No matter who you talk to in the equipment or contracting business, health insurance seems to be one of the top five on every executive's hit parade. Everybody is looking for that silver bullet to allow them to control health insurance costs. Yet, they still wind up with the same 20% increase every year.
So is there something a company can do to reduce the burden of health insurance? Are there acceptable plans available for small companies that fit into the annual budget? The answer to both questions is "yes" ? you do have the opportunity to cut your costs, and there are plans available for small companies, with more opportunities on the horizon.
Legislating cheaper coverage?
Even the government is trying to help you. The Small Business Health Options Program (Shop Act) HR 6210, a program to make health care more affordable for the self-employed and small businesses, is winding its way through the House. In summary, the bill would:
- allow small businesses to form state or national pools to spread risk;
- provide small businesses with a $1,000 tax credit per employee ($2,000 for family coverage) if they pay at least 60% of employees' premiums;
- provide a $1,800 tax credit ($3,600 for family) for the self employed;
- make insurance companies compete for the business;
- trim the administration costs, which could be 10% to 25% of the premium cost;
- ban the practice of rating insurance based on health status or claim history.
The thinking is if the plan moves ahead, it will do so after the elections. But I wouldn't hold my breath waiting for it. I'm having a hard time imagining which insurance companies are going to bid on a contract where they can't use your health or claim history to underwrite the coverage. In addition, Congress can't figure out how to fund Medicare going forward. How are they going to fund the $1,000 or $2,000 annual tax credits for the 47 million folks without coverage?
Lower cost options
So what do you do in the meantime? Believe it or not, people have been discussing ways to help you get coverage at a reasonable cost. It will take some effort on your part, and put some burden on your employees if they want coverage with a plan you can afford, but it can be done.
An alternative to HR 6210 is to form your own coalition plan with others in your industry, or with other companies in your area looking for coverage. While there are requirements for both employer and employee to make this work, you can normally offer more than one type of coverage through these types of programs.
The more participants in the coalition plan, the less you pay for administration costs and the more you spread the risk. Of course, you want participant companies to have a decent claim history, along with a corporate culture to keep health care costs at a minimum. A procedure would need to be set up to establish underwriting standards before a new company could be added to the program. There are brokers out there who can help you review this alternative.
Another option would be consumer-driven health plans where the employer pays the first dollars, giving employees the option of avoiding the second tier of dollars required to pay claims. These policies basically come in two forms: Health Reimbursement Accounts (HRA) and Health Savings Accounts (HSA), with the HSA acting as a sort of savings account the employee can take with them.
I like these plans and, if properly explained, believe they will reduce your costs because employees have an incentive to either avoid out of pocket expenditures or add to their savings account. Add in a Section 125 component and you wind up with quite an attractive proposition for employees. These types of plans can also be offered as one of the options of a coalition program.
Coverage for all seasons
I know many of you have a seasonal workforce and a core group. Offering health coverage to your entire workforce could prove to be very expensive.
To make health care work for both groups, consultants are dividing up your health insurance into two categories, with full coverage for the core group and limited coverage for the seasonal group.
Limited coverage premiums can be in the $150 to $200 a month range for a single person. In many cases, employees have the right to "buy in" to a more comprehensive plan if they so desire. There is no doubt this could work for many of you who find it impossible to offer a standard plan for all employees.
Even with limited benefits, there are now very affordable drug card options that take the sting out of co-pay provisions. Many of the chain stores offer programs for generic drugs at $4 per refill or a 90-day supply for $10. I'm not sure if this applies to all drugs, but they need to be generic at a minimum.
From a preventive standpoint, many insurers are placing attractive incentive programs in front of employees to get and keep them healthier. Programs that start "at the top" have shown progress in reducing claims. Smoking, high blood pressure and weight are some of the targets of these incentives.
There is no doubt the insurance industry is making progress toward making health care available to more Americans. Now is the time for companies to review their health insurance program to see if it should be more consumer driven or part of a larger group. In short, during a time when you need to reduce expenses, there is no reason you can't reduce your health care costs. ?
Garry Bartecki is director of dealer/distributor services at BDO Seidman, LLP of Chicago, as well as a consultant to the AED. He has also worked as an independent CPA and consultant to equipment dealers. He can be reached at (312) 616-4677 or firstname.lastname@example.org.