Although not forced to offer it, many small business owners view employer-provided health benefits as an absolute must. Current employees appreciate the gesture and take it into consideration when weighing their long-term options, while many prospective employees see it as a deciding factor when multiple offers are on the table.
Unfortunately, other important factors come into play — most notably, cost. Many small businesses that already provide medical benefits are worried about the rising price tag. While average annual premiums rose 4 percent from 2014 to 2015, workers’ wages only increased 1.9 percent and inflation actually declined by 0.2%, according to the Kaiser Family Foundation’s 2015 Employee Health Benefits Survey.
Considering the desire to provide health insurance benefits, but also taking into account heightened prices, owners and managers are looking at a variety of tactics to save money on small business health benefits.
High-Deductible Policies With Health Savings Accounts
Small businesses that contribute to Health Savings Accounts enable their employees use pre-tax money to cover medical costs. HSAs roll over from year to year and can be funded by employees or the company.
Unfortunately for employees, HSAs often are associated with high-deductible policies. High-deductible policies come paired with low monthly premiums, making them a good fit for individuals who don't anticipate having many medical expenses.
Reducing Insurance Vendor Payouts
Beyond HSAs, there are other ways to minimize insurance vendor payouts — and ultimately slow the influx of your company’s premiums. For example, wellness programs and initiatives allow small businesses to creatively save money, with the added benefit of showcasing key company values. A business might choose to reward gym members, nonsmokers, healthy snackers, or employees who attend an information session.
Some companies also save money on health insurance benefits by offering disease management programs, staffed by nurses and provided by insurers or third-party providers. These programs help employees better manage and treat chronic illnesses — many of which represent a significant share of an employer’s healthcare costs.
According to one study, “disease management reduced healthcare costs by $136 per member per month, driven by a 29% reduction in hospital admissions.”
Using the Federal SHOP Exchange
Some companies save time and money through the Small Business Health Options Program (SHOP), a federally provided group market health insurance exchange where employers can find lower-cost group plans that offer tax credits. A few of the biggest boons of SHOP are control, flexibility, and ease of use. The entire SHOP sign-up process is online.
Still, involvement has been tepid. The Government Accountability Office estimated SHOP will likely fall quite short of its 2015 target of 2 million signups.
In some instances, the best insurance benefit options are outside-the-box options — although often there are key drawbacks, too. Direct primary care enables physicians and small businesses to work together to provide more affordable preventive care. However, this model by itself doesn’t adequately address potential high-cost emergency situations.
Another unique option is purchasing cooperatives, which unite small businesses in hope of boosting their bargaining leverage against insurance vendors.
Defined Contribution Health Plans
One of the most popular ways that small businesses save money on health benefits is through Defined Contribution Health Plans. Decision-makers are discovering that directing employees to select their own right-sized medical coverage through the Health Insurance Marketplace opens up opportunities to improve benefits, lessen hassles and reduce costs.
Once employees have chosen their insurance policies, a small businesses can set up an allowance program to reimburse those individuals for their health plan costs.
Cost is top-of-mind for any small business that offers health insurance benefits. There are many opportunities to creatively and strategically save money on health benefits, including through the use of a Defined Contribution Health Plan. Review your options before selecting a solution that fits your company’s needs.
What questions do you have about saving money on health insurance?