According to a recent United States General Accounting Office report, nearly half of all domestic workers receive employee benefits. Those benefits — including paid leave, retirement insurance income and health insurance — now account for 70 percent of total employee compensation. Health insurance costs to employers have skyrocketed in the period from 1991 to the present.
“Employees don’t understand that, while they may contribute $25 each pay period for health benefits, their employers contribute may $250 per pay period,” says Robert W. Fisher, senior vice president of Sky Insurance, a division of Sky Financial Group.
Despite the costs, the availability of health insurance benefits factors significantly in a company’s ability to attract and retain a quality workforce, Fisher says. Companies must find ways to meet their employee health insurance obligations cost effectively, he adds.
Smart Business spoke with Fisher to learn how business owners and managers can control costs and still offer attractive health insurance benefits to employees.
How can employers choose among health coverage options to remain cost effective?
Companies do have options in providing health insurance, life insurance and dental and vision insurance to their employees. They can offer traditional group coverage or high-deductible health plans coupled with Health Savings Accounts (HSAs). HSAs allow employees and employers to set aside pre-tax dollars that may be used to cover deductibles and other health-related expenses not covered by the underlying policies. Unused funds carry over from year to year, and may be taken by employees upon retirement to pay for medical expenses.
A good broker who knows the medical marketplace can help employers navigate the market. The broker will meet with the employer and discuss their specific needs, in order to decide which plans provide appropriate coverage.
How can employers control costs while choosing the most appropriate plan?
There is no silver bullet. Costs are determined mostly by how much employees are using the plan, as well as the demographics of the employee population. As a result, most employers consider cost-reducing options, such as raising deductibles or increasing prescription co-pays. The new high-deductible health plans, coupled with HSAs, are designed to control cost by providing employees with the tools they need to make better, more informed, health care buying decisions.
Can controlling eligibility help contain costs?
Companies can control employee eligibility, but many insurance companies require that employers cover 60 percent to 75 percent of their employees in order to qualify for group plans.
How do employee wellness programs affect insurance costs?
Typically, 20 percent of a company’s employees account for 80 percent of the health insurance costs due to large claims related to catastrophic health conditions. Most of those conditions are lifestyle driven.
Company-sponsored wellness initiatives — smoking cessation, weight counseling, nutrition counseling, incentives for regular physical exams, vaccinations for dependents, and recommended medical screenings — are things all employers should do. However, they won’t see an immediate reduction in health benefit costs. That will happen over time as employees adopt healthier lifestyles.
How often should employers review their health benefit packages?
Every year. The review should examine the current plan and compare it to other plans in the marketplace to make sure the coverage is still meeting their needs. It is not recommended that employers change plans annually, but a thorough review is recommended at least annually.
How can employers communicate benefit information to employees?
Health and wellness information in employee newsletters is useful. Also, many companies are now using Internet-based communication tools to educate employees on benefit and health care-related issues. New companies are also providing coaching services to help employees become better health care consumers.
Are there other new strategies employers can adopt?
One of the new cost control tools is to provide incentives for employees to enroll dependents in other coverage when available through their spouse’s employer-sponsored plan. In this case, the couple decides which of them will include dependents on which employer’s health plan.
How will employer health plan benefits change in the future?
In the next five years, employers may probably adopt plans with higher deductibles, and there will be more use of HSAs. As employees understand the costs and realize they can make contributions to HSAs that accumulate toward retirement, they may have incentives to use benefits wisely and engage in lifestyle changes that promote wellness.
ROBERT W. FISHER is senior vice president of Sky Insurance. Reach him at (330) 492-3373, or [email protected].
