Despite efforts to lower the cost of health care, small businesses are still struggling to cover the expense.
According to the U.S. Small Business Administration, small businesses pay premiums that are 18% higher on average than large businesses pay for the same coverage. What’s more, the SBA says small businesses have higher administrative costs to set up and maintain the plans and less bargaining power in negotiating with insurance companies.
On top of that, health-care reform, which was supposed to save small businesses money, hasn’t helped, according to John Cerasani, president of insurance brokerage Northwest Comprehensive. “The fact of the matter is health-care reform didn’t do anything to address the rising costs small business owners have,” he says.
Given these challenges, here are four ways to save on rising health-care costs.
A common misconception among small business owners is that once they take out health insurance they are locked in for a period of time. But according to Anthony Lopez, small business consumer specialist at eHealthInsurance, health insurance can be a month-to-month expense, which means you can change plans at any time.
“There’s a lot of different options,” says Lopez. He says to shop around at least once every six months to make sure you are saving as much as possible.
Offer High Deductible Plans
These plans have lower premiums, but require the plan holder to pay a higher out of pocket deductible, which could motivate your employees to take better care of themselves.
“High deductible health plans put the onus more on employees to take care of themselves in terms of managing expenses and costs,” says Cerasani of Northwest Comprehensive. While high deductible plans may face resistance at big companies, Cerasani says small businesses are increasingly turning to high deductible plans as a way to offset costs.
eHealthInsurance’s Lopez says that offering multiple plans, including one with a high deductible, will also save the small business owner money. And small business owners looking to offer medical, dental and vision may save more by bundling them together. “It reduces costs overall” by bundling it with one company versus using multiple carriers, says Lopez.
Another way to save: offering employees health savings accounts, which are like personal savings accounts that can only be used for qualified health-care expenses. Typically HSAs have lower premiums, says Lopez.
Consider HMO Plans
Health maintenance organization or HMO’s are plans in which prices are negotiated by the participating doctors and typically cost less than other plans. “Certain HMOs are extremely strong and have considerably lower premiums,” says Cerasani.
Tier the Amount of Contributions
Another thing small business owners can do to save money, while a little less traditional, is to tie the amount an employee pays for health care to their salary, says Cerasani. For example, employees making $20,000 to $45,000 would pay a certain amount while those making $45,000 to $60,000 pay more, and employees earning more than $60,000 pay the most.
“The higher compensated folks pay more of the employee contribution,” says Cerasani. “It saves the small business owner money to make the costs cheaper overall.”