This article was updated on March 26, 2012.
The U.S. spends more than almost any other country on health care, but we’re ranked nowhere near the top of the list in quality of care of quality of life. Clearly, something needs to change--and indeed, the U.S. Supreme Court is now weighing arguments around President Obama's health care reform law.
But how do we, as entrepreneurs, even start the discussion?
I am not a health care expert, but I can offer up my story as a small business owner. I can tell you what my company, Dero, is currently doing, why we’re doing it, and what needs to be done now.
We renew our health insurance policy every May 1. As renewal approaches, I hold my breath for the inevitable: How much will our premiums go up this year? For years, premiums climbed about 20% each spring. And each spring we had to consider how we would respond to these increases, and what effect it would have on our employees and the company. We want to provide the maximum benefit to our employees, but we also need to remain competitive.
In our decision-making process, we keep asking ourselves the same questions: What is fair? What is sustainable? What is the right thing to do? For years, my company simply swallowed the increase in rates.
Four years ago, we switched to a high-deductible plan, which has slowed the increases but not stopped them. An employee with individual coverage has a $2,500 deductible; family coverage comes with a $5,000 deductible. Employees can pay that deductible out of a savings account to which Dero contributes.
Dero pays a flat rate of roughly $2,200 per employee for their premium. For those employees that are single, do not have children, or have coverage through a spouse, that amounts to approximately 96% of their premium. About two-thirds of our work force fits this description. We also fund $2,400 of their health savings account, which they can use for healthcare expenses before they reach their deductible. In addition to the 4% premium outlay, these employees are only required to pay $100 a year towards their deductible if they max out their coverage.
Those that have spouses without coverage, those that have children, do not enjoy that level of coverage, obviously. Dero still pays $2,200 toward their premiums and $2,400 toward their HSA accounts, but they pay the rest. In my case, that means about an extra $500 a month in premiums and an additional $200 a month to fund the family portion of my health savings account. About half of the employees that use our insurance to cover other family members also have equity stakes in Dero. In theory, business owners can offer a separate class of coverage for themselves, but is that really fair?
The other added benefit of the health savings account is the fact that if the money in an individual’s account is not used, they get to keep it as part of their retirement savings. That has been a good motivator for people to weigh the cost and benefits of going to the doctor—at least until they max out their deductible, and face no financial penalty for going to the doctor as much as they want.
So what’s wrong with this system?
1. It’s a competitive disadvantage. For Dero, offering this level of health insurance benefits makes us less competitive than we otherwise could be. A long time ago, we made the decision that we would offer the best benefits we could as long as it was financially sustainable. And from a business point of view, we have to offer decent benefits, because we’re competing with much bigger companies who have more resources than we do.
2. It’s unfair to those who lose their jobs. Yes, Cobra is available, but in the case of our employees, that would mean that a person who was accustomed to paying only 4% of their premium suddenly is responsible for paying 100%--at a time when they are most vulnerable.
3. There are so many people around the country who are simply left out. People need to put aside ideology and focus on real results. The American system is far from the gold standard. Let’s let go of our pride and understand the best systems in other countries as we shape ours. And always ask the questions: What is fair? What is sustainable? What is the right thing to do?