The time to renew health benefits plans
is upon many businesses. With all the
cutbacks and troubling economic news employers have had to contend with
lately, the option of varied benefits choices
is a welcome one. The variety of plan structures and additional programs that exist
allow employers and their employees to
take greater control of a system where costs
have historically been experiencing double-digit increases for some time now.
“When business owners face a health benefits renewal with an increase of 10 percent,
even 20 percent, what can they do?” says
Rob Wilson, president of Employco Group.
“Neither the business owner nor the
employees have discretionary dollars for
that now.”
Smart Business asked Wilson about ways
to lessen the impact of rising benefits costs
by offering employees more choices.
How can business owners approach open
enrollment season?
Employers can decide to absorb premium
increases if they’re in the financial position
to do so. If there’s absolutely no room in the
budget for an increase in premium, they
may consider passing it along to the employee. Another consideration may be to split
the increase between the employer and
employee so both parties can shoulder the
burden.
Employers can also quote other insurance
carriers. It is typical in the industry for carriers to have different sales strategies,
depending on where they are in the business cycle. Premiums may be higher at certain times to increase revenue and lower at
other times to obtain more market share.
Since each carrier has its own approach, it
may be possible to find the same coverage
at lower premiums if you take the time to
look. It is a good idea to compare rates with
different carriers at least once a year.
What are different plan structures to consider?
It’s always beneficial to consider different
plan structures whether you’re staying with
the same carrier or switching. Do a comparison between a preferred provider organization (PPO) plan and a health maintenance organization (HMO) plan or consider offering both.
Conduct a thorough evaluation between
plans in terms of co-pay, deductible, co-insurance, prescription drug card and pick
the plan that’s best suited for your group and
budget. You may be able to significantly
reduce your premiums by increasing your
deductible, co-pay, co-insurance and/or prescription drug card.
Keep in mind employers have the option
to review their policies every year before
renewal so changes are not permanent and
may just be for the upcoming year
Aside from the traditional PPO and HMO
plans, are there other nonconventional
options that can be considered?
The health savings account (HSA) is
becoming more popular. It’s a high-deductible plan, so typically the premium
would be lower. Other benefits of HSAs are:
- Tax deductions when individuals contribute;
- Tax-free withdraws for qualified medical expenses;
- Portability — the account belongs to the
individual.
Another option to help employees with
health-related expenses is a flexible spending account (FSA). An FSA account allows
employees to put away pretax dollars that
can be applied toward employee-chosen
medical expenses such as premiums, co-pays, deductibles, prescriptions, over-the-counter medicines or even day care.
For example, if your employees pay $500
toward health care premiums, deductibles,
etc., using an FSA, they can use pretax dollars instead of after tax dollars. That equates
to a tax savings of $178 for every $500 of premiums paid.
Are there options specifically for small
businesses?
Small to midsize businesses may choose
to look into industry associations or partnerships with human resource organizations (HRO). By joining an HRO, businesses
that might otherwise be too small to obtain
competitive pricing can now get the same
buying power as bigger companies. When
an employer joins an HRO and bands
together with all the other companies comparable in size, the number of the group
increases exponentially to hundreds or
thousands of employees. The buying power
now lies in the hands of a much bigger pool,
which, to insurance carriers, is more attractive. The pricing may be more competitive
through an HRO than on a stand-alone basis
since the insurance is bought in volume at a
reduced rate.
How should employers communicate with
employees about plan changes?
Employers need to communicate honestly
with their employees during open enrollment time, especially if there will be
changes in the benefits plans. If, due to the
decrease in revenue, the existing PPO plan
has to be changed to a HMO plan or the
deductible increased, reassure the staff that
these changes may not be permanent.
ROB WILSON is president of Employco Group (www.employco.com), a division of The Wilson Companies. Employco handles
human resources outsourcing for 400 small and medium-sized Midwest companies. Reach him at (630) 286-7345 or
[email protected].
