As President Obama’s health care law winds its way through the court system, and as the law is not yet due to take full effect for some time, small businesses are still left wondering what to do about ever increasing health care costs.
Making matters worse is the fact that, unlike some larger businesses, small businesses usually don’t have the capacity to absorb significant healthcare-related cost increases. While a larger business may have the margins to be able to pass such expenses onto their customers, small businesses usually don’t. So what are you to do?
There are options, although none of them are all that attractive. Some are better than others, but in all honesty, these days 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, so while I list a couple of those options below, they should be the options of last resort.
The first and easiest thing to do 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 reducing 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 and prescription co-pays: The higher the co-pay, the lower the premium.
Create a Medical Savings Account (MSA): MSAs are like medical IRAs. Pre-tax dollars are deposited into these accounts and the earnings are tax-free while sitting in the account. MSAs must be created in conjunction with an IRS qualified “high deductible” health plan. What is a high deductible? It can range from roughly $1,500 for an individual upwards of $5,000 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.
MSAs 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.)
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. No, none of these are perfect. 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 rein in costs against your employees’ needs for adequate health care.