By Onofrio R. Cirianni
Healthcare costs are skyrocketing, and companies large and small are feeling the pain. In fact, in 2006, the average increase in health care premiums was double the rate of inflation, according to the latest survey from the Kaiser Family Foundation.
Since 2000, premiums have risen 87 percent. In order to attract top talent, companies need attractive choices for their benefit plans, along with compensation. With benefit costs being the second highest expense next to salaries, today’s businesses are seeking solutions to the constant rise in premiums.
Choosing a health plan that encompasses the majority of needs for your employees can be a guessing game. We advise companies to work with their employees by surveying their needs for a benefit plan. While it can be a struggle to make everyone happy, a survey can take out a lot of the guesswork. In order to be useful, we suggest the survey be short and the questions well stated. Many companies can find ways to save money based on the feedback received from the surveys.
For example, some companies are in industries that attract a younger workforce. Therefore, those employees might not mind a higher co-pay for seeing a specialist because the need is infrequent. The employer realizes the savings without depriving the employee. In addition, companies should hold educational meetings to guide employees on what the benefit package offerings are, how they work and how to maximize their benefits and reduce their out-of-pocket costs.
Another way to reduce company benefit costs is to offer innovative plans. There are several good alternative benefit options that are now becoming more mainstream. These plans answer the need to reduce high-benefit premiums for companies. The new programs, Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs), are a tax-favored and cost-effective means to providing health insurance. HRAs are funded by employer contributions and allow employers to provide funds on a monthly basis to accounts employees can use to pay for deductibles and other out of pocket expenses not covered by their health plans. The unused portion of funds in an HRA at the end of the plan year remains with the employer. The unused monies can be allocated to help fund future medical expenses and retiree medical costs.
An HSA is a tax-sheltered savings account that is driven by employee contributions and is similar to an Independent Retirement Account, but is earmarked for medical expenses. Deposits are 100 percent tax-deductible and what is not used from the account each year stays in a secure trust and continues to grow interest on a tax-favored basis that can supplement retirement. These funds are not subject to tax, as long as the rules regarding the HSA funds are followed. At age 65, the funds can be withdrawn for any purpose without penalty and are subject to normal income taxes. HSAs require the employer to offer a qualified high deductible health plan (HDHP).
Other rules apply to HSAs and HRAs, so companies should check with their benefit advisor. An advantage to both the employer and the employee is that these innovative plans, coupled with a qualified HDHP, are good alternatives for employees who do not make frequent doctor visits. Companies now have the ability to offer a qualified HDHP in conjunction with an HRA or an HSA, and also offer their employees a comprehensive plan.
Getting the Best Deal
Companies need to be proactive to get the best economical benefit plan. Allow yourself plenty of time to review the options for your benefit packages – we start reviewing our clients usually 120 days out from the renewal date. The sooner we know where our client stands as far as the increase, the better. We can redo a census (data gathering about the company’s current employees) and explore the market to see where our client can do better.
It is crucial for a company to have a benefit advisor. These specialists understand the marketplace and are in constant contact with the carriers. They also can navigate your business to incorporate the programs mentioned above and develop strategies that can control costs and provide the flexibility to suit your company’s needs.
Onofrio R. Cirianni (firstname.lastname@example.org) is director of corporate benefits at Amper Financial Services (www.amper.com), an endorsed service provider of the NJBA Service Corp. for employee benefit services.