Every year small businesses grapple with health premiums continuing to go up. The renewal paperwork comes from their health insurance agent [whom they have seen since this same time last year] and it has a 20%, 30% or even 40% increase in premium for the same policy. So the business owner is left with some hard decisions that have to be made. Most employers are extremely reluctant to reduce benefits. So, what left to do? Well, they can pass along the entire increase to the employees which never goes over well. They can absorb the entire increase themselves but that will erode an already fragile profit margin. The typical employer tends to opt for some happy medium option whereby the employer is absorbing some of the shock and the employee picks up the rest. One of the ways to have the employee pick up a portion is by increasing the co-pay amount that's built into the plan design. The problem with that approach is you're never going to make up the gap in the premium increase by adjusting the co-pay for office visits from $25.00 to $40.00. The only thing that left is increasing the deductible that the employee has to meet before benefits kick in. Employers typically go kicking and screaming to implement this but it's the only way to make a real impact.
There is hope though! By increasing the deductible you may be able to qualify for a Health Saving Account where the employee is paying for out-of-pocket expenses out of a tax-deferred medical savings account that bears interest. In addition, now that the employee has to pay more out-of-pocket expenses then before, the employer can offer a myriad of supplemental coverages that help fill in the gaps. For example, a hospital confinement policy is very inexpensive and pays the employee directly a lump-sum benefit daily for a hospital stay. There are also Limited-Medical Benefit plans that cover such things as doctors visits and preventative care. Again, typically the covered amount is paid directly to the employee. These are actually individual plans that the employer can help fund or the employee pays the full amount of the monthly premium. The advantage to the employee of an individual policy is that it's portable - they can take it anywhere they go. In either case, the monthly premiums are very affordable and will help cover some of the new expenses employees have to pay as a result of an increase in deductibles.
For more information on this and other ways to reduce health premiums such as wellness programs and lessen the impact on your employees email me at bknauss@employeemployersolutions.com.
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