NASHVILLE COMPUTER owner Charles Henson faced an annual dilemma: a hike in the premium for the Tennessee MSP’s group healthcare plan. “The way that we typically would save money in years past is we would go with a higher deductible, which affects the individual or the family that we’re protecting,” he says.
The other option Henson, like many business owners, has employed is to switch carriers when rates go up. “That’s a disruption for all employees,” Henson notes, “because every year you don’t know who your insurance provider is, [and] your doctor may or may not fall into your plan.”
Unlike other recurring business expenses that are more predictable, such as rent and payroll, insurance “is always a 12-month gamble,” says Rusty Goodwin, executive consultant for The Mid-State Group, an independent insurance agency. Yet, he adds, “Employee benefits is the second largest expense after payroll for an employer.”
Charles Henson
It’s also an important tool for hiring and retaining skilled staff at a time of exceptionally low IT unemployment.
To make providing good health insurance more sustainable, there are some steps MSP owners can take.
One is to make benefits management an ongoing exercise rather than an annual event, recommends Dennis Boyle, division vice president, small business, at Gallagher, a global insurance brokerage, risk management, and consulting services firm. “Looking at it just once a year creates some challenges because you’re trying to do a lot in a compressed timeframe,” he says, causing you to miss potential opportunities.
He recommends working with a benefits consultant who can offer a market analysis on products and trends. “So as you approach your renewal, you have a clear picture around what direction you want to go in.”
Goodwin says to look for a plan that is, first, sustainable. “It’s got to be something that the employer can keep offering year after year.” It also must be usable, meaning co-pays and deductibles can’t be so high that employees can’t afford to go to the doctor, he adds. Finally, the plan should not include benefits that aren’t being utilized or that nobody needs. “If you do those three things properly, at the end, what you have is real savings.”
He also encourages business owners to weigh the pros and cons of different health insurance mechanisms:
- Fully funded: The employer pays a yearly premium to the insurance carrier and employees and their dependents may pay deductibles or co-payments. This is the least risky but most expensive option typically.
- Self funded: The employer operates its own health plan and pays the carrier a fixed fee monthly, plus any variable costs. This is usually the least expensive but riskiest option should you experience catastrophic claims.
- Level funded: An employer pays a health carrier a set monthly payment to cover estimated costs. If claims are lower than estimated, a year-end rebate is issued. This is the middle ground between fully funded and self funded.
If you do decide to change carriers, be sure to educate employees about the new plan, Boyd advises, and be transparent about why you’re switching. “It just creates more clarity and then helps the employees understand the decision process.”
Goodwin cautions business owners about adjusting deductibles and out-of-pocket costs upward in order to afford a plan, because if individual costs become too high, employees may leave.
In Henson’s case, when he recently faced a 30% jump in his premium, he worked with Goodwin to “look at our policies and see what we had, how we’re doing it, and put us into a portfolio that allows us to flatline and or stay closer to what we have been paying in years past.”
His new increase was just 3%. “I can do anything for your IT [needs] … but when it comes to healthcare, that’s where we trust in a professional to help us save those costs so we can continue giving those benefits to our employees.”
Image: iStock / Andres Victorero
