There’s one thing we can all agree on when it comes to health insurance: it’s expensive. Last year, employers spent an average of 7.6% of their total annual budget on employee health care costs, which averaged $6,435 for an individual plan and $12,865 for a family plan per employee. And even with generous employer premium contributions, health insurance can cost a lot for employees, too.
As a business owner, it’s easy to feel conflicted about providing employee insurance. You have a budget to manage, and health benefits are a big line item cost. At the same time, you care about your staff’s health and want them to be protected in the event of a medical emergency. Is it possible to offer health benefits without breaking the bank?
With a little savvy and insider strategy, you can keep costs down for you and your employees – and make sure everyone stays covered. Check out these 7 practical ways to save money on small business health insurance.
Saving money for your business
If you’re looking for ways to save on health plans but still provide a valuable benefit for employees, here are a few ideas.
Tip 1: Shop around.
Health insurance prices change every year. It’s always a smart idea to see what plans are available in your area for the upcoming coverage period. You may be able to save money by:
• Switching to a different health insurer. Some insurers might increase their rates substantially year-over-year, while others may have a more modest increase (or even decrease their rates).
• Changing to a new health plan type (like an EPO or HMO, which are usually cheaper than PPOs). EPOs have a curated network of doctors, but don’t require referrals. HMOs are usually built around a single medical system and require referrals to see specialists. Both types of plans are able to drive cost savings with doctors and medical groups – and pass along those savings to you.
• Selecting a different set of plan tiers. More options are not always helpful – studies have shown that employees often over-insure themselves when choosing between several plans.
Tip 2: Offer an HSA-compatible plan.
A Health Savings Account (HSA) is a long-term account an employee sets up to pay for their health care expenses. HSAs can only be used with specific HSA-compatible insurance plans that usually have high annual deductibles and lower monthly premiums. These types of plans can help you save on premium contributions while still providing health coverage for your employees.
Tip 3: Explore level funding.
If you have a relatively healthy employee base, level funding might be a good option to explore. Level funding is a group health insurance product that behaves like a fully-insured product but gives more opportunity for cost savings.
Here’s how level funding works:
• You pay a fixed monthly premium into an account.
• This money is used to pay claims for employee health care.
• If there’s any money left in the account at the end of the plan year, it goes back to your business.
• If employee claims spending exceeds the funds in your account, your health insurer covers the difference.
• Talk to your broker to learn more about level funding plans available to your business.
Related Reading: Everything you need to know about employee health benefits
Saving money for your employees
Even if you’re sponsoring health benefits for your employees, they can still end up paying a lot of money for care during the year. According to Kaiser Family Foundation’s 2016 Employer Health Benefits Survey, 51% of employees had a plan deductible of $1,000 or more last year, compared to just 20% of employees in 2009 – which means they’re on the hook for more out-of-pocket expenses.
Here are a few ways you can help your staff manage their health care costs.
Tip 4: Provide a solid set of plan options.
Healthy employees who don’t go to the doctor often can save money with a lower premium, higher deductible plan. Others who have ongoing health needs can save money by opting for a higher premium, lower deductible plan. Make sure to provide a variety of plan options so everyone can get the coverage they need (without paying for what they won’t use).
Ideally, every plan option should include benefits like wellness rewards, telemedicine, free annual physicals and flu shots, and great customer service to keep employees happy and healthy year-round.
Tip 5: Educate your employees on health insurance.
If you don’t understand how insurance works, it’s easy to make costly mistakes when it comes to choosing and using your plan. Educating employees on how health insurance works is a low-cost way to help them save.
Education can take a variety of different forms, including:
• In-office trainings leading up to Open Enrollment.
• Easy-to-understand plan and benefits materials from your insurer.
• Monthly or bi-monthly emails with educational health insurance content.
• An in-house or external insurance guru employees can go to with questions. This could be your HR administrator, an insurance broker, or someone else.
Tip 6: Get smart about FSAs.
Employees can set aside money to pay for health care through a Flexible Spending Account (FSA) you set up. They can put in money pre-tax from their paycheck and decide what health care bills to pay from their account throughout the year.
During Open Enrollment, give your employees a chance to opt into a FSA, and remind your staff to use their FSA dollars before they expire at the end of the plan year!
Tip 7: Look for telemedicine options.
Many health plans now include free or low-cost telemedicine options that let you talk to a doctor by phone or video instead of visiting a clinic in person. For routine medical issues such as colds, rashes, UTIs, and pink eye, telemedicine can be a great way to get treated by a medical professional while saving time and money in the process.
Saving money for everyone
Bonus tip: Both employers and employees win when everyone in the company stays healthy. That’s why 83% of large companies (200+ employees) invested in wellness programs in 2016.
Wellness programs encompass everything from quitting smoking to losing weight to staying active to managing stress. They can be official or unofficial, use technology or not, have a big budget or no budget at all. You can even incentivize participation with a little competition! It’s up to you to determine what works best for your business.
Looking for money-saving health insurance options? Get help from Oscar Health, winner of this year’s LA Business Journal’s Leader in Health Care award. Check out the Oscar for Business page for more resources.
