I was in an exploratory meeting with a potential prospect this week, and as is the case with many business owners today, a primary concern with this business owner is the escalating cost of healthcare for his employees. With close to 50 employees and no true human resource administrator in house, this company is in an ideal situation for the comprehensive outsourced human resource management program Axiom HRS is built on. Not only was I able to identify a need for increased attention to human resource administration and compliance, but I uncovered a significant pain and struggle between this business owner’s desire to provide health coverage for his aging staff and the health insurance premium dollars being spent.
Some very direct questions regarding the history of the plan and the demographics of the company led to the following scenario:
- 47 eligible employees
- 3 on plans of spouse
- 24 participating
- Company spending close to $400,000 in annual premiums
- $2500 High Deductible Plan with HSA
- No company contribution
- Company paid 90% of premium for single coverage
This set of circumstances and the high percentage of company paid premium was disturbing to me. Any competent broker or benefits consultant in today’s environment would suggest that 90% company paid premium would be positive for participation numbers and in this particular case, 90% is failing miserably, and premiums are increasing 20-30% per year as only those employees who incur regular claims are participating. Even 10% of $700 per month of a single high deductible plan encourages healthy young people to roll the dice. Unless an unforeseen event occurs, a 25 year old single man will never meet the $2500 annual deductible, and all monies for medical care will come directly out of his pocket or self-funded HSA account anyway. And try to look a 25 year old healthy man who makes $10 per hour in the eye and explain to him why he should spend $70 per month to participate in a health plan that he does not use. Or even worse, try explaining to the insurance company why virtually every participant in a small group health plan exceeds their deductible year after year.
The bottom line is that a short sighted approach to reducing premiums does not work. This group needs the participation of all employees so that the young healthy staff members who are not participating in the plan currently become participants and spread the risk pool. Spending additional dollars in 2012 to cover 100% of single premiums would achieve the desired full participation, and would undoubtedly lead to a more attractive group to take to market. There is a decent chance that the increased participation would actually lower the aggregate cost of insurance while accomplishing the employer’s goal of coverage for the entire staff.
I have no interest in selling insurance plans as this is not a profit center for Axiom Human Resource Solutions, but I do have a vested interest in making certain that my clients are in the best strategic position to weather the storm of spiraling premiums. Maybe there is a new and refreshing way to strategize for your group or maybe you just need a fresh set of experienced eyes on your group health plan that have absolutely no economic stake in selling you a product. As I have mentioned previously, human resource management is a vital part of every business, and outsourced solutions are often the answer.