Are you subsidizing your competitor by paying his employees' health benefits? You might be if you offer medical coverage to your workers' spouses.
5. Careful who you're covering
Are you subsidizing your competitor down the street by paying his employees' health benefits? You might be if you offer medical coverage to employees' spouses. That's why more small businesses are eliminating coverage for spouses and family members if they can get insurance at the spouse's workplace. A business, for example, might require an employee to pay the entire premium for her husband if he is eligible for coverage at his job. Four out of 10 companies in the Kaiser report say they're very or somewhat likely to boost employee contributions for family coverage in the next two years. Clearly, this is not going to make your employees happy. "But it's about survival," says Joe Martingale, national leader for health care strategy at benefits consulting firm Watson Wyatt. "It's certainly better than terminating coverage altogether."
Look at whom you're covering in-house, too. Adams at Mountainview Mushrooms found that annual turnover at his company last year ran about 30%, or 36 people, half of whom left within the first six months. New employees were eligible for benefits after three months, which meant that the business was paying two to three months' worth of premiums for workers who soon left. By extending the probation period to six months, Bart estimates the company will save about 3%, or $8,000, in health care costs this year.
6. Be your own insurer
With a self-insured plan, your company assumes responsibility for the costs of your enrollees' medical claims. In most cases, a self-insured business purchases stop-loss insurance to limit its financial liability to a certain dollar amount in case an employee has a catastrophic claim, such as cancer or an organ transplant. For example, you might have a $45,000 cap on claims per person a year and a $1 million cap on total claims. If you exceed either amount, the stop-loss policy pays the remainder.
The Employee Retirement Income and Security Act, or ERISA, exempts self-insured plans from consumer-protection regulations and state-mandated benefits, which can lower the cost of premiums. Employers also are not required to pay tax on premiums. But before you go and cancel coverage with your insurer, understand that self-insured plans aren't for everyone. A self-insured company spreads the risk of costly claims across its work force. That's a reasonable gamble to take if you have at least 100 workers. Fewer than that, however, and one big claim could break the bank.
That said, self-insurance can result in dramatic savings. Slammed with premium hikes of 20% or more for three years in a row, Quantum Imaging & Therapeutic Associates in Harrisburg, Pa., was shelling out $100,000 a month last year to insure 120 people with two PPO plans and one major medical plan, says Scott Deardorff, the company's accounting manager. Deardorff obtained two years' worth of claims records and discovered that Quantum was paying much more in premiums than the cost of its claims. So last November the company switched to a self-insured plan and sliced its monthly costs to about $65,000, a 35% savings. Its stop-loss insurance kicks in if Quantum exceeds more than $50,000 in claims for a given person, or $1.2 million in total claims, a year. Under the program, employees can choose between a major medical plan and a benefits-rich PPO that has no deductible if they stay in network. Dental and vision coverage are available as well. "We control our deductibles, our office copays, our drug formulary, and we're saving money," says Deardorff.
7. Jump in the pool
There's strength in numbers. Purchasing pools let small companies -- typically those that have fewer than 50 employees -- band together to buy health insurance. The combined purchasing power of the group often translates to better rates and access to plans from a larger number of carriers. "Purchasing pools are on your side," says Georgetown University's Kofman. "They can negotiate the bells and whistles that you may not be able to get on your own."
Some pools, like California's PacAdvantage and New York City's HealthPass, are open to any local employer that meets certain requirements. Others are run by national trade associations or other organizations and are restricted to members only. If you belong to a trade group or chamber of commerce, check to see if it offers health insurance for members. Your insurance broker also should be able to tell you about pools in your state.
The Connecticut Business and Industry Association (CBIA), the nation's largest statewide business organization with more than 10,000 members, launched its purchasing cooperative, Health Connections, in 1995. Today the program insures more than 63,000 people employed by 4,700 small businesses, according to Philip Vogel, the association's senior vice president. The Bushnell Center for the Performing Arts in Hartford joined the pool in 2003 primarily because of rising costs, says Diane Bruno, director of human resources. The nonprofit, which has 50 full-time employees, pays 75% of the premium for the least expensive plan offered by Health Connections. If employees want to upgrade to a richer plan, they pay the difference. That formula helped Bushnell save $30,000 last year.
