High-quality health insurance is the pillar of employee retention. More than 55% of U.S. workers say that the quality of health insurance is the key factor in deciding whether to stay at their current job.
Meanwhile, health insurance costs are on the rise. In 2021, health plan costs are expected to increase by 5.3%.
Health insurance for small businesses is especially prohibitive. While more than ¼ of all covered workers face an annual deductible of $2,000 or more, nearly half of all covered workers for small businesses face that deductible. Many companies are struggling to save money by lowering the cost of employee health insurance.
But how do you lower the cost of employee health insurance without damaging productivity?
Below are seven options to reduce the expenses from employer-sponsored health insurance:
Reducing coverage is a straightforward way to cut employee health insurance costs. However, this move will reflect on the company's morale. Many employees choose a place to work based on the benefits offered by the employer. By cutting these benefits, you risk losing your top talent.
Reducing coverage is the last resort for companies that can't use other options to cut employee health insurance costs.
You may be paying for insurance that your employees don't require. To figure out if you are overinsuring your employees, you need to study their health needs and healthcare spending trends.
You can poll the employees to find out:
Once you have this information, you can go further to analyze the use of health insurance in your company for the past few years. You may find out that some services aren't in demand. Cutting these will not reflect on your employees' satisfaction, but it will reduce the financial burden on your business.
Employers that encourage healthy physical, emotional, and social lifestyles are in high demand by both Millennials and Generation Z employees. Additionally, such lifestyles can reduce the number of insurance claims, thus cutting costs.
By implementing programs that help employees lead a healthy and physically active lifestyle, you don't just decrease the average costs of insurance claims. You also contribute to the increase in employee productivity and engagement. According to the CDC, productivity losses related to personal or family health issues cost U.S. employers $1,685 per employee per year. Additionally, people with chronic conditions consume at least 50% of the company's claims expenses. Focusing on preventive measures can improve the claim's ROI.
Some insurance carriers may offer premium reductions for companies that implement high-quality wellness programs.
Many employees have a good idea of the type of coverage they need. By giving them a choice, you may lower the cost of employee health insurance substantially. An employer can encourage each employee to plan his or her healthcare journey separately. This could result in choosing high deductible and low premium plans.
Employers that offer tools to support personalized enrollment decisions could reap the benefits of lower coverage costs. Even though not all employees are ready to accept high deductible costs, giving them a choice could yield beneficial results.
FSA (Flexible Spending Accounts) are accounts set up by either employer or employee. They allow employees to set aside a certain amount from their paycheck (pre-tax) to use for eligible healthcare expenses. Funds in the account can be used to cover deductibles and co-payments for medical services.
The employer owns the FSA account so the employees can't take it with them if they leave. The main benefit for the company is that if any money is left over in the account, it could be added to the company's bottom line to use on plan-related expenses.
A Flexible Spending Account gives more flexibility to employees while allowing the employer to maintain control. Using a FSA can reduce the amounts you spend on healthcare coverage while offering tax savings.
In this way, a FSA can balance the reduction in costs with keeping employees satisfied.
The self-insured or self-funded medical plan involves the employer assuming financial risks for providing healthcare benefits to the employees. Self-insured employers pay for claims as they are presented instead of buying a pre-determined premium from an insurance carrier. Usually, a self-insured employer creates a special trust fund to pay incurred claims.
If you opt for a self-funded medical plan, you can:
While you can save money on pre-paid insurance coverage, you could be facing formidable expenses in case large claims occur.
Working with a PEO (Professional Employer Organization) can help you decrease health insurance expenses without reducing coverage, implementing wellness programs, or turning to alternatives like self-insurance plans or FSAs.
By collaborating with a PEO, you get access to enterprise insurance plans. When a PEO works with an insurance provider, it negotiates benefits on behalf of all its client’s worksite employees at once.
Instead of buying coverage for 100 employees from one client, PEO acquires it for thousands of employees, thus granting small companies access to Fortune 500-level benefits.
Top-notch health insurance coverage can be a burden for a business of any size. Cutting health insurance costs by reducing benefits can reflect on your retention effort and employees' morale.
To give your workforce access to high-quality health insurance, consider joining a PEO. Such collaboration is the simplest way to keep your employees happy with their benefits without spending formidable amounts to finance them.