After health care reform legislation was passed 13 months ago, businesses including field service companies waited with trepidation to find out how things would change — and so far that change hasn’t been good. With all the uncertainty the legislation has caused, insurance companies have raised premiums substantially. After payroll, health care is the second-highest cost for small businesses, so increased costs in this area can be potentially crippling to a service firm’s bottom line.
In a recent post on Business on Main, a community for small-business leaders, Toddi Gutner advises how to position a business so it can withstand the changing health care industry. For small business owners in the field service sector, following these three instructions could save a lot of money:
1. Assess your current plan: With so many other things to worry about, like providing service to customers and drumming up new business, most companies don’t know exactly what their current health care plan provides. It may sound easier to just stick with the plan a business already has, but it can only help to see what else is out there.
While most small businesses are in a holding pattern, it’s still a good idea to “make sure your plan meets your employee needs and promotes the enhancement that the reform has offered,” says Shawn Dangel, a small-business specialist with eHealthInsurance.
2. Consider more modest benefits: Like cushy pension plans, employees know that the days of health care being fully paid for by employers are a distant memory. A way to offset the rising costs of health care is to offer plans to employees with higher deductibles (which mean lower premiums), along with health savings accounts (HSAs) or health reimbursement accounts (HRAs).
3. Take on more risk: With premiums rising, some firms are moving to a self-funded model. Gutner explains:
The self-funded model is based on the premise that a portion of the population will not use the plans as much as one might expect. “The 80 percent of the population that doesn’t use it will pay for the 20 percent that does use it,” says Jucha. With self-funding, the employer takes the first $5,000 to $30,000 of funds per employee per year and puts it into an account instead of giving the premium to an insurance company. At the end of the year, that account should have some money left over.
Uncertainty when it comes to changing health care policies isn’t just leading to higher premiums, it’s also leaving business owners scratching their heads over how to plan for things like grandfathering regulations and the exchange-driven process, where some businesses will be penalized for not providing coverage to employees who can’t afford to purchase their own insurance. Beyond the three tips listed above to save on costs, the best plan is to find out concrete answers to how changing regulations will affect things and act accordingly.