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    Pinching Pennies on Insurance Premiums

    Feb. 1, 2003
    by Terry Nicholson Are you feeling the pinch? If youre a small business owner, chances are youve felt the pinch in a big way in the past couple of years

    by Terry Nicholson

    Are you feeling the pinch? If you’re a small business owner, chances are you’ve felt the pinch in a big way in the past couple of years — the pinch of rising health care costs. If you look at the costs of health care, the one item that’s been as certain as death and taxes is rising premiums.

    Yet, employees closely guard their right to health insurance through their employer and consider it one of the most important benefits offered through the workplace. Simply put, if you don’t offer health insurance, you’re jeopardizing your ability to attract and keep the best workers.

    At the same time, most employees really have no concept of how much health insurance costs. Nor, in most cases, do they pay any of the premiums attached to their health insurance.

    As a result, employees don’t hesitate to see a doctor for any situation, and ask for brand name prescription drugs they may have just seen in a newspaper or television advertisement.

    How Did Health Care Get So Expensive?

    Health care is more expensive now than ever before. In fact, these costs are rising faster than our country’s Gross Domestic Product.

    According to the U.S. Department of Health and Human Services, between 1960 and 1998 our GDP increased 16 times. During the same amount of time, our national health care expenditures increased 29 times.

    Health care spending, today, makes up 13% of our GDP, while in 1960 it was only 5%.

    What does that break down to? In 1960, health care spending averaged $141 per person. In 1998, that amount had already leaped to $4,094. Today, it’s even higher.


    One reason is technology. Medical technology is a fascinating world that allows your appendix to be taken out through a simple, tiny incision. Detection of diseases is better. There are better ways to treat cancer and other terminal illnesses.

    So, technology is obviously a good thing. However, it’s also a very expensive thing, accounting for 30% to 40% of the increase in health spending, according to various studies.

    Along with the increased level of technology in the medical field, the government has also made it mandatory for certain procedures to be covered by insurance. When insurance providers are required to cover high-cost procedures, the cost inevitably trickles down to business owners in the form of higher premiums.

    The state of the hospital system also accounts for some of the rise in health care costs. Hospital costs have risen over the past few years, and with consolidation occurring amongst hospitals, there is less competition to keep rates in check.

    One of the largest, and most visible, areas of increased health care spending is drugs. Drug companies are now permitted to advertise their brands of drugs, and they are becoming as common on television as car and beer commercials.

    In fact, a baseball fan could hardly watch a World Series game last year without seeing Rafael Palmeiro hit one out of the park for Viagra.

    This high level of exposure has caused a flood of people to head towards higher priced, brand name drugs. More people using these drugs means even higher premiums.

    These factors are turning the prospect of health insurance into a nightmare for small business owners who must bear the weight of higher premiums. Getting rid of health insurance altogether in your business would only drive your employees away, but how can you keep the rising tide of health care costs at bay?

    What Can You Do?

    As a small business owner, you might feel you have no alternative when it comes to paying higher health insurance premiums and waiting nervously every year to see how much they’ll increase. However, the fact is there are some things you can do.

    Shop around: The easiest thing is to simply compare plans to find the one that suits your company’s needs at the lowest cost. The Internet is an amazing resource for quickly comparing insurance plans.

    The Health Insurance Association of America (www.hiaa.org) has an informative report on health insurance in small businesses. Other websites such as www.ehealthinsurance.com and www.healthmarket.com will allow you to compare several health care plans. Also, health insurance providers will normally list their plans in great detail on their sites, as well.

    Defined contribution: One option employers are turning to is a defined contribution plan. These plans allow the employer to set a determined amount to put towards each employee’s health care costs. Your employees can choose which plan they’d like to use, and the employee then pays any premiums above your set limit.

    This type of program tends to make employees more aware of where they are spending their health care dollars.

    Health care savings accounts: These plans allow your employees to place a part of their pre-tax salary each pay period into an account that can then be used for health care costs. Your employees will then be saving their own money, tax-free, to pay for their health care costs. This type of plan provides tax savings to the employees but also to the employer.

    Pass the buck: Another thing some small business owners are doing to keep their health insurance going is to raise the deductible or co-payments their employees must make. Asking your employees to shoulder some of the health care burden is a positive alternative to not being able to offer insurance at all.

    Join an association: Most large corporations are able to negotiate lower premiums from their insurers because of the clout that they have. But, what about the little guy? There are associations that small business owners can join to create this type of clout with insurance providers. Research associations that may exist in your state.

    Get specific: One way to keep costs down is to remove specific benefits from your health care coverage.

    For example, you may be able to remove a prescription card from your health care coverage to save costs while still offering health care. You may also be able to provide employees drug cards offered by various private companies and urge them to use more generic drugs in place of costly name brand ones.

    These are a few actions that can limit the pain from the health care pinch right now, but what about preventing it in the future?

    Insurance premiums will likely continue to rise as technology continues to improve and the majority of our population, the baby-boomers, continues to get older. So, how can you take some preventive action to reduce health care costs into the future?

    Knowledge is Power

    There are several actions you can take to reduce future health care expenditures, and all focus on your employees. A large portion of the illnesses and diseases in our world today comes from lifestyle choices. So, one action you can take is to educate your employees on healthy lifestyles.

    Education: The first action to take is educating your employees. Inform them of the benefits of a balanced diet and exercise. Bring in a guest speaker to your office to talk about these issues. A great resource is a local college or university. You can also educate employees on the actual costs of health care. Provide incentives for choosing generic drugs or a less-costly hospital for routine illnesses.

    Exercise: A great way to promote more healthful living amongst your employees is to offer them discounted rates at a nearby health club. With daily exercise, they’ll become healthier individuals, which will reduce health care costs, reduce absences from work, and boost morale.

    Promote healthy habits: Don’t just educate your employees about health. Support them becoming healthier individuals. Offer healthier foods in the vending machines in your office. Bring in fruit in the morning instead of donuts. Make your workplace a no smoking zone. By reinforcing good habits in the workplace, they’ll carry over to the rest of your employees’ lives.

    Promote prevention: Take preventive measures to keep your team healthy. Offer them flu shots when flu season comes around. Promote a health information line or nurse phone line they can call for information before rushing to the doctor’s office for minor items.

    The key to keeping your health care costs down is prevention, and educating employees on healthy habits is the first key to prevention. By looking for different insurance plan options, making your employees more responsible for their own health care costs through higher premiums, and educating your staff on the benefits of a healthy lifestyle, you’ll be able to avoid some of the health care pinch in the future.

    Terry Nicholson is president of AirTime 500 TM, an organization dedicated to providing HVAC contractors with a competitive edge by providing proprietary tools, management/expertise, marketing systems, training, and buying clout that leads to freedom of time and financial independence. For more information on AirTime 500, call 800-505-8885 or email Terry Nicholson at [email protected].