Employers are the largest source of health insurance coverage for working Americans. They are well aware of the cost increases of late and what they could be facing in the future without some sort of reform, but are fearful that new mandates could create more burdensome costs.
Regardless of what changes are to come with a reform bill, employers will still need to find more sure and steady ways to reduce expenses while still offering employees coverage.
One answer could be to partner with a human resources organization (HRO). Working with an HRO gives small and mid-sized employers access to the options and buying power comparable to that of larger organizations. The offerings available through an HRO can make quality insurance a reality for any employer struggling with insurance cost increases.
Smart Business spoke to Rob Wilson, president of Employco Group Inc., a division of The Wilson Companies, to learn more about reform, cost control and what companies can do to ease their burden.
What are the most significant issues employers need to pay attention to as reform talks go forward?
There is a lot of ambiguity surrounding the talks of health care reform for businesses of all sizes. Even without solid details regarding the reform, business owners are bracing themselves for the imminent changes.
According to the new survey results by the Kaiser Family Foundation, since 1999, health insurance premiums have increased 131 percent, which is more than triple the rise in workers’ wages and four times the overall inflation rate.
Right now the cost to cover a family on average for employers is just over $13,000. The Business Roundtable has reported that, without any reform, employer health care costs will jump 166 percent to roughly $28,530 per employee per year by 2019. By then, total health care spending would reach around $4.4 trillion.
There is no way businesses can afford to pay that much. When you look at the increases over the past ten years, it’s extremely expensive. But the federal reform is not the right answer. Who can afford to pay for federally mandated plans and the bureaucracy associated with it? The proposed health care bills will be taxing individuals and business owners at a time when the businesses are struggling to survive.
One of the biggest issues that is not addressed in federal health care legislation is tort reform. It is estimated that the industry can save $80 billion if tort reform is addressed. Why are we not focusing on that?
If business owners are facing a possible increase of 166 percent 10 years from now, what can they do to address this now?
Companies are reacting to these increases by lowering the portion of the premium that they are paying as well as increasing deductibles and co-pays to try to bring down the cost.
According to a Kaiser Family Foundation Survey of companies with 200 employees or less, the percentage of covered workers enrolled in a plan with a general annual deductible of $1,000 or more for single coverage is now 40 percent, compared to only 16 percent in 2006.
How can employers keep the cost of health benefits down during these tough times?
Partner with an HRO to take advantage of group buying power.
Through the buying power of an HRO, businesses that may otherwise be too small to obtain competitive pricing for health care can now get the same buying power as large companies. When an employer joins an HRO and bands together with other companies, the number of the insured employees 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.
Look into flexible spending accounts through an HRO.
A Kaiser Family Foundation Health Study last year indicated that an overwhelming number of small businesses don’t offer flexible spending accounts or even the pre-tax premium option. If the monthly health insurance premium for an employee is $1,000 and the employer pays 50 percent, the employee can make his or her $500 monthly payment using pre-tax dollars instead of after-tax dollars, thereby avoiding being taxed on this amount.
Both the employer and the employee save payroll tax dollars by utilizing flexible spending accounts, which apply pre-tax dollars toward employee-chosen benefits, including deductible payments, adult and child day care, eye/vision care and more.
By using these options, both the company and the employees save a considerable amount of money where, in this economy, every penny counts.
Rob Wilson is president of Employco Group Inc., a division of The Wilson Companies, which provides human resources outsourcing, staffing and insurance for 400 small and medium-sized Midwest companies. Reach him at (630) 286-7345 or firstname.lastname@example.org.