A: Of course, you are not the only entrepreneur who feels this way. Health insurance premiums have been a big problem for small business for some time, and a recent survey I saw indicated that premiums could rise another 20% in the near future. Yet there is no legislative relief on the horizon.
Making matters worse is the fact that, unlike some larger businesses, small businesses usually don’t have the capacity to handle significant healthcare-related cost increases. While a larger business may have the margins to be able to absorb such cost increases or the ability pass these expenses onto their customers, small businesses usually cannot do that. So what is the small business owner to do?
There are options, although none of them are all that attractive. Some are better than others, but in all honesty, too many options for reducing health care costs relate to cutting benefits or shifting costs onto your employees. While that may help you keep costs down, it doesn’t make for a happy workplace.
The first and easiest thing to do then is shop around. For example, www.ehealthinsurance.com is a good site for comparing health plans. Also, speak with your insurance agent. The plan you bought a few years ago may have cheaper alternatives today. By shopping around, you can compare quotes for scores of different plans.
Beyond shopping, here are some other ways to reduce your health care costs:
Cut out the extras: If your plan offers dental and vision for example, you may want to consider cutting those. Your employees will still be covered in the areas where it really counts. No, I certainly do not enjoy advising you to cut employee benefits, but I also understand that health care costs are a major concern for many small businesses, and cutting benefits is better than cutting jobs.
Increase visit co-pays: The higher the co-pay for your employees when they visit a doctor, the lower the premium.
Increase prescription co-pays: Similarly, by increasing the amount your employees pay for their prescriptions, you can reduce your premiums.
Create a Health Savings Account (HSA): HSA are like medical IRAs. Pre-tax dollars are deposited into these accounts and the earnings are tax-free while sitting in the account. HSAs must be created in conjunction with an IRS qualified “high deductible” health plan. What is a high deductible? It can range from roughly $1,000 for an individual upwards of $10,000 for a family. Once the amount saved in the MSA reaches these levels, the employee can use these pre-tax dollars to pay for what is typically a much lower cost health plan.
HSAs are a relatively new option and have several things in their favor. They lower your premium. The savings for your employee are tax-deductible and earnings are tax-free. Medical expenses paid out as a result are tax free. And, upon a disability or the age of 65, the funds saved can be taken out and used for anything, without penalty (although taxes will finally come due at that point.) To learn more, go to www.hsainsider.com.
Join a health purchasing alliance. This is another recent phenomenon that can reduce your premiums while offering employees options. Here, instead of joining one health plan, you join a ready-made alliance of many health plans all of which are being jointly administered. Because they are all competing for your healthcare dollars, you get the best possible prices, and are able to shop for various coverage options under one roof.
Check out association options: Your business may be eligible for a discount from an association. For example, the California Bar Association sends me healthcare plan options every year.
Whatever you choose to do, it is important to know that employees consistently rank “health care benefits” as the most important extra benefit they get from employment. So as you make your choices, you must weigh carefully your need to reign in costs against your employees’ needs for adequate health care.
Today’s tip: Here’s a good trick: Once a year, write a letter to your customers, thanking them for their patronage, giving them a discount on something, and telling them that you are now offering some new product. You may be surprised how many orders you get for the new thing.