What Do You Do With Health Care Costs Continuing To Rise?
Health insurance premiums have been a big problem for small businesses for some time, and with the Affordable Care Act now before the high court, we may not actually see any benefits of federal legislative relief any time soon.
So what are you to do? Whether you are solopreneur who is self-employed or are a bigger business with employees, the good news is that you have options. Sure, some are better than others, but there are options.
5 Ways Small Business Can Cut Health Care Costs
1. Shop: The first, best, and easiest thing to do is shop around. For example, our friends at Ehealth offer a great way to compare policies and shop for coverage. Also, the plan you bought a few years ago may have cheaper alternatives today. By shopping around, you can compare quotes for scores of different plans.
Beyond shopping, here are some other ways to reduce your health care costs:
2. Cut out the extras: If your plan offers dental and vision for example, you may have to consider cutting those. Your employees will still be covered in the areas where it really counts. No, I certainly do not enjoy advising you to cut employee benefits, but I also understand that health care costs are a major concern for many small businesses, and cutting benefits is better than cutting jobs.
3. Increase visit co-pays: The higher the co-pay for your employees when they visit a doctor, the lower the premium.
4. Increase prescription co-pays: Similarly, by increasing the amount your employees pay for their prescriptions, you can reduce your premiums.
5. Create a Medical Savings Account (MSA): MSA are like medical IRAs. Pre-tax dollars are deposited into these accounts and the earnings are tax-free while sitting in the account. MSAs must be created in conjunction with an IRS qualified “high deductible” health plan. Once the amount saved in the MSA reaches these levels, you can use these pre-tax dollars to pay for what is typically a much lower cost health plan.
MSAs have several things in their favor. They lower your premium. The savings are tax-deductible and earnings are tax-free. Medical expenses paid out as a result are tax free. And, upon a disability or the age of 65, the funds saved can be taken out and used for anything, without penalty (although taxes will finally come due at that point.)
Whatever you choose to do, it is important to know that employees consistently rank “health care benefits” as the most important extra benefit they get from employment. So as you make your choices, you must weigh carefully your own need to reign in costs against any employees’ needs for adequate health care.