I made a case last week that the average eye care practice would do well to improve the employment benefits offered to staff. Of the typical benefits provided by most employers, health insurance is the biggest challenge because it is very expensive and the cost has generally increased dramatically over recent years. Even with the high cost, I'm convinced that eye care practices are better off providing a health insurance benefit because it greatly improves your ability to attract and retain excellent employees.
A complete overview of health insurance is not possible in a brief article like this, but I will provide some practical insights to get you started in your own analysis.
Hard to shop
Shopping for health insurance is very time consuming because there are many complex options and it is difficult to find the information you need. Find a good local insurance agent to work with, but even then it will prove frustrating. One of the basic factors we all need when we shop is the price - but that is elusive until you can provide an employee census with names and ages, and a price quote is not really accurate until the insurance underwriter obtains actual applications from the employees. You will want to obtain quotes from a few insurance companies.
In my experience, some health insurance plans will provide a reasonable bid for the first year but when it comes time for renewal, the premiums may jump significantly; often 25% or more. That may be part of the marketing strategy or it may be based on actual claims experience with your employees.
You may want to poll your employees about their interest in health insurance and at what cost, and also benefit features, including the importance of drug plans, deductibles, co-payments and choice of physician.
There are many choices to explore, including PPOs, HMOs and health savings accounts (HSAs). In addition to working with a trusted insurance agent, I also recommend discussing the options with a CPA. CPAs work with many small business owners, know the norms, and know how to assist with the payroll deductions that you will put in place. They are often small business owners themselves and have navigated the waters for their firm. They may even recommend a specific insurance plan.
What to offer
There are unlimited options for how much of the health insurance cost your practice should cover. Some practices offer a flat dollar amount and then let the employees shop for individual insurance on their own. Some provide 100% of the premium. Some practices pay for 50% of the premium and withhold the rest of the from the employee's paycheck. There is no right or wrong, but the employee will judge the value of the benefit when they see the actual personal cost and they make comparisons with what other employers do.
There really is no official standard for small business in regard to health benefits, and it is changing rapidly as health insurance costs skyrocket and as businesses struggle in the current recession. Keep in mind it is very difficult to ever cut employment benefits, so design your policy to protect your business.
It should be noted that payroll withholdings for health insurance are made before tax withholdings, so the benefit is not taxed.
I certainly made some mistakes over the years with the health plan for my employees, but here are a few points to consider.
- I only provide a benefit for the employee. Dependents like spouse and children may be included in our company health plan, but the employee is charged for 100% of that portion of the premium.
- It is very important that the employee pay some portion of his or her own premium. In the old days, an employer might pay 100% of the premium cost, but that makes it very difficult to ever shop for a new plan or to reduce benefits to cut costs. If the employee has some stake in the cost, they are happy to look at more economical alternatives. Having the employee pay a portion of the premium prevents those who can obtain insurance through a spouse from joining your plan needlessly.
- I believe the employer should pick up the majority of the cost, but the employee should have a significant stake. I prefer percentages to dollar amounts because dollars change too rapidly and can quickly become out of date. I settled on the practice paying for 80% of the premium for the employee.
- I offer a PPO plan because it includes the vast majority of doctors in my area and freedom of choice is extremely important to people.
- I moved to a high deductible ($2,000 per individual) to keep premiums lower.
- I include basic drug insurance coverage because the cost of prescription drugs is prohibitively expensive for many people without it.
- I don't offer dental insurance or vision plans in an effort to keep costs down.