Theresa Long, co-owner of Focal Point Marketing in Kennewick, received a shock last month when she discovered the costs for the insurance plan that covered the company’s employees would rise by about 80 percent this year.
“We were in a pool insurance as a small business, and even though our staff is fairly young, they do an average age of everyone in the pool,” said Long.
That put her into a panic, especially since the company had less than a week to find another option without lapsing the policy.
Long went to Pacific Crest Planning of Kennewick and the company worked closely with her to help find an affordable alternative.
“Our insurance will be going up about 3 percent when we shopped around, but we had to change carriers,” said Long. Long said the company, which has a young staff with an average age of 26, purchased a high-deductible plan and a separate bridge policy to cover the high deductive.
“We really had to get creative,” said Long.
And her advice to other business owners: start shopping early.
Rising health insurance costs are forcing small business owners to be vigilant in researching insurance options to find creative, more affordable ways to provide health insurance coverage for employees.
Health insurance is a major cost for small businesses and with premiums soaring, many small business owners are asking their employees to shoulder more of the costs.
Employer costs for employee compensation averages $30.11 per hour worked in September 2011, according to the U.S Bureau of Labor Statistics. Wages and salaries averaged $20.91 per hour worked, accounting for 69.4 percent of these costs, while benefits averaged $9.21 per hour, accounting for 30.6 percent.
Total employer costs for Sept. 2011 were 7.42 percent higher than the same period in 2007, which average employee compensation was $28.03, with $19.56, or 69.8 percent, accounting for wages and salaries. Benefits at that time averaged $8.47 per hour, or 8.4 percent of total compensation.
And the rising cost of health care insurance isn’t the only higher costs employers are facing these days, said Matt Henderson, an employee benefits consultant with Pacific Crest Benefits.
“Their costs are going up all over the place, so they have to find ways to cut back,” Henderson said.
Henderson said one way employers can do that is by increasing the deductible on the group policy by $1,500 to $2,000, then buying a medical bridge plan to supplement the policy.
“The medical bridge plan can be thought of as a deductible insurance plan,” said Henderson.
The medical bridge policies supplement existing major medical coverage by helping employees pay the medical and non-medical expenses associated with a hospital stay or outpatient surgery — like deductibles, co-payments or child care.
“We have used it for small businesses, those with just four or five employees, to large groups,” said Henderson. “The larger the group, the more dramatic the savings are.”
Another option that can help employers avoid rising healthcare insurance costs altogether is by offering their employees Lyfebank.
Through Lyfebank, the employer deposits a set amount into the employees account each month and employees use the money in their Lyfebank account to purchase individual health insurance policies. That allows employees to have more control over their health care coverage, depending on their needs, Henderson said.
“In the traditional group insurance model, the employer picks the policy — but insurance isn’t really a one-size fits all model,” Henderson said.
That can also help business owners avoid situations like the one Byron Martin, owner of Technologize, faced earlier this year when his insurance group gave him notice they were switching policies and that his rates would go up $1,000 a month.
“For a small business that’s huge,” said Martin. “That was on a Thursday and they told me that open enrollment would end Monday.”
With just a few days to research, Martin was under the gun and also turned to Pacific Crest for help.
“We went with a $3,000 deductible, but I’m still paying a few hundred dollars more than I was before with a $1,000 deductible,” Martin said.
Martin said the ordeal with complex and frustrating, especially because of the time constraints.
And being in the Tri-Cities, which has a large concentration of government workers that receive higher levels of benefits also puts small business owners at a disadvantage when trying to hire and retail quality employees, Martin added.
And Martin has a valid point.
While the Bureau of Labor Statistics sites the average employee compensation at $30.11 per hour in September, at the same time state and local government workers collected an average of $40.76 per hour, with benefits averaging $14.19 per hour worked — that’s 54 percent higher than the average in the private market.
“That’s a huge difference and small business can’t provide the same coverage,” Martin said.
Henderson said he doesn’t anticipate any plateau in the rising cost of health care, especially as more elements of the Affordable Care Act go into effect.
“The fact that it’s called the Affordable Care Act is the biggest misnomer out there,” said Henderson.
With insurers being mandated to cover more, prices will likely continue to rise, Henderson said.
His best advice for small business owners is to research, plan and find the best option for the next year.
“Make decisions on what’s going to be your best strategy for the next 12 months, because we don’t know what’s going to happen a year from now,” he said.
And then consult with your insurance advisor to talk about long-term sustainable strategies for the future — whether that is higher deductibles, bridge plans or other options.
“Don’t be scared to try new things,” Henderson said.