The spiraling cost of health insurance is a burden on all businesses, particularly SMBs (small- to medium-size businesses). Faced with double-digit premium hikes year after year, employers are struggling to find ways to contain health-insurance expenses. Here are a few tips to help you stretch those dollars.
1. Know your requirements. Before buying a health plan, make a list of the features you want it to provide. Stick to this list as you interview several vendors.
Do you want a full-coverage plan that includes routine office visits, or a less expensive catastrophic plan that covers major procedures in hospitals? Do you want to offer prescription coverage, vision care or dental? How large will the deductibles be for medical care and prescription costs? These decisions can be thorny as you struggle to balance the budget without breaking your employees' backs, but they should be made before you look for a plan.
2. Check providers' credentials. Consider lesser-known health insurance vendors whose premiums may reflect their lower position in the marketplace. But be careful not to get involved with a fly-by-night outfit. Check with your state insurance regulator to ensure that vendors are licensed to sell insurance, and examine their track records for complaints.
3. Consider an HMO. Generally, an HMO (health maintenance organization) will have lower premiums than a PPO (preferred provider organization) or an indemnity plan. HMOs are structured to minimize costs by emphasizing preventive care and reviewing the medical necessity of procedures more thoroughly.
4. Offer HSAs. An HSA (health savings account) is a payroll deduction savings plan that allows employees to allocate part of their pretax pay to a savings account that can be spent for certain medical expenses. An HSA can be used to satisfy health-plan deductibles with tax-free dollars. This allows the employer to offer a plan with higher deductibles and avoid paying FICA (Federal Insurance Contributions Act) taxes on the portions of payroll that are allocated to HSAs. HSAs can also be used for out-of-pocket expenses not covered by insurance plans, such as contact lenses, flu shots and over-the-counter medications.
5. Consider penalties for unhealthy behavior. A growing number of employers are charging their staffs more for health insurance if they smoke tobacco. Some businesses go so far as to make tobacco abstinence mandatory as a condition of employment. It is controversial whether such bans can extend beyond the workplace and working hours, but some employers still argue that they have the right to control out-of-the-office behavior.
6. Offer health education programs. A work force that takes care of itself translates into fewer insurance claims and lower premiums. Seminars emphasizing the benefits of healthy lifestyles can pay off in reduced premiums, less absenteeism and more productive employees. Sponsoring employee sports and fitness programs is another way to keep total health maintenance costs down.
Some employers offer cash payments or discounts on health-insurance premiums to employees who participate in weight-loss or exercise programs, or who enroll in programs to manage chronic diseases such as diabetes and asthma.
7. Join business associations. Membership in certain small-business associations often includes discounted group health-insurance offers. Shop around to see which associations in your area offer such member benefits and how their plans stack up against others.
8. Pay less of the premiums. As insurance expenses rise, employees are shouldering more and more of the monthly premium costs. This is the least desirable way to contain costs, but one that many employers are forced to choose.
The Bottom Line
The price of insurance will continue moving upward. It's important for a SMB to consider every way in which it can slow the rising tide.
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