Health Care Costs Continue to ClimbWritten By Mary Sedor
Article Date: 07-01-2007
Copyright (C) 2007 Associated Equipment Distributors. All Rights Reserved.
Dealers are exploring new options to deliver attractive health insurance benefits.
Of the approximately 44 million people uninsured in the United States, small business employees are one of the fastest growing segments. Roughly 15 percent of small business employees don’t have coverage.
Recently AED surveyed member dealers on their health care costs, coverage, and concerns. (Dealers with union contracts didn’t participate in the survey.) The responses revealed group health insurance costs have continued to rise. In 2007, the majority of dealers faced an increase of 1 to 24 percent compared to 2006. For a lucky 31 percent, costs remained the same.
As costs have risen, nearly 40 percent of dealers have had to cut insurance benefits for their employees. Nearly half have shifted more of the financial burden to their employees. Dealers that cut benefits typically increased deductibles and total out-of-pocket expenses.
Coverage options vary, but the majority of dealers offer their employees a PPO, although a few offer HMOs. Only a handful provide Point of Service insurance, which is like an HMO with co-pays but allows the insured to obtain medical services out of network, usually by paying a deductible and co-insurance. None of the dealers that responded to the survey offered employees an HSA or HRA.
The majority of dealers – 88 percent – offer prescription coverage, and 75 percent offer dental coverage. Just over 40 percent of dealers provide vision care benefits.
One the biggest concerns at Stewart & Stevenson, an equipment dealer in Houston, Texas, is “designing plans which will fulfill the needs of the demographics of our employees, while maintaining affordability to the employee and the company,” says Terry Hatcher, vice president of human resources.
The average employee contribution has continued to rise since 2000, climbing 143 percent in seven years. Average out-of-pocket costs for deductibles, co-payments for medications, and co-insurance for physicians and hospital visits rose 115 percent during the same period.
The average cost of employee coverage is $73 per month – just $3 shy of the national average of $76. On the low end of the scale, some dealers charge employees as little as $35 for single coverage. On the high end, dealers are charging $195 for single coverage.
For employee plus spouse coverage, dealers charge employees $195; employee plus children averages $202. The national average for family coverage is about $300.
“We want to make sure we can maintain the same level of benefits from year to year, but it’s getting harder and harder as insurance premiums continue to rise between 10 percent and 15 percent each year,” says Amanda Schutz, director of human resources and marketing at Folcomer Equipment Corp., a Case, dealer in Aberdeen, Md.
What can dealers do to lower costs and still provide benefits? Some are turning to wellness programs for their employees.
“We now have access to disease management, health risk assessments and wellness programs through our Third Party Administrator,” says Michael DeVries, human resources director at Cummins Mid-South.
“Converting this data into tangible health care improvements for our associates is a main concern for us. The education and use of these programs are critical to improving our associates’ health and reduction of future claims.”
Healthier employees mean fewer claims and lower costs.
“If we can’t get a handle on controlling costs, how do we continue to offer our current benefits to employees without a reduction in coverage,” says Bernice Provencher, human resources manager at Chadwick-BaRoss, a Volvo dealer in Westbrook, Maine. “We have implemented a wellness program in our company and hope to see benefits in the future.”
Decreasing benefits for employees is difficult and it can make attracting the best available prospective employees more challenging. Forty-four percent of dealers say a benefits package is “very important” in attracting new hires.
While there is no clear solution, Wells Fargo, a small business insurance provider, recommends these cost saving tips for small businesses:
- Do your homework. Survey your employees about their insurance needs. Do their families require insurance? And consider insurance plans that require second opinions and include built-in cost containment features.
- Talk to your employees. Design a plan that includes employee contributions toward the cost and keep employees informed of changes in health care costs and rates. Create a committee to investigate the group health insurance market.
- Educate your employees about the cost of health care. Encourage employees to request second opinions and alternative treatments. Help employees understand what is and
is not covered under the plan.
- Create a health-conscious work environment. Limit smoking at work to designated areas or eliminate it entirely. Offer classes and incentives to help employees quit smoking. Subscribe to a newsletter that offers health-conscious information to your employees, and offer healthy choices in vending machines and alternatives to pizza and beer at employee events. Promote moderation in the use of alcohol and establish a zero tolerance drug and alcohol abuse policy. Add a fitness center, offer memberships in health clubs, and encourage or provide incentives for employees to participate in weight loss classes and programs. Provide your employees with health education materials and resources.
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