Health care now costs a lot for small business and its employees. According to the Kaiser Foundation, an employee’s individual policy at $7,000 annually in 2018 and the average family premium of over $19,000 is equivalent to a 5% increase from 2017 and 20% increase since 2008.
Many firms are asking their employees to pay about 28 percent to their employer’s premium in 2018, up from 26 percent in 2008 or by paying higher deductibles.
The Kaiser report found that 85 percent of covered workers pay an annual deductible for single coverage that has increased by as much as 55 percent over the last five years. The employees’ portion of co-payments for the doctor and hospital visits have also increased.
Health savings accounts
The Health Savings Account or HSAs is like a retirement plan for health care. The HSAs is partnered with a high-deductible health-care plan where both employers and employees can contribute as much as $3,500 (individual) and $7,000 (family) a year — pre-tax. The contribution is invested like a 401(k) retirement plan (employees 55 or over can put away an additional $1,000).
However, unlike a retirement plan, employees can withdraw funds every year to help pay for specified out-of-pocket medical expenses. Many small employers choose to offer HSAs over Flexible Spending Accounts because HSAs allows higher contributions and the ability to rollover any unused amount to the next year.
Self-insurance is another option that more small employers are considering. It works together with a level-funded or hybrid self-insurance plan. The employer pays for an employee’s out-of-pocket health cost up until a specified limit, and then the stop-loss insurance plan takes over. Self-insurance cost much lower because the employer pays only for those employees who need the benefit.
Association health plans
The Association Health Plan was finalized by the Department of Labor in 2018 and went into effect in January. This plan allows businesses to form associations, or buying groups, to get better terms when they purchase health-care coverage from insurance companies.
Unfortunately, the plans are having some problems. Some states, including Pennsylvania and New Jersey, have filed a lawsuit that challenges the rule’s legality which are against some of the 2010 Affordable Care Act’s requirements.
Association Health Plans may be a good option for freelancers or very small businesses that can be part of a group through their membership in a professional organization that carries the option nationally.
More options are coming up that intend to give the right health-care plans that will allow small businesses to control their health-care costs.