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Healthcare options for small businesses

Q: As a small business owner, I feel like the costs of health care are going to bury me. Do you have any recommendations on ways to control costs but still offer a competitive option without irritating all of my employees? I don't need to offer the best plan out there but just something that is an option for most of my employees.

A: As health benefit costs increase, many employers are looking at alternative ways to offer competitive plans but better control costs. You are not alone. Many of our clients are considering many more options this year.

I consulted Damian Bonaventura, Principal of Northern Benefits of Massachusetts. Bonaventura works with many small- to mid-sized businesses within New England. Bonaventura offered this advice:

There are at least three ways to control health care costs while still providing quality coverage to attract and retain employees. The first and most common option is to offer a health reimbursement arrangement (HRA). The HRA is set up and funded by the employer to help employees pay for certain medical expenses such as deductibles and co-payments. HRAs often force employees to make better decisions about their health care and perhaps even explore lower cost services. An HRA can be paired with any health plan. Employers will often pair the HRA with a high deductible health plan (HDHP) resulting in lower premiums.

Another option is to establish health savings accounts (HSA) for your benefits-eligible employees. An HSA is an employee-owned bank account that can be funded by both the employee and the employer. Employers can help fund these accounts by using the savings incurred if a high deductible health plan is purchased. Unused funds roll over and accumulate year after year.

The third alternative is partial self-funding. Unlike community rated health plans, a partially self-funded plan uses the group's actual health status as the basis for the health plan rates. With partially self-funding, the employer finances the company's health plan, funding claim expenses up to a pre-determined amount. If actual expenses are less, the employer can retain the savings. If expenses are greater, there is a limit on your financial risk through stop-loss insurance protection.

Many small businesses are struggling with how to offer competitive plans while reigning in costs. A good benefits broker should work with you to help educate you on the many healthcare design options. A good broker should help you design a plan that meets your needs as well as the needs of your employees. Lastly, you should consider using your broker to also help communicate the plan design to your employees. Employees will often accept and embrace a new healthcare plan design if they fully understand the plan.

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