A Healthy Way to Manage Health Care Costs : Aerotest employee’s success in developing a self-insured plan at the Irvine firm has led him to start his own consulting business.

Recently, an employee of Aerotest Inc. was faced with an astronomical medical bill after his young son, who has Down’s syndrome, was taken to the hospital with a spinal ailment.

But when the $64,000 bill reached the company’s claims office, Jonathan Bromberg, the head of the employee benefits office, practically flipped.

“I knew that it should have been lower than that,” he said.

Bromberg picked up the phone, called the hospital administrator and managed to haggle the cost down until it was within the range of the employee’s health insurance guidelines.

An unlikely scenario?

Not when a company is its own insurer of health care benefits, says Bromberg, who is the designer of the company’s self-insured health program.

His seeming legerdemain in managing costs for the Irvine-based aircraft engineering and testing company has worked such magic on the bottom line that he has decided to take his show on the road.

Bromberg’s success in developing a workable self-insured health plan at Aerotest led him to start his own consulting company--called, appropriately, the Claims Office--to show other employers how they, too, can save tens of thousands of dollars in employee health care costs.

The key to saving money, he said, is simple: Cut out the middle man.

“All insurance consists of three segments,” Bromberg said. “The cost of claims, the cost of administering the claims and the commission fees, which are the profits for the third-party administrator.”

In fact, he said, the profits for insurance companies can be so high that they can take up as much as 60% of a company’s health care costs. The best way to save money, he claims, is simply to do it yourself.

Teaching companies how to develop their own indemnity plan and handle their own health benefits is easier than it may seem, Bromberg said. The Claims Office promises to set up a workable system, including a software program, and teach employees how to be effective claims adjusters within a year’s time.

For the consulting contract, Bromberg said he charges about $15 per employee per month for a one-year period.

“We know (the self-insurance system) works because we’ve been doing it successfully since 1981,” Bromberg said. Other companies, he said, think “the risk is too great. But it’s not as risky as one would think. It’s mostly fear of the unknown.”

Faced with skyrocketing health costs, more and more employers are looking to self-insurance, in a variety of formats, to hold down costs, said Rebecca Morrow, editor of a newsletter published by the New York City-based Institute of Management & Administration Inc.

“Self-insurance is really growing in popularity,” Morrow said. “It can really be effective.”

In July, Morrow’s institute studied Bromberg’s method and contention that it saves as much as 60% without cutting back on benefits. The organization gave him glowing marks.

While there are hundreds of companies, mostly insurance firms, that offer self-insurance consulting around the country, the Claims Office is the only one of its kind in Orange County.

Morrow said that she was impressed by its uniqueness, especially Bromberg’s theory that a third-party administrator is unnecessary.

“It’s a very lean and mean program,” Morrow said.

In its analysis of Bromberg’s program at Aerotest, the institute found that Aerotest’s medical and dental costs, using a system much like Blue Cross, ran $2,472 a year for each of its 600 employees, far below the yearly $4,186 average per-employee cost in similarly sized and comparably insured companies.

The higher per-employee cost was cited in a report by benefits analyst Foster Higgins & Co. Inc., the international benefits consulting firm based in Princeton, N.J.

Bromberg said the article about his company’s benefits package prompted him in late summer to start up the Claims Office.

Although he has yet to sign any consulting clients, he said the increasingly strident controversy over spiraling health care costs--health care accounts for as much as 12% of the nation’s gross national product--is beginning to generate interest in his plan.

“There’s just so much talk about health insurance,” Bromberg said. “And this works.”

Accountability is the key to effective managed health care, as exhibited in the case of the worker whose child had Down’s syndrome, Bromberg said. Third-party administrators do not have day-to-day contact with employees and therefore are not as aware of special circumstances and needs as an employer would be.

The result of employer involvement is much more than that of saving money.

“You end up with a much happier employee,” he said.