Health insurance costs are one of the most significant expenses for small businesses. Many entrepreneurs and business owners struggle to manage these costs while ensuring their employees have quality coverage.
In this post, I'll discuss why focusing on health insurance can be a hidden source of revenue for your business.
Understanding the Cost of Health Insurance
Before you can begin to manage health insurance costs, it's important to understand what your company is paying for. The cost of health insurance premiums varies depending on factors like the size of your business and the type of coverage offered.
There are also various taxes and fees associated with health insurance, which can impact your bottom line. It's important to understand the full cost of coverage so you can make informed decisions about how much you should be paying, what the competitive landscape is, and what to budget for health insurance each year.
This is not a very transparent industry, and so getting some clarity on your actual claims can make all the difference in strategizing. This is something I can help you with if you'd like to learn more.
Finding Ways to Save Money on Health Insurance
Once you have a better understanding of the costs involved with offering health insurance, you can start looking for ways to save money. One of the most popular strategies is to shop around and compare health insurance plans from different carriers. Notice I said popular... I don't believe it is necessarily the most effective way to get you to the lowest possible cost.
In fact, you may be able to negotiate better rates with your current carrier or even explore alternative options like self-funded plans or alternative strategies that move you away from expensive fully insured programs. This is not as scary or risky as you might think.
So let's dig in.
Here are a few strategies you should be considering to lower your monthly bill:
HRA (Health Reimbursement Arrangement) – An HRA allows employers to pay for their employees' medical, dental, and vision expenses on a tax-favored basis while also reducing the premium paid to the insurance carrier.
High Deductible Health Plans (HDHPs) – HDHPs allow businesses to provide coverage with lower premiums by asking the member to pay a higher deductible. This can be a great option for businesses with healthy employees and especially if the company takes some of those premium savings and contributes towards and Health Savings Account (HSA) for each employee.
Evaluate Your Coverage – Take the time to review your coverage and determine if you can reduce your premiums by reducing the number of services offered. This could be as simple as eliminating coverages that aren't meaningful to your population.
Level Funding – Level funding allows businesses to budget for their premiums upfront and pay a fixed monthly amount. This is a great first step to getting transparency into your claims while not going fully into a self-insured arrangement and can be especially helpful for businesses that want to start down the process of predicting their future healthcare costs.
Consumer-Driven Plans – With consumer-driven plans, such as Surest, you can dump the traditional deductibles and teach your employees to become better consumers and save big at the same time. With no deductibles, no coinsurance, and no hard math to figure out. You can get clear, upfront prices that you can see in advance while incentivizing your employees to make better healthcare decisions.
Partially Self-Funded Health Plan – A partially self-funded health plan allows employers to budget for their premiums upfront and pay a fixed monthly amount. This type of plan can provide more cost flexibility while still offering employees access to quality coverage.
Pharmacy Contract Review – Pharmacy plans are often the most expensive part of a health insurance plan. Ask your insurer to review your plan and find ways to cut out low-performing/high-cost drugs, poor contract language and reduce costs.
Wellness Program – Implementing a wellness program can help employees stay healthy, which in turn can reduce your health insurance costs. Studies have found that businesses focusing on employee wellness saw decreased healthcare costs over time.
Changing Carriers – If you feel like your current health insurance provider isn’t meeting your needs, it may be time to consider changing carriers. It's a good idea to compare plans from different insurers and select one that offers the coverage you need at an affordable price. This is something that your consultant should be doing on an annual basis to keep them honest anyways.
Health insurance is one of the most significant expenses for small businesses, but it doesn't have to strain your budget. By understanding the cost of health insurance and using strategies to reduce them, you can create a hidden source of revenue recovery for your company.
Take the time to review your current plan, compare plans from other carriers, and look into alternative strategies like the various self-funded strategies I outlined above (even if you are not a large business). If you heed my advice, I know these steps can help you save money on health insurance costs in the short and long term while still providing quality employee coverage.
By finding ways to reduce your health insurance costs, you can create more financial breathing room, attract higher-quality talent, and focus on other areas that will help you grow.