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Balms for rising health care costs
By Jenny
C. McCune Bankrate.com
Rising health care costs are giving businesses a major
headache, and the pain is only going to increase this year and into
the foreseeable future.
Health insurance premiums have been on the rise for
years, and the biggest increases tend to hit the smallest companies,
according to Towers Perrin, a New York-based firm that conducts
an annual survey of business health-care costs.
"It's tough for small businesses," explains Brian
Stitzel, a consulting actuary with Buck Consultants, a human resources
consulting firm in New York City. "They don't have the leverage
or bargaining power ... They are at the mercy of insurance companies."
So what's the prescription for soaring medical costs?
Although small companies are handicapped by their size, there are
still steps they can take to curb rising health care costs.
Assess needs
Start by assessing your company's needs. What do your employees
need with health insurance. For example, if you have an aging work force,
pregnancy coverage won't be as crucial as it would be for you as
it might be for another employer. Figure out what your company's
employees need and what they can do without before you shop for
a policy.
Do your research
Find out what health care plans are available for small businesses.
Ask your insurance agent. Also check online using a search engine
such as Google
or Alta
Vista. "Type in your state, 'small business' and 'health insurance,'
" says Clive Riddle, president of MCOL,
a business-to-business managed care Web site. "You'll be amazed
at what you'll turn up." There are also small-business oriented
Web sites such as eHealthInsurance.com, which compare policies and
offer them for sale online to small businesses.
Unite
Look into health plans that pool together small businesses to give
them more clout and better benefits. More than two dozen states
sponsor such programs. For example, California has the Pacific
Business Group On Health, which offers a choice of 15 health
plans. "It's a neat program," says MCOL's Riddle says. "Each employee
can pick a different plan according to his needs -- something that
a small business couldn't offer on its own."
In addition to state-sponsored health plans, see whether
trade association in your industry offers pooled plans. Also check
with your local chamber of commerce to see whether they know of
any plans or if they sponsor any small-business health care coverage
initiatives. Having trouble finding a group to pool resources with?
There's also the National Business Group on Health in Washington,
D.C., which represents 100 coalitions across the United States.
Finally, there are Professional Employer Organizations.
Companies outsource part or all of their personnel functions --
such as payroll processing, workers' compensation, and benefits
administration -- to PEOs. Because they represent many employees,
they can use their size to procure better rates and offer employees
more choices.
Shop
Before your company signs up with a health care provider, examine
its plan compared to other plans. Make sure you're getting the most
coverage for the least amount of money. "Being a good shopper is
the best bet for small businesses," Buck's Stitzel says.
Read the fine print to find out the true cost of the
plan. For example, how often does your potential insurer raise rates?
The plan that your company can barely afford this year, may be out
of reach next year if the insurer routinely boosts rates each year.
Visiting the insurer's Web site (look at its press releases or investor
relations section), reading annual reports, or asking existing clients
can determine whether rate hikes are likely, what their size would
be, as well as reveal any other hidden costs.
Get feedback
After you've signed up with a health care provider, ask your employees
for feedback. Are they getting what they want or need in the health
plan? You may find you can ax certain benefits since they're not
a high priority with your employees, or that your small business
is paying a lot for a health insurance plan that isn't satisfying
your employees' needs and that you need to shop around more.
Self-insure, to a point
Pay medical bills yourself. Have your company pay routine medical
bills for your employees. Buy "stop-loss" insurance for catastrophic
illnesses.
Split the difference
Get medical coverage with a high deductible -- say $2,000. Tell
your employees that they are responsible for the first $500 in expenses.
Your company covers the rest. This is best for employees with young
and healthy workers.
Give half a loaf
Can't afford a whole plan? Something's better than nothing. MCOL's
Riddle advises small-businesses owners to do their best to provide
some coverage. For example, a lot of the increases in health care
insurance stem from prescription plans. Maybe your company can't
offer a "$5 for every prescription" plan, but it can negotiate with
a local pharmacy to provide some sort of discount. Or dispense with
a prescription plan entirely and focus on major medical care.
Look into an MSA
If your company can't afford any coverage help your employees set
up individual Medical Savings Accounts. Such accounts work much
like 401(k) savings plans except their funds are used to finance
medical coverage. They can be combined with a high-deductible health
plan for complete coverage.
Lower benefits, increase costs
The ugly truth is that you may still need to reduce benefits to
your employees, increase their co-payments or both. While these
moves won't be popular, having some reduced benefits at a higher
cost still beats no medical coverage.
Jenny C. McCune is a contributing
editor based in Montana
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