Small business owners say the cost of health insurance is one of the largest business challenges, with the Affordable Care Act only increasing the resources needed to offer healthcare to employees.
How can business owners get a handle on the cost of health insurance and benefits? Here are six tips - from conventional to unconventional - to help.
1. Employee education
Employees may not realize the value in the benefits they currently have. If they're not using their benefits to the fullest, then your small business is not getting the most value out of your money. Educate employees on the benefits and how to use them.
2. Encourage preventive care and wellness
Make it easy for your employees and their families to stay healthy by promoting prevention. This can be done through education, wellness programs, and a company culture of health and wellness.
3. Focus on the most valued benefits
If you decide you need to eliminate some of your benefits, be sure to keep the ones that your employees care most about. Target your benefits for better efficiency and effectiveness instead of cutting based on cost alone. Consider which programs will have the most value to your employees and to your bottom line.
4. Evaluate a Consumer-Directed Health Plan (CDHP)
A CDHP is a health strategy that involves the consumer to make decisions about their health care. CDHPs encourage employees to make informed decisions and spend wisely - which can lead to lower costs for the company.
CDHPs come in various forms, but most commonly this means offering a high-deductible health plan paired with a spending account for out-of-pocket costs such as a Health Savings Account (HSA) or Integrated Health Reimbursement Arrangement (HRA).
5. Increase cost-sharing
Another strategy used by businesses of all sizes is shifting more of the costs of health insurance to employees. While this is a less popular strategy from an employee morale standpoint, it is a decision many businesses have made over the last decade. It is especially common for businesses to reduce contributions for family coverage.
6. Reimburse premiums, instead of paying for them
Many small businesses are transitioning away from employer-provided health insurance and choosing to reimburse employees for their individually-purchased health insurance plans. With this approach, the business controls all costs while providing quality health benefits to employees.
The small business simply sets the amount they can afford and provides employees health insurance allowances. Employees then use their allowance to purchase individual health insurance coverage and are reimbursed by the company, up to the amount available in their balance.
Over the past 15 years, the cost of group health insurance premiums has increased over 200 percent - far outpacing inflation and wages. Today, the average total cost to cover an employee is $6,251 a year for single coverage (2015) and $17,545 a year for family coverage.
Meanwhile, individual health insurance has become more accessible and more affordable. In many states individual health insurance costs up to 60 percent less for similar coverage.
As such, both the business and employees may save on cost of health insurance with this contribution strategy.
With the escalating costs of employer health insurance, small businesses must take actions - both small and large - to manage the cost of health insurance while meeting the benefit expectations of employees.
What strategies is your small business using to address rising healthcare costs? Leave a comment below.