Managing and Benefits

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Benefits

Q Our health insurance premiums have become a significant expense. Besides making employees pick up more of the cost or offering fewer benefits, what can we do?

Steve Swoboda
COO And CFO
Booyah Networks
Westminster, Colorado

All three branches of government, academics, and think tanks are busy on that one. When they come up with something definitive, we'll let you know. If you can't wait that long (and with health insurance premiums for families of four up 87 percent since 2000, who can blame you?) here are some ideas.

One option is to switch to a high-deductible insurance plan that's compatible with health savings accounts (HSAs for short). Such plans can save between $1,000 and $3,000 per worker on premiums (it varies significantly depending on state insurance regulations), says Ronald Dobervich, a partner at Sage Benefit Group, which is based in Minneapolis. Employers then deploy some of that freed-up cash to tax-free accounts with which employees pay for medical expenses. Funds in HSAs draw interest, and the money rolls over from year to year. Employees can also contribute pretax earnings to their HSAs and take the accounts with them if for some unfathomable reason they leave you for another employer.

The downside: Employees may smell a benefit cut. The numbers vary depending on your state and plan, but a common setup requires a single employee to pay about $2,500 out of pocket per year before a PPO or HMO kicks in. (A traditional PPO plan has a deductible of about $600.) Even if you put up, say, the first $1,000 by funding their HSAs so that their savings on premiums outweigh the extra expense for the deductible, some employees will have a hard time grasping how this system saves them money.

Another option is to outsource your HR department to a professional employer organization. A PEO is considered a co-employer; for about $150 a month per employee it handles everything from payroll to benefits. Because it co-employs workers from many companies, the PEO has a larger risk pool and can oftentimes get better rates from insurers. For example, MindLeaf Technologies, a Bedford, Massachusetts, firm that handles IT and administrative services for hospitals, saved 17 percent on health care costs for its 76 employees, without reducing benefits, through a PEO, says CEO P. K. Shah.

Yes, there's a fee, but the PEO earns it by doing more than cutting checks: managing 401(k)s and recruiting employees, for example. Delegating health care management may be the healthiest thing your company does all year.

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