With insurance costs escalating almost beyond financial reach, determining which benefits to offer employees remains one of the toughest challenges for employers.
“Employers are scrambling for ways to reduce costs,” said Ike Trotter, president of the Ike Trotter Agency in Greenville.
Most employers are moving to higher deductibles and co-pays, but that is a short-term cure to a long-term problem, said Rex Haynes, president of Brown & Haynes Insurance in Southaven.
“How many times can we do that? Every insurance company seems to now be offering ‘consumer-driven health benefits,’ such as health reimbursement accounts (HRA) or health savings accounts (HSA). The goal is to get the individual more involved and more aware of the cost of their medical care,” said Haynes.
Under those plans, many employees mistakenly believe the cost of a doctor’s visit is $25, because that is the co-pay amount. Or they think the cost of their prescription is $20, the amount of their prescription co-pay, said Haynes.
“The theory behind HSAs is if the employee is more involved in the purchase of their healthcare, they will be more careful in how their money is spent,” he said. “This will, in my opinion, take a long term effort to educate employees. But it may offer some long-term savings.”
Employers and employees benefit from pre-tax savings reaped from such plans, said Trotter.
“By buying their personal benefits with pre-tax dollars through payroll deduction options, employees have a tax advantage,” he said. “And because their taxable salaries are lower, employers don’t have to pay as much to match Social Security.”
Even though such plans sound good, “when you line them up against a standard health plan, they’ll go for that standard health plan every time.”
“There’s the fear they could stand to lose a lot more than by going into a full reimbursement program,” said Trotter.
Rhonda Ferguson, president of Financial Concepts in Columbus, said, “As an advisor and an employer, I can tell you the costs are increasing, especially health insurance. It gets harder and harder to pay for complete coverage for employees. I know employers are having to ask employees to pay for part of the coverage. And while it’s a benefit employees don’t want to be without, they often can’t see what a benefit it is. It’s invisible unless they are using it regularly. But on the other hand, when more people are competing for fewer jobs, any benefits are appreciated.”
Ken Barlow, president of The DelKen Group, a human resources firm in Ridgeland, said more employers are offering better benefits packages because salary increases are getting smaller every year due to economic conditions and the rising cost of doing business. “So when employees can be given benefits that meet their needs — from good working conditions to good protection from illnesses to 401(k)s — the employer becomes more attractive than other companies even if salaries are not quite as competitive,” he said.
Overall, 401(k) contributions are remaining level, and employer matches generally range from 2% to 6%. Deductibles are rising to nearly $1,000, with insurance companies paying 80% of the balance. “Very few companies still offer 90%/10%,” said Barlow.
“Because of the impact of Katrina on the workforce, it’s going to change the entire recruiting and employment picture because some companies will not go back into business and highly qualified workers will be thrown onto the market,” said Barlow. “I’ve seen reports that some 400,000 people have been displaced concerning job loss as a result of the disaster. Some of those have evacuated to the metro area and will make Jackson their permanent home. There will be more competition for all jobs.”
The number of insurance agents marketing employee benefits packages is diminishing. An agent in Central Mississippi said he no longer bothers with it because “it’s so hard to tap into that market. There’s so much competition, as soon as you write up a package and put in the hours to do it, a payroll company swoops in and steals all your business.”
Contact MBJ contributing writer Lynne W. Jeter at firstname.lastname@example.org.