Running for Cover
Should you eliminate health coverage entirely or limit it to a few key employees?
If you're asking yourself this question, you're not
alone. The percentage of small businesses offering health insurance
fell from 69 percent in 2000 to 60 percent in 2005, according to a
September 2005 Kaiser Family Foundation/Health Research and
Educational Trust survey. Companies cited high premiums and
workers' access to other coverage as reasons to nix
coverage.
But is it better to eliminate coverage for everybody, or keep it
for a few? Either way, bruised morale could become an issue:
Workers still rate health insurance as the most important benefit,
according to a 2005 study by Employee Benefit Research Institute, a
nonpartisan Washington, DC, group that researches benefit programs.
"If you've got talent you want to keep, [eliminating
coverage] may not be the best strategy," says Nan Andrews
Amish, founder of Big Picture Healthcare, an El Granada,
California, health-care consulting firm. "Employees care about
health insurance."
Still, offering raises in lieu of health coverage, instituting
slight pay cuts to keep health coverage or switching to a
high-deductible plan are all options. To employees, "a little
health coverage is better than nothing," says Richard L.
Kaplan, a professor at the University of Illinois College of Law
and expert in health-care financing. If you decide to cover only
key people, have an attorney make sure your changes aren't
discriminatory and will be acceptable to the IRS come tax time.
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