Four Ways to Cut Small Employer Health-Care Costs
As the cost of everything from fuel to fry oil surges, so goes the cost of covering employees' health-insurance premiums.
The average annual premium for family coverage through an employer reached $15,073 this year, up 9 percent from $13,770 in 2010, according to an annual survey from health-care researcher the Kaiser Family Foundation and the Health Research and Educational Trust. For individuals, the average premium rose 8 percent to $5,429 in 2011, up from $5,049 last year, says the survey. In 2010, the average family-coverage premium rose just 3 percent, while the individual coverage premium gained 5 percent.
At a time when sales remain anemic and the prospect of a double-dip recession looms, rising health-care costs couldn't have come at a worse time for many of the nation's small businesses, says Bob Mirabile, president of AEC National Recruiters, a recruiting firm in Bayport, N.Y. Not only is the rising cost of health care preventing some employers from adding staff, some are just jettisoning the benefit entirely.
"Health-care coverage was a marketing perk used by companies as a 'value added' in recruiting a new hire for many years," he says. "But now many employers are opting out of [offering] heath care coverage for any new hire altogether."
Although insurers claim that premiums have risen because health costs have increased, many business owners blame the surge in premiums on the health-care overhaul. Prominent small-business group the National Federation of Independent Business, along with 26 states, yesterday petitioned the Supreme Court to strike down the entire law, claiming that it is unconstitutional.
But according to the survey from the Kaiser Foundation, only around 1.5 percentage points of the 9 percent increase in premiums stem from measures associated with the health-care law. Consumer advocates have suggested that insurers may be hiking premiums in anticipation of a 2012 provision that requires insurers to justify any price increases of more than 10 percent. The health-care law doesn't fully go into effect until 2014.
No matter the reason for the uptick in premiums, finding savings now might allow some owners to continue providing employees' coverage. Here are four ways to cut your company's insurance costs:
- Keep employees healthy. Just as older workers who tend to frequent the doctor more than their younger counterparts can cause a company's premiums to rise, doing the opposite -- that is, not using medical care as much or securing lower priced procedures instead of costly ones -- can help lower premiums. Some companies use wellness programs or discounted gym memberships to give employees incentives to make better health decisions.
- Ask employees to help cut claims costs. Small firms should ask employees to comparison shop when considering pricey procedures, suggests Mark Wagar, the president and CEO of Empire BlueCross BlueShield in New York. For instance, getting a podiatrist to fit you for orthopedic shoes doesn't have to take place at the most expensive shop in town. People might consider comparison shopping if they knew your business -- and their own health-care coverage -- depended on it, he says. "The point is to not avoid the MRI if you need it but the wide-ranging costs one hospital [or doctor] can charge vs. another," Wagar says.
- Consider 'working spouse carveouts.' For employees with working spouses, consider a policy that would encourage them to take advantage of the other companies' plans, Jeffrey Kraut, an independent certified public accountant from Commack, N.Y., told Entrepreneur.
- Switch to a higher deductible plan. Moving into plans that have higher deductibles can certainly help you save on costs, but they aren't always popular among employees, says Wagar. To make such a switch more palatable for employees, consider tying in a health savings account, or HSA, which is a type of saving account that allows employees to use pretax dollars to pay for medical expenses, which you also help fund, he says. The money in those accounts can be put toward medical expenses like co-pays and deductibles. And if employees don't spend anything, funds can accumulate over time and help pay for medical expenses well into the future, too.