Controlling Health-care Costs

Contractors have always had plenty to worry about, but their number one concern today centers on paying for employee health care. In fact, a recent survey* found that 71% of contractors said that the rise in the cost of health insurance premiums is their top challenge.

Contractors want to keep offering health insurance since it’s the benefit employees value most. Unfortunately, it’s also the benefit that has seen the steepest rise in costs over the last decade. 

What can you do if you want to continue offering health insurance to your employees but want to lessen the negative effect on your bottom line?

Increase Copay Amounts

Your employees will most likely understand that paying an extra five or ten dollars as part of their copay is preferable to shouldering 100% of the cost of a medical visit. By increasing the copay, you pass along the greatest burden of increased costs to employees who use the system most.

Consider Another Provider

If you haven’t already done so, have your staff research costs and coverage available through all the health-care providers in your region. You may find a provider that has done a better job of containing cost increases than your current provider.

Create a Wellness Program

Designed to encourage healthy behavior among employees, workplace wellness programs are being embraced by employers eager to reduce health-care costs. These programs operate on the premise that healthier employee lifestyles translate into lower rates of illness and fewer doctor and hospital visits. A report** by the U.S. Department of Health and Human Services shows a median of $3.11 in savings for every dollar spent on implementing a wellness program.

Wellness programs can offer free on-site flu shots, blood pressure checkups, and weight loss and stop-smoking sessions. Programs can incorporate employee education that focuses on health risks and preventable diseases, as well as health risk assessments that evaluate employees’ overall health based on lifestyle and personal and family medical history.

Consider Offering a Health Savings Account

Health savings accounts (HSAs) are something new in the health-care field. Though they are still evolving and largely untested, these tax-favored accounts could potentially help your business control spending on health care.

HSAs must be used in conjunction with a high deductible health plan, generally defined as a plan with a minimum deductible of $1,100 ($2,200 for family coverage) that limits annual out-of-pocket expenses (other than for premiums) to no more than $5,500 ($11,000 for family coverage). As an employer, you can fund all or part of your employees’ HSAs on a tax deductible basis. Employees may deduct their contributions. For 2007, the HSA contribution limit is generally $2,850 for an employee with individual coverage ($5,650 with family coverage). These limits will be adjusted for inflation in future years.

Money set aside in an HSA may be used tax free to pay qualified medical expenses that aren’t covered by insurance, such as doctors’ fees, hospital services, dental and vision care expenses, and prescriptions, among others. Any money not spent during the year is rolled over for use in subsequent years.

* CFMA 2005 Construction Industry Annual Financial Survey.

** “Prevention Makes Common ‘Cents,’” United States Department of Health and Human Services, September 2003.

“. . . workplace wellness programs are being embraced by employers eager to reduce health-care costs.”