Healthcare Costs on the Rise

Address employee needs with new, cost-effective benefit options.

Smarter, better, cheaper—this is the mantra many construction businesses use today to remain competitive and do more with less.

Healthcare is one of many rising costs of doing business. The National Business Group on Health surveyed a group of large companies and found that employers estimate their healthcare benefit costs will increase by an average of 8.9 percent in 2011, compared with 2010’s average increase of 6.9 percent.

According to Hewitt Associates, an HR and outsourcing consulting firm, the average total healthcare premium per employee for large companies will be $9,821 in 2011, up from $9,028 in 2010 and double what they paid in 2001.

These facts paint a picture of the changing benefits landscape. With the growing uncertainty surrounding healthcare, many business owners want to know what the future will be like and if they will be able to provide insurance benefits. Some have started passing on these costs to employees through higher premiums and deductibles, while others have started using creative alternatives to continue providing value.

New options have also emerged that give business owners a way to be cost-effective and provide plans that address their employees’ needs.

Self-Funded Plans

Previously, only large companies could benefit from self-funded insurance plans (in which the employer assumes the risk for, or underwrites, the cost of all covered healthcare services). Bigger companies tend to have a large risk pool and can better predict and price the potential losses from benefits offered to employees.

Today, self-funded plans have gained attention from smaller companies as an alternative to traditional carrier plans. In fact, these plans have experienced a 6,000 percent increase in the last 12 years, according to the Society of Professional Benefit Administrators. They can often help business owners provide more customized healthcare offerings at a greater cost-savings than traditional plans.

Some business owners use these plans to counteract rising health insurance costs. Others believe these plans will prevent them from being subject to business healthcare reform regulations. For instance, with the passage of the Employer Retirement Income Security Act (ERISA) in 1974, self-funded plans are exempt from many state coverage mandates, including coverage for acupuncture, port-wine stain therapy and several others.

High Deductible Health Plans

High deductible health plans and their accompanying health savings accounts (HSAs) allow individuals to put money away tax-free to pay for benefits. With 2011 before-tax contribution limits of $3,050 for individuals and $6,150 for families, HSAs can offer your employees added flexibility. Employees can use the money to pay for healthcare expenses or grow it tax-free for retirement.

HSAs do not have a “use it or lose it” requirement, which is attractive to employees. As of January 1, 2011, HSAs had grown by 1.98 million year-over-year (a growth rate of 18.2 percent) according to Interpro Publication HSA Update.

Companies that have had to cut health benefits can offer HSA plans to provide new, budget-friendly options to employees.

Flexible Spending Accounts

Flexible spending accounts (FSAs) have become a staple in many benefit plans because they allow employees to put aside pre-tax money from their paychecks to pay medical expenses. Companies also use them to address higher healthcare rates.

FSAs have long been perceived as a valued benefit option, but many see them as a required accompaniment. FSAs can help employees buffer the increased financial burden of out-of-pocket expenses and deductibles.

Voluntary Benefits

Non-insurance voluntary benefits can supplement core benefits by addressing employees’ personal needs at a low cost. We have seen companies offer a range of benefit options in this category, including auto and home insurance, 529 college savings plans, deferred compensation, estate planning, fitness programs, lunch programs, medical opt-outs, pet care, profit sharing, stock options, uniforms and more.

When companies offer these benefits, it shows they have performed due diligence to select the appropriate providers and get the best deal.

Voluntary benefits not only help employers provide a competitive benefits package, but they also help reduce employer payroll taxes and improve the bottom line.

Wellness Plans

To reduce claims and premiums, many employers have implemented wellness plans that promote employee health. These companies believe healthier employees will show up to work more often, be more productive and visit the doctor less frequently. Wellness programs may include on-site exercise and weight loss programs, health education services and healthy vending machine options.

Companies have more benefit options than ever. And, in most cases, a one-size-fits-all plan will not work. As the number of plans and their complexity continues to grow alongside increasing government regulations, construction executives must determine the best options for their company, while still protecting their bottom lines.

To find the best plans for your business, align with an expert and take advantage of technology. The most successful business owners research and review information and actively pursue options to address their changing benefit needs.

Construction Business Owner, November 2011