Health care costs, already a significant drain on many small businesses, may increase further following the U.S. Supreme Court’s decision on the constitutionality of the Affordable Care Act, expected this summer. The central question of the case examines the individual mandate, which is set to go into effect in 2014 and will require most Americans to buy health insurance or pay a penalty.
If the individual mandate is struck down, the Court will also decide whether or not other components of the law must be dismantled as well. If the individual mandate stands, employers will likely find themselves carrying more employees on their health care plans, including those with pre-existing conditions.
Employers may already find themselves offering coverage to more people because some parts of the Affordable Care Act are already in effect. Children may now remain on their parents’ health care plans until they are 26 years old, and adults who were uninsured for six months or more because of pre-existing conditions are now eligible for coverage.
While waiting for the Supreme Court decision, many employers find themselves trying to balance their employees’ needs with rising health care costs.
The single most popular way to manage the high cost of providing health care to employees is the use of high-deductible insurance, which continues to gain popularity.
High-deductible plans are less expensive at the outset because they offer lower premiums, but employees must meet higher deductibles before insurance payments begin. High-deductible plans are part of a trend of consumer-driven healthcare that has employees questioning the breakdown of charges. Wells Fargo and American Express are just two of the companies offering their employees strictly high-deductible choices.
When aiming to reduce a business’ health care costs, it’s helpful to understand the basics of some of the most popular savings account options:
- HSAs (Health Savings Accounts): Employers are now offering HSAs as a side benefit to high-deductible plans. Employers and employees contribute to these accounts using pre-tax dollars. When employees need to pay health care costs it is usually as easy as swiping a debit card to access those saved funds.
- HRAs (Health Reimbursement Accounts): Health reimbursement accounts are funded by employers with tax-free money. These accounts allow an employer to reimburse employees for qualifying medical expenses and the employer gets to decide what those expenses will be. HRAs are administered by third parties and the money in the account is allowed to roll over from year to year.
- FSAs (Flexible Spending Accounts): With flexible spending accounts employees set aside pre-tax money to pay for health care or child care or other dependent-related expenses. If employees don’t use their FSA dollars by the end of a calendar year, the money is forfeited. FSAs are generally offered as a vehicle for reducing health care costs for employees in traditional insurance plans.
In searching for lower health care options, the first step for employers is to assess what health care is costing the business.The next step is to shop around and see if costs can be reduced. Many small businesses do the following to help them find lower cost health care:
- Partner with a reputable Professional Employer Organization (PEO) to gain access to better benefits packages
- Purchase health care directly from the health insurance company
- Join an association that offers health insurance options to its members at a discounted price
These are uncertain times for employers navigating the world of health care coverage for employees. Staying current with the law and examining all of the options is the way to provide the benefits employees need and want, without breaking the bank.
What steps have you taken to reduce health care costs for your business?