Does anybody understand the health insurance landscape any longer? I don’t think so, and as we get closer to 2014, it gets even more confusing. All we really know is health insurance is expensive and getting more expensive by the year. This large, illusive cost is out of control, yet is something contractors have to address.
Many contractors are finding more work and are hiring back workers who were laid off, or new workers to handle the additional business. When you add more people, here you go again with the insurance issues. It is a never-ending battle.
If you hire union workers, you are covered, though with a very expensive alternative. Non-union shops may still incur an expense, but have more flexibility in designing what they offer employees. Yet, even if you offer a simple plan and an employee is laid off again as work slows, there is the COBRA issue to deal with.
Evaluate what you need to offer
Putting cost aside for a moment, you need to consider what to offer to attract the talent required. This may not pertain to everyone, but it does more often than not when you need someone now for a job that will be starting shortly.
You do have the option to avoid the hiring process altogether by subcontracting work to others and keeping the head count to a minimum. So let’s assume you do everything you can to avoid hiring, but still want to offer insurance to employees. If that is the case, the first thing you should do is check with your peers to see what they’re offering. If you are going to offer health insurance, you want to at least offer benefits in the same ballpark.
Next, determine what you can afford to pay and how much employees have to contribute. The type of plan you pick, along with custom perks added to the plan, will determine what you have to pay. To keep this cost to a minimum, it is a good idea to survey your employees to see what they expect from a policy. Who knows? You may be offering more then you need to.
Keep in mind that on average, employers pay $4,000/month and employees $900 for single coverage and $9,700 and $4,000, respectively, for family coverage. Can you afford it? Can your employees afford it? If not, on to Plan 2 to reduce the cost.
Plan 2 may mean no group policy at all. Maybe you have employees buy individual policies where you reimburse them a fixed amount for coverage. Personal policies are covered by state law and allow more flexibility regarding coverage and cost.
Assuming you only want to cover “permanent” employees while trying to avoid COBRA situations, you may want to set the standards for admission to the plan to avoid insuring part-time people. For example, maybe employees have to wait six months before they can join the plan.
Alternative plan options
Once you decide what you can afford and have a couple of plan designs on the table, you have to decide which plan to take, and then educate employees how the plan works and the costs for which they are responsible. It may be a PPO or an HMO, which is less costly. It may be a health reimbursement arrangement (HRA) or health savings account (HSA), which encourage employees to watch the spending before they reach the total deductible provided by the company.
In most HRA/HSA plans, the company pays the first portion of the deductible. But I did see one plan where employees cover the initial out-of-pocket costs, and only after they reach their maximum out-of-pocket deductible did the company portion kick in. Some inexpensive perks that can be added to make the plan more attractive to employees might be term life insurance, vision coverage and long-term care coverage.
The point of this exercise is to spend a minimum amount of insurance dollars using plan design and education, while at the same time offering a plan that meets most employee needs. It sounds easy. And it may be if you survey your peers to see what they are offering, and work with a competent broker who will help you design a program in your price range.