Dealing With the Rising Costs of Employee Benefits
By David Lewis
Reprinted from the Norwalk Hour
9/30/02
In today's business world while there is an immense amount of instability
and uncertainty the cost of business services has for the most part
remained steady, with one major exception. That would be the rising
cost of employee benefits. So what is a business owner to do in order
to manage this major expense while also delivering this key component
of the employment relationship to their staff?
Over the past 5 years there has been a steady increase in the cost
of health related insurance. Coming into the tail end of 2001, the
period of time where most businesses are renewing their coverages,
we were all facing the harsh reality of double digit increases in
our premiums, averaging at over a 14% increase per plan. As difficult
as that was to swallow this year's numbers are even larger, trending
towards a range of 17-22% overall. Businesses must truly focus on
this issue if they are to somehow afford to continue to provide benefits
to their employees. Allow me to offer up some advice on how to best
address this complex issue:
· Use an insurance broker, one who
specializes in health-related benefits. You need someone who is
intimately familiar with the carriers, their products and their
associated costs. Further, you want someone who takes the time
to learn more about your business and your employee population.
Lastly, look for a broker who demonstrates creativity and offers
up a high level of service. Most brokers are taking in a 4% commission
on your monthly premium. Don't pay someone that high a fee and
not get monthly support and service in return.
· In order to manage the rising expense
of coverage employers are looking to share the burden. While that
is both a practical and necessary step, be strategic in how you
accomplish this. Look for more subtle ways of increasing the burden
than simply raising their monthly contribution. Restructuring your
plan, with a focus on higher co-payments at the point of service,
will go a long way towards sharing the expense. Look as well at
your deductible amounts for out-of-plan services and hospital visits.
· Prescription drug expenses are rising
at an alarming rate. The days of offering a $2 co-pay are gone.
Seek out a 3-tier plan, that at the lowest point offers generic
medications, the mid-point name-brand, and at the high level the
most costly of medications, a distinction your carrier will make.
Distinguishing the tiers in this fashion will directly lower your
premiums.
· Show your employees what you spend
on them per year in total. Produce an annual summary that tallies
up items like benefits, taxes, other insurances, and salary. Awareness
is a powerful tool.
Benefits management is a very complex issue, not to mention one
that has a huge financial impact on businesses of all sizes. You
need to face the issue head on and, with an experienced partner and
advocate, strategically execute a plan that will make the associated
expense a bit more manageable.
