Editor's Note: This is the second article in a series provided by HR Department Unlimited, a human resource and training consulting firm.
It's no secret to business owners that the cost of providing health insurance benefits has risen to the point where it is now not only the most expensive benefit, but it may be one that's seriously straining budgets and business stability.
According to a survey of 2,100 various sized companies conducted by the Kaiser Foundation, the average monthly premium for a single employee in 2006 increased by about 9 percent, and stands at $353 ($4,242 per year). The average premium for a family in 2006 amounted to $957 or $11,480 annually.
The percentage of growth of health care spending has outpaced the rate of inflation and the increase in wages every year since 1999.[1] This means that health care expenses are occupying an ever-increasing portion of every employer's budget and each employee's paycheck.
Naturally, business owners have developed strategies to cope with this difficult trend. Some have been forced to abandon providing benefits to retirees, or even current employees. Since 2000, the percentage of businesses offering health benefits to employees has decreased from 69 percent to 61 percent. The trend is even more pervasive in the smallest companies (three to nine workers). This decrease in coverage is contributing to an already existing national crisis, as these uninsured workers are forced to rely on government sources for care.
Here are several suggestions to help you develop short and long term solutions to control health insurance premium increases.
Work with Your Broker
All brokers are not created equal. An experienced and knowledgeable agent or broker should be able to provide business owners with alternatives to terminating health benefits as well as strategies to control health care increases and ways to continue to provide a sound benefit package to your workforce.
Agents and brokers are in the service business, and as such, need to deliver fresh ideas and sound strategies. Experienced agents will help you understand the industry trends and let you know what strategies similar companies might be employing. Many business owners are not aware of the plan designs that are available. Agents should be prepared to "shop the market" and give you quotes from a variety of companies.
In addition, the agent should arrange employee meetings and explain any plan changes in a way that helps employees understand the need for such change and assures them that the benefit package is a good one. Without proper communication, even the best plans may fail.
Communicate with Employees
The fact that health benefits are increasingly expensive should not be a secret to your employees. Let them know that changes may have to be made, but that you are working to make sure they get the best benefits the business can afford. Some of our clients develop focus groups of interested employees to help examine the available options. People appreciate explanations for change, and if the company has a history of loyalty toward employees, the employees are likely to reciprocate.
The communication should continue with education throughout the year focusing on the benefits provided and the most prudent ways to manage and use these benefits. Many studies support the principle that communication of benefit packages is more likely to ensure employee satisfaction than the actual benefit package itself.
Understand Your Objectives
Is your objective to assist with all of your employees' medical costs, or to make sure they are covered in the case of a catastrophic medical condition or accident? Catastrophic coverage usually ensures that employees won't lose their homes or have to declare bankruptcy in the case of an extreme medical condition, but might not pay for routine procedures, prescriptions or treatments.
Employers need to develop a strategy that will allow them to meet goals and the mission of the company and to ensure that the benefit package is consistent with
