Cost Saving Tips
TIPS FOR SAVING MONEY ON
YOUR EMPLOYEE BENEFITS PROGRAM
By: Jonathan Greer
Benefits Broker, Rockridge Health Benefits
Offering health benefits is a proven way to recruit and retain employees. That’s especially true in this tight labor market – I’ve spoken to many employers struggling to hire and retain good employees. At the same time, many employers don’t know what to do about the rising cost of providing health benefits. For employers that don’t currently offer benefits but who see the need in order to compete for labor, adding this new overhead cost can be a difficult decision to make.
But offering benefits doesn’t have to break the bank. Here are several ways to offer robust benefits and save money at the same time:
- Offer an HMO option along with a PPO: HMOs are the most affordable insurance option for businesses and individuals, with monthly premiums 15-to-20% lower than PPO plans. If you offer employees a choice, many will opt into an HMO plan, immediately saving you money. There are even more savings to be had if you offer the HMO as a “baseline” plan. In that scenario, you offer to pay a fixed contribution for the cost of the baseline plan, and if they choose to upgrade to a more expensive plan, they are responsible for the difference. This is especially attractive for businesses on a budget because it provides cost certainty.
- Lower your tax bill by earning federal tax credits: Eligible small business employers can receive two years of tax credits for up to 50% of the cost of providing health insurance. To qualify, you must have 25 or fewer FTE employees earning an average of less than $50,000 annually, or 10 or fewer FTEs earning an average of less than $25,000.
- Give employees healthcare debit cards: Instead of offering expensive PPO plans, you can offer a lower-cost High-Deductible Health Plan (HDHP) and then issue debit cards – funded by the employer – to pay most of their out-of-pocket expenses. This will lower your costs because it is all but impossible that everyone will need medical services up to the amount of their deductibles. Experience shows that the cost of paying out-of-pocket expenses for employees rarely exceeds about 22% of the total deductible exposure. Combine that with the significant cost savings from offering an HDHP, and you can save thousands each year while still offering excellent health insurance.
- Reimburse employees for their premiums: You can establish a tax-advantaged Health Reimbursement Account (HRA) and set a fixed amount of money aside for employees to use to pay some or all of their premiums. The reimbursement is tax-free to employees, which also lowers your payroll taxes.
- Offer voluntary benefits: You can improve your benefits program for free by including low-cost voluntary benefits such as short-term disability or critical illness coverage. These add-ons are generally very inexpensive and 100% of the premium is paid pre-tax by the employee.