Health Insurance Premiums

In an article for the National Center for Policy Analysis (http://www.ncpa.org/pub/ba642) Daniel Wityk states: “Since 1999, the cost of employer-provided health insurance has risen 120 percent, or four time faster than prices generally . . . small businesses face higher than average costs.” Wityk points to two causes for the higher than average costs for small business: first, insurance premiums for small businesses are 18 percent greater than those paid by large companies, and second, administrative costs run up to 25 percent of the cost of premiums for small business health plans compared to 10 percent for large businesses.

Large businesses self insure and are governed by federal law where small business must use small-group health policies subject to state regulation. The Employee Retirement Income Security Act of 1974 (ERISA) exempts self-funded employer plans from state regulations. In self-funded plans, the firm pays employees' medical bills and a third party processes claims. Large employers (and trade unions) do not face costly state mandates, but do enjoy economies of scale. Therefore, their costs are lower.

Given the fact that reform is on the way, but will not change things in the immediate future, what are the best tactics for the owner-managed business?

First, do not hesitate to delegate the fact finding and research aspects of this task. Having someone else, besides the owner-manager, understand the issues of health care is an advantage.

Second, understand the effect of the group of which your insurance is currently a part and the effect of state regulation on that group. While your insurance broker may feel that the best choices have been made, make sure you understand what other group and state regulation options there may be given your business configuration. You may belong to a trade or professional group who offers some meaningful programs or resources.

Third, understand what co-pay and deductible options are available. Other benefit plans may be able to compensate for having higher deductibles. Make sure you understand what cafeteria plans and medical health care savings plans have to offer.

Fourth, do not hesitate to use an insurance broker, but make it clear that this will not be a relationship purchase or renewal. You will want hard work and creative thought to obtain the most efficient health care package available. You will reserve the option and have every right not to select the health care plan offered by a broker.

Fifth, involve your employees to properly consider that effect certain decisions on coverage will have on their lives and their work attitude. Do not delegate the authority to make a decision, but make an effort to inform your employees and determine their opinions before you make your decision.

Sixth, start at least 90 days before renewal. Make your decision with enough time so that any change necessary can be accomplished.

Please comment or post with your own health insurance experiences and issues.