When you’re running a business, it can be hard to find a balance between providing health insurance and keeping your costs manageable. In a recent survey, the Kaiser Family Foundation found that in 2019, the average annual employee health insurance premiums were $7,188 for individuals and $20,576 for family coverage. The average premium for individual coverage increased by 4% since 2018 and the average premium for family coverage increased by 5%.
How can you save money while still doing right by your employees? Here are some things to consider:
Look at other plan options
If you want to reduce health care premiums, you can start by comparing plan prices. Rates for small businesses vary by carrier. You must keep in mind that plans with lower premiums have higher out-of-pocket costs. You don’t want to just choose a plan because it has the lowest premium, it may also offer significantly less coverage. To better understand all the different options available for you, it is best to consult with a health insurance agent They will be able to explain the ins and outs of the different health plans available and help you choose what would be a good fit.
Offer a high deductible health plan
Offering a high deductible health insurance plan (HDHP) is one of the easiest ways to reduce your health care premiums. With an HDHP, you’ll pay lower monthly premiums, as will your employees. That being said, some employees are unhappy with these plans due to the high out-of-pocket costs. If possible, offer an HDHP plan in addition to plans with lower deductibles to give your employees multiple options.
Combine a high deductible health plan with a health insurance savings account (HSA)
You can offer an HSA only by offering a high deductible health insurance plan. While it’s true that a high deductible coverage can mean more out-of-pocket costs for employees, premiums are typically lower. The idea is that an HSA will help cover additional expenses. With an HSA, pretax dollars are set aside to pay for qualified out-of-pocket health expenses. Both employers and employees can contribute to the account. Any unused savings remains in the employee’s HSA account, which is owned by the employee, and remains with them even after they leave their employer.
Consider a Heath Care Reimbursement arrangement (HRA) to offset the higher deductible.
An HRA must be integrated with an employer sponsored health plan. The employer selects the benefit that is eligible for reimbursement. The funds can be used to offset medical expenses. For example, the employer plan has a $5,000 deductible and the employee is responsible only for $1,000 of the actual expenses incurred. The employer can set up an HRA plan to cover the remaining $4,000 medical deductible. These funds are owned by the employer and are a “use it or lose it” benefit. This can actually benefit the employer if the funds allocated for each employee are not used within the calendar year. This is an integrated HRA, there are post-deductible HRA’s and limited expense HRA’s as well.
Offer an FSA
A flexible spending account, or FSA, allows employees set aside pretax dollars from each paycheck to pay for eligible out-of-pocket expenses. Employees can use this FSA account to pay for expenses such as medical, dental, vision, hearing, and prescription drug benefits for themselves, their spouse and their dependents.
These are just a few examples of ways to potentially save in monthly premiums. To discuss in detail and to learn if these options may fit your business, please contact Professional Insurance Programs at 800-637-4676 or [email protected].