The rising cost of providing employee benefits is being decried on all fronts, but independent insurance agents say it’s especially difficult for their small business clients to keep up.
Ken Ray, senior vice president of the employment benefit division with Stewart Sneed Hewes/BancorpSouth agency, has observed the impact for some time as premiums rise with increasing health care costs.
The challenge? Paying for it
“The big question is how we pay for it. That’s the challenge,” he says. “Some small businesses buy it from insurance companies who offer it to small groups, and not many offer it any more. Others buy it on their own, based on the type and demographics of each group. Carriers pool together small groups around the country to help keep costs down.”
And then, some small businesses are dropping employee benefits. Ray says Mississippi has a large number of those who do not offer benefits. “The cost got too high or over the years they had to pass along the cost to employees. Then they wind up with the business having to drop it because the group goes out of existence.”
Scott Brewster with the Ross & Yerger agency in Jackson has dealt with employee benefits for small businesses for years and has watched costs climb.
“The first response is to pass the increase along to employees or change the deductible. After that, they change insurance carriers when they see that no more costs can be passed along. Families can’t absorb it, and wages are not moving up at the same rate.”
Employers, he says, are getting more creative with employee benefits and are trying new things. “Consumer-driven healthcare plans — that’s the big buzzword — and for that, consumers are basically being asked to be more cost conscious,” he says.
Brewster sees small businesses using health reimbursement arrangements (HRAs) with the employers setting up accounts to which the workers can contribute. HRAs are mostly the employers’ money compared to health savings accounts (HSAs) that are paid by employees.
“The HRA takes what an employer would spend on raising deductibles and puts it into a savings account,” he says. “Providing a way to do that is a good thing the government has done.”
However, word is getting out slowly about HRAs, and Brewster sees a learning curve between the employer and employees. “It’s not rolling out like you’d think it would,” he says. “The carrier will help set it up, and then it becomes the responsibility of the employer and agent to educate employees.”
He thinks HRAs will be a gradual trend in the marketplace, especially after more big carriers come out with plans for those businesses that are not self insured. “If they do, it will open up a lot more opportunity,” he added. “We’re a big proponent of that.”
Strength in numbers?
Ray also sees a variety of attempts by small businesses to continue providing employee benefits, including industry and trade organizations banding together to provide coverage for member businesses.
“It hasn’t been successful because it doesn’t address the costs of healthcare,” he says. “Healthy 25-year-olds don’t buy it, and the others who need it don’t have the young members to help spread the costs. The most innovative products are trying to address the costs, such as Health Savings Accounts. That also allows the employer to set them up and has helped the situation.”
He works with businesses, physicians, hospitals and carriers to help them work through this important issue. He also thinks the governor’s proposed Health Care Exchange is an admirable effort to address the problem for small businesses. However, he doesn’t feel it affects costs.
“If people can’t afford it, they won’t buy it,” Ray says. “We’ve met with the governor to offer suggestions, and we’re not trying to block it. We see it as a work in progress.”
Brewster notes that some employers have stopped paying for dental, vision and life insurance, and in some cases health coverage is totally paid by employees. Additionally, employers are trying to change consumer buying habits and improve the health of their employees through wellness programs.
“Employers are seeing that the health of their employees is part of controlling costs and will help overall,” he says. “We see some doing smoking cessation programs and giving credits for healthier people. They use it as an incentive.”
Weight loss and walking programs are also part of some employee plans. Reducing body mass may be part of an incentive to reduce premiums, too.
“All of this may help the trend toward wellness. It’s very much the trend to pay for checkups and preventative medical visits. Some things are covered 100% now,” Brewster says. “Employers are demanding more help with ideas, education and wellness programs, and we are listening to our clients.”
Contact MBJ contributing writer Lynn Lofton at firstname.lastname@example.org.