Options can reduce cost of employee health coverage

Health insurance premiums are up as much as 20 percent among Tim Lavin's clients, although, he says, increases in the 5 to 6 percent range are more common.

Nationally, according to a survey conducted by the Menlo Park, CA-based Kaiser Family Foundation and the Health Research & Education Trust, an affiliate of the American Hospital Association, Chicago, premiums for employer-sponsored family health coverage are up nine percent this year, to a per-employee average of slightly over $15,000. Of that, employers typically contribute just shy of $11,000.

“What I'm finding,” says Reggie Schwartz, a financial planner at Schwartz Financial Concepts in Naperville “is that business owners are tapped out. What they've tried to do is absorb some of the increases, and we've tweaked their plans accordingly. But there's no financial cushion left.”

That obviously complicates the health coverage decision. In today's economy, “Business owners want to hold on to revenue. They're reluctant to change anything,” says Lavin, president of The Lavin Insurance Agency in Schaumburg.

Although no one solution fits every small business, options do exist. The options can be confusing, however. “It's tough for a business owner to set aside the time to evaluate all this,” Lavin says.

One of the options both Lavin and Schwartz explore is the Health Savings Account. Linked to high deductible health plans, HSAs allow employees to pay out-of-pocket medical expenses with pretax income deposited in special savings accounts; for employers, the high deductible reduces costs. Because it's different, however, the HSA takes some selling.

“What I try to do,” Lavin says, “is convey the idea that there is a way around premium increases” in traditional health plans.

Lavin also encourages employers to consider self-funded plans, which, he acknowledges, work best for companies with “25-30 or more employees. There is a risk of unexpected large claims,” Lavin notes, “but partial reinsurance helps.”

Ultimately, the design and therefore cost of a health benefit plan “depends on how much the business owner is comfortable spending on the monthly basics,” Schwartz says.

She talks to employers about a strategic combination of group and voluntary benefits.

Dental and vision coverage are examples of voluntary benefits. Employers contribute to the group coverage, but employees pay the cost of the voluntary coverage plans.

“Employees are looking for add-on benefits,” Schwartz says. “Even when there are no raises, employees like the potential of (for example) vision plans that help with the cost of contact lenses or glasses.”

Schwartz also takes a close look at such options as HMOs, still around and still popular; flexible spending accounts; and doctors whose practices are “part of a full-service facility” where the economies of size and the availability of specialists in the same organization “offer good cost containment.”

Ÿ Jim Kendall welcomes comments at JKendall@121MarketingResources.com.

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