Low Cost Health Care Insurance
4 Methods to Reduce the Costs of Healthcare
by Matt Berkley
According to a recent study, the rising cost of health care is the most burning issue for entrepreneurs. Not only are increased premiums cramping profits, they’re making business owners question their businesses’ ability to attract and retain prime employees.
The survey, commissioned by Aflac, questioned a broad spectrum of small business decision-makers—70% of which indicated concern over their company’s ability to provide affordable health insurance coverage for employees. Two primary concerns included:
* Attracting and retaining employees, with 63% of respondents reporting that they are concerned about the company’s ability to provide a benefits package that will attract and retain employees.
* Nearly half agreed that they can’t attract and retain top quality employees without offering competitive health benefits.
How much does insurance cost these days? A report by The National Association for the Self-Employed (NASE) states that in 2005, premiums for employer-sponsored health insurance rose to an average of $10,880 annually for family coverage and $4,024 for individual coverage.
The bad news is that health benefits planning season is here. The good news is there are a few steps business owners can take to help ebb the rising tides.
Keep Up With The Times
“Maybe the biggest mistake is not reviewing and analyzing your insurance program on an ongoing basis,” says Scott Stream, owner of Stream Benefits Group. Health insurance programs are in a perpetual state of flux, Stream explains. The types of plans, the level of benefits, the coverage of specific types of treatment and the prescription coverage undergo constant scrutiny by insurance carriers with changes on an ongoing basis. “With the continuing changes in the industry,” Stream advises, “it’s important to research alternatives. Just because a certain plan worked in the past doesn’t mean it’s the best for the future.”
Get Proactive
Have an open dialogue with your employees about the benefits plan. Explain in no uncertain terms the cost of health care coverage and its affect on the company. Not doing so can cost you in the long run, says Sheelah Yawitz, president of the Missouri Merchants & Manufacturers Association. “Either the employer or preferably the health care insurance broker should meet with the employees and educate them on being an informed health care consumer; i.e., using generic brands and avoiding trips to the ER unless it’s a true emergency.”
A proactive approach is the driving force behind the recent trend of consumer-directed health care plans or CDHPs. Insurance carriers are implementing these programs with the goal of engaging the consumer to make better health care decisions, according to Steve Walli, president and CEO of United Healthcare of the Midwest. “What I would encourage employers to do is determine what they’re doing to help employees make better health care choices. A lot of what’s going on in health care is preventable. We’ve seen statistics that for chronic conditions, 50%-60% of the costs are avoidable due to behavior modifications or lifestyle choices.”
Consider A Higher Deductible
Health Reimbursement Accounts (HRAs) continue to be a popular option for employers looking to assume some of the risk on the front end, Stream says. Not to be confused with Health Savings Accounts (HSAs), HRAs are funded by the employer only. By paying a portion of the deductible, the original premium cost from the insurance carrier is reduced. The employer, Stream explains, is banking on the fact that most of the employees won’t optimize their deductible, thereby reducing the overall costs of insurance.
HRAs are more than high deductible plans, says Yawitz. And they can be customized to match your firm’s objectives. “There’s a great flexibility for the employer to allow roll-over of unused funds for later years. They can also allow funds to be used in retirement to pay for health insurance costs.”
Because small businesses will continue to pay more per employee than their larger counterparts for the same health care coverage, options like HRA plans are being welcomed to the table.
Says Walli, “A lot of small-business owners are thinking certainly in the short term that the HRA approach is the one they want to consider, because they’re going to have more control.”
Health Savings Accounts (HSA)
A Health Savings Account works like an IRA, except the money is used to pay health care costs. Participants must enroll in a high deductible insurance plan. Then, a tax deductible savings account is opened to cover current and future medical expenses. The money deposited, as well as the earnings, is tax-deferred. The money can then be withdrawn to cover qualified expenses tax-free. HSAs are an expansion of Medical Savings Accounts (MSAs). The employer, employee or combination of both can fund HSAs within the same calendar year.
The pros: Unused money can be rolled over and used in subsequent years.
The cons: The plan can only be used in conjunction with a high-deductible insurance plan. The first few months may be difficult for many employees until they get a chance to accumulate savings in their accounts.
Health Reimbursement Arrangements (HRA)
A health reimbursement arrangement is an employer-funded account that reimburses employees for qualified medical expenses. These plans can only be established by an employer for the employee.
The pros: Employers can utilize program to soften the blow of rising insurance plans.
The cons: Employees will forfeit any unused funds if they leave the company or die.
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