)(9) trust is almost always exempt from state premium taxes. More important, funds in the trust are deductible at the time they are deposited.
"One major advantage if a company goes the tax-exempt trust route," explains Ted Nussbaum, senior consultant in Coopers & Lybrand's New York office, "is that a company can use a 501 (c)(9) trust to accelerate payments to the plan. As we go into 1985, you can prepay your 1985 contributions. That way you get a double deduction in 1984 -- one for your 1984 contribution, and one for your 1985 contribution."
Finally, don't worry that employees won't like self-funding: Clearly, attitudes are changing. For example, a survey released last fall by Equitable and conducted by Louis Harris & Associates Inc. shows that the majority of Americans are willing to accept changes in their health care coverage that are designed to reduce costs. Specifically, 65% of those surveyed said it would be acceptable to require employees to pay part of their health insurance premiums; 58% would accept higher deductibles than they now have in their insurance policies; and 52% find it acceptable to require patients to pay a larger share of their medical expenses covered by health insurance.
"From the employee's point of view, it's really irrelevant as to how the insurance is funded," says Dennis B. McKoy, a vice-president at Johnson & Higgins, an employee-benefits consulting and insurance brokerage firm in New York City. "The employees' real concern is, Whar does it cost, and what's in it for me?"Bleach on carrots? Consumer question answered.
We asked Dr. Sheryl Barringer, Professor and Graduate Studies Chair in the Department of Food Science and Technology at The Ohio State University to respond.
The white film is the surface drying out. The carrots are peeled, which roughens up the surface and makes it dry out faster than unpeeled carrots. It is not chlorine.
We had a few questions in our comment section, asking if carrots are rinsed in bleach or chlorine.
Organic carrots are not washed with chlorine solution. Chlorine alternatives, including ozone solutions, are used on these. Non-organic vegetables, including carrots, are washed with a sanitizer, most likely chlorine and occasionally with chlorine alternatives (like peracatic acid, Prosan, or different combinations of organic acids and detergents). It is somewhat difficult to generalize because different manufactures use different approaches. However, it is reasonable to assume that if the vegetable is not organic, it most-likely has been sanitized with chlorine.
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