Health insurance continues to consume a large portion of a business' money and often payroll is the only expense that tops it. According to the U.S. Bureau of Labor Statistics, in March 2016, health insurance benefits cost small businesses (with less than 50 employees) an extra $1.61 for every hour worked by an employee. Multiply that by a 40 hour work week, and that comes out to almost $65 a week, $260 a month or over $3,000 a year, per employee.
In other words, health insurance costs small businesses a lot of money, and businesses more than ever need to gain a clear understanding of the issues driving costs and how best to manage them. In addition to some of the other topics we have previously covered, below are a few more issues we will be helping our members with as we approach the 2017 benefit year:
1. The Affordable Care Act will change, but nobody knows how much: The ACA essentially rewrote the rules for employers when it comes to providing health insurance, and the law also enforces those rules pretty rigorously. Businesses with less than 50 employees don't have to worry about it, since they're not required to offer health insurance to employees, but bigger companies need to always be in compliance, or risk a hefty fine. The law continues to have a huge impact on health insurance costs, although there are some segments of it that many feel need to be modified. It’s become a point of much political contention as there are large groups who feel the law should be entirely re-written, but this is unlikely. The next federal legislative session to bring changes in ACA, but nobody knows how drastic the changes will be.
2. Premiums will continue to rise: Many insurance rates won't be officially approved until mid-September, but businesses can expect to see increases and some carriers are looking to increase rates by upwards of 20%.
NARFA Executive Director Philip Healy believes, “As health insurance costs continue to rise faster than the broader rate of inflation, many businesses should look at higher deductible plans to control their costs, and offer voluntary benefit programs to round out a robust benefit plan so employees have protection against high cost medical events.”
The the growing costs of prescription medication is also a big driver for the increases. Prescription costs went up 9% in 2016, so providers have to find a way to pay the higher prices. Healy also said that prescription prices are only going to continue to rise, so “As we continued to plan for the 2017 benefit year, we put a big emphasis on programs for high cost drugs to help our members manage these rising costs.”
3. Costs will vary by employee age: Businesses with less than 50 employees also have to take age into account. Because of new ACA regulations, if a business has less than 50 employees, each employee receives a different premium rate based on their age. Employees are divided into age bands. Younger employees have lower premiums than older ones, and if an employee's family is insured on a plan, then each family member gets their own rate based on their age, too. The most used medical services are primary care, specialty care and pharmacy, so it's important for businesses to look at programs that keep these services affordable, as they will drive the majority of insurance costs.
The four pillars of any successful benefit program are finance, compliance, administration, and strategy. More than ever, having a partner who clearly understands your needs and how to help you control costs is critical to long term success for your business. As we always say, employee benefits are not transactional, and need to be customized to fit the unique needs of your business. The NARFA team sets members up for success with better and cost effective plan designs, the best national networks, voluntary benefits, administrative support, and much more.
Contact us today to see why hundreds of businesses in your industry continue to stay with NARFA and grow with us.