With open enrollment season officially underway, many small businesses, as well as their employees, are wrestling with the rising cost of health insurance.
According to a recent study by the Kaiser Family Foundation, there was a spike in health insurance premiums this year, with the cost of employer-sponsored health insurance increasing 9 percent for family coverage and 8 percent for single coverage.
That’s especially troubling for small businesses when you consider that they pay up to 18 percent more per worker than large firms for the same health insurance policy.
The good news: there are many ways for small businesses to mitigate those increases. Here are seven cost-cutting open enrollment tips for small businesses:
1. Educate your employees about health insurance costs: According to recent numbers from the Kaiser Family Foundation, the cost of employer-sponsored health insurance increased 9% for family coverage and 8% for single coverage in 2011. But the fact is that most employees don’t have a good understandingof how much employers pay toward their coverage.
If you’re facing increased costs and need to ask your employees to contribute more toward their premiums, it’s time to sit down and have a frank discussion. If employees better understand the challenges increased costs present to your business, they may be more willing to accept necessary adjustments to their coverage or contributions.
2. Employees prefer cuts in benefits to rate hikes: A recent survey sponsored by eHealthInsurance and conducted by Kelton Research shows that employees are more likely to be upset by increases in their monthly premiums than by changes to their benefits. Keep that in mind when deciding how to adjust your health insurance offerings for next year.
3. Conduct an employee poll to find out which benefits matter most: If you find that you must cut benefits from your health plan in order to make ends meet, ask your employees to complete an anonymous poll. Don’t ask about their health or their medical history – that’s illegal – but ask them which types of benefits matter most to them: robust preventive care, prescription drugs, chiropractic, maternity care, low co-payments, vision or dental coverage, etc. This can give you some guidance when choosing which kinds of plans to offer.
4. Consider ALL options available from your carrier, and new carriers too: When open enrollment season comes around, many employers get notices from their insurance company suggesting a few coverage alternatives, but there’s usually more to choose from. Contact your agent or broker to explore other options that might be available through your current carrier.
A licensed agent representing multiple carriers can also provide you with fresh quotes from other insurers in your area. It’s all part of doing your homework if you want to make sure and get the most for your health insurance dollars.
5. Offer your employees more than one coverage option: Smaller businesses tend to offer fewer coverage alternatives, but there may be benefits to offering more. If you’re currently offering your workers only one health plan, consider adding a second or third to the mix. For example, you might offer a high-deductible Health Savings Account-eligible plan, and then another plan from the same carrier with a lower deductible.
The dollar amount you contribute toward employee coverage need not change, but it gives employees who want it the chance to start a Health Savings Account or to pay a little more from their own pockets for a plan with a lower deductible or more robust benefits.
6. Get that new tax credit while it lasts: Not all small businesses can afford to offer health insurance. But until 2014 tax credits are available for small businesses with 25 or fewer employees with average annual wages of less than $50,000. You may qualify for a credit of up to 35 percent of the premiums you pay toward employee coverage. Talk to your accountant to learn more.
7. Discourage employees from going uninsured: Some businesses will find that they’re unable to provide employer-sponsored health insurance in the coming year, or that their employees can no longer afford rising rates and opt not to enroll. If that’s the case, encourage your employees to do what they can to make sure they have some form of coverage. It gets them better access to medical care when they need it and helps keep them financially sound, which can only be good for your business.
If their spouse works, they may be able to enroll in his or her plan. If they’re under age 26, they may qualify to re-enroll in a parent’s health insurance plan. To explore government-sponsored options, they can also contact the non-profit Foundation for Health Coverage Education.
About The Guest Author: Anthony Lopez is a licensed small business insurance expert at eHealthInsurance.com. Additional tips and advice for small business owners can be found at the eHealthInsurance blog.