How You Can Control Health Insurance Costs for Your Business

Key Podcast Highlights

Healthcare costs are expected to rise significantly in the next year.
- They’re expected to increase 6.5% for 2024.
What Can Employers Do About Rising Healthcare Costs?
- Stick to high deductible plans. If you have a high deductible health insurance plan, you also need to combine it with an HSA.
  - With an HSA, you and your employees can contribute money pre-tax each year.
  - If employees don’t use up the funds in an HSA, they can carry them over into the next year.
  - When an employee leaves the company, they can take the money with them.
- You can also consider an HRA, health reimbursement account in addition to healthcare offerings or in lieu of them.
  - These allow employers to put a fixed amount of money away for employees healthcare, per employee.
  - The employee can then take that money and get healthcare on their own.
  - This takes the employer out of the whole administration process. There’s more flexibility.
  - This is a good option is you can’t afford to increase healthcare premiums each year because you decide how much you’re going to contribute to your HRA.
- You can also consider a captive insurance program.
  - This is just like self-insurance.
  - In fact, a lot of smaller companies are self-insuring through captive insurance programs.
  - You can google these providers to find one that’s right for you.
  - Essentially, you’re joining up with a thousand other like minded companies, and pooling costs together. You’re joining a buying group for health insurance.
  - Its you and a thousand other companies are buying health insurance together this means you get a more favorable price.

Transcript

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Gene (00:01):

Hey everybody and welcome. My name is Gene Marks and thanks for joining me this week on The Hartford Small Biz Ahead podcast. I wanna talk to you this week about health insurance. Why? Because very recently, the Wall Street Journal reported that healthcare costs are going to rise significantly in the next year. In fact, according to two surveys that came out from benefits firms, both Mercer and Willis Towers Watson, healthcare costs are looking to go up around 6.5% on average for 2024. Such a boost according to the Wall Street Journal, could add significantly to the price tag for employer plans that already average more than 14,600 a year per employee. So healthcare costs are going up and that’s an issue, obviously for us as business owners. What do we do about something like that? So, lemme share with you just some advice on controlling your healthcare costs in 2024 that may help you.

Gene (00:54):

First of all, you definitely wanna stick to high deductible plans where you can. So if you can contribute or at least offer these health insurance options with the highest deductible plans, that’s what most of my clients are doing. However, if you have a high deductible health insurance plan, you need to combine it with an HSA or health savings accounts. Health savings accounts are like a 401K for your healthcare, your employees, and you can contribute money pre-tax per year and then take that money out and use it for unreimbursed medical expenses. Anything from acupuncture to certain over the counter pharmaceuticals that you buy. When you’re using these funds, if you don’t use them all up, they will carry over to the next year. And as you build up these funds, you can invest them in different alternatives to get even more of a gain on those funds as well.

Gene (01:45):

HSAs are really good, and when employees leave a company, they can take the money with them. So they like that they’re portable, they’re be way more flexible than flexible spending accounts. So get an HSA for your business, a health savings account if you’ve got a high deductible health insurance plan. That’s number one. Number two, consider an HRA or health reimbursement account. An HRA can be in addition to your healthcare offerings or in lieu of. With a healthcare reimbursement account or an HRA, you basically put a fixed amount of money away for your employee’s healthcare, per employee. It’s pre-taxed so they don’t get taxed on it. You get a deduction for it, but then the employee can take that money and get their own health insurance on their own. They can go to the healthcare exchanges or they can go to maybe a broker that you recommend as well.

Gene (02:35):

But it takes you out of the whole administrative process, the whole decision making process. It relieves you of any fiduciary responsibility and frankly, it gives a lot more flexibility to your employees. Plus, if you don’t, if you can’t afford to increase your health insurance premiums year over year, you decide how much you’re gonna contribute to the HRA for your employees. So, in a down year or a slower year, maybe you contribute a little bit less or you only contribute the same, so you’re not subject to any price increases from your health insurance companies. So it’s another option that gives you more options and more flexibility. Good, good on with HRAs. I’m seeing a lot of my clients do that over the past couple years. Finally, consider a captive insurance program. Now, a captive insurance program is just like self-insurance and over time self-insurance have always been sort of the area for like big companies but that’s changed.

Gene (03:32):

A lot of smaller companies are now self-insuring through captive insurance programs. Where do you find them? Just Google captive insurance and your state or your city, or just generally captive insurance. Because there are many providers that are national. If you join up in a captive insurance program, you’re essentially joining up with a thousand other like-minded companies and pulling your healthcare costs together. You’re sharing the risks and the rewards with each other. But because it will be a large pool, you’re essentially joining a buying group for health insurance. So it’s not just you buying your health insurance from somewhere, it’s you and a thousand other companies buying their health insurance from somewhere, which basically means that you can get your health insurance at a more favorable price. In addition, good captive insurance companies, they are run by experienced people with lots of background in the healthcare industry.

Gene (04:27):

You and I really don’t have that, no offense. So here we’re basically outsourcing and delegating the responsibility of buying our health insurance and making the right decisions to people who frankly know what they’re doing, probably more than you and me. So captive insurance programs, because of all those reasons, have really been growing in popularity with small businesses and they’re reaching an economies of scale. So consider a captive insurance program. You might wanna use one of those to replace your health insurance provider altogether. So let me recap. Health insurance costs are going up next year. Some of the major providers are projecting as much as a six and a half percent increase in 2024, but you do have some actions that you can take. Number one, consider an HSA or a health savings account if you’ve got a high deductible plan, and you should have a high deductible plan.

Gene (05:15):

Number two, consider opening up an HRA, health reimbursement accounts, either with a plan or without one, so that you can put pre-tax money away and your employees can take that money and buy their own health insurance, and you don’t have to get involved in that decision. Plus, you have more of a control as to how much you contribute. Finally, you might want to consider participating in a captive insurance program. It’s a self-insurance program where you’re basically joining a buying pool of a bunch of other, like-minded business owners who are pulling their resources for health insurance and buying it at hopefully a more affordable price. And assuming both the risks and the rewards of such a program. Those are some of the actions that I would recommend this year to try and control your health insurance costs. You gotta provide some type of health insurance benefit to your employees, even if they’re paying a hundred percent on their own, you still have to be able to provide some type of benefit, and that’s why some of these options might be helpful for you.

Gene (06:10):

Hope this helps in your decisions with health insurance this year. It’s gonna be a tough one for out rising health insurance costs, but hopefully that’ll help you navigate your way through them. You’ve been listening to Gene Marks and this is The Hartford Small Biz Ahead podcast. If you need any advice or help or tips in running your business, please visit us at SmallBizAhead.com or SBA.thehartford.com. Thanks so much for joining me. I’ll be back next week with a few different tips to help you run your business. I look forward to talking with you then. Take care.

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