HOW SMALL BUSINESSES CAN CONTROL HEALTH CARE COSTS
Tax preparation and tax planning services are evolving as small business owners are turning to health care advisors and their tax professionals to learn how they may reduce their health care costs. As employers explore ways to reduce their health care costs, employees covered by those plans will be affected.
The Journal of Accountancy had an excellent article written on Feb. 4, 2014 by Ken Tysac that discusses how employers can possibly control their health care costs. Mr. Tysac hit the nail on the head when he cited industry experts who say that employers who consider cost-savings strategies must also evaluate their impact on various other factors, including employee morale, productivity, retention, and recruiting.
Cost-savings strategies discussed in this article included:
- Creating a self-insurance plan: A self-insurance plan is where the employer pays for the health care costs of its employees. While this type of plan may appeal to companies who employ younger and healthier employees, it would definitely be less attractive for those employers who have aged employees and are more prone to need medical care. If such a plan is used, it is very important that the plan provide for “stop-loss” insurance with an insurance company. Using such a provision allows the employer to control its outlays to a set amount per employee, but the insurance company would cover for insurance costs above that amount. Without a “stop-loss” provision, just one employee with a debilitating disease can have a devastating impact on the employer’s financial situation.
- Creating medical defined contribution plans: Similar to 401(k) plans, the employer pays a pre-determined amount to plans established by the employer on a private exchange and the employee selects the plan that works best for him. Employees would pay the difference if they select a plan on the exchange that is more costly than the employer’s plan.
- Employers create a high-deductible plan: This is a defined contribution plan that is often paired with a health reimbursement arrangement (HRA) plan or a health savings account (HSA) where employees use pre-tax dollars to pay for medical expenses.
- Review health care provider contracts: Employers should already be in the practice of meeting with their current health care provider to discuss ways to control health care costs as well as speaking with other health care providers to compare benefits and costs.
- Evaluate coverage of dependents and spouses: The Affordable Care Act requires employers to offer coverage to employees and their dependents, but not their spouses. Perhaps the employer will not offer spousal coverage, charge a higher premium to include the spouse, especially if the spouse is eligible for coverage under the spouse’s employer health plan but decides not to take that coverage. Plans that include “Employees plus family” or “Employees plus children” do not take into account the total number of dependents. The article discusses employers considering “employee plus one”, “employee plus two”, etc. coverages to better control health care costs.
- Change the total benefits package: Employers may wish to consider having employees pay for dental, vision, and other insurance coverages that had been paid by the employer and use those premium savings as an offset against the employer’s health care premiums.
- Consider wellness programs: The theory with these plans that if the employees participate in a wellness program that they are less likely to need medical care.
When considering ways to control health care costs, it is important that employers consult with their health care insurance provider, legal counsel, and their tax professional. Accordingly, if you want to learn more about controlling health care costs, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation.
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