Wish That Group Health Insurance Wasn’t So Expensive?
Part I: A Tough Nut To CrackByRaymond D. MatkowskyAre you a small business struggling to pay your employees health insurance premiums? Do you even offer health insurance? Yes or no, you’re not alone! While all companies are struggling with healthcare costs, the deck is stacked against small businesses. Insurance companies will not negotiate prices with groups of less than 50 employees. Plus, there is very little information of value and a lot of bad advice being given out. If you are a small business, one of the biggest challenges you have is to find a way to provide your employees with health insurance and not go bankrupt. This is not a problem that is going away soon, but there are steps that you can take now. However, before taking these steps, you need to realize three facts.
No Two Companies Are Alike
First of all, insurance rate calculations are complex. Your neighbor may have a company that appears to have a nearly identical employee base, but you are quoted a 40% higher premium because one of your employees had surgery three years ago. Each individual group will have a unique rate and no two will be alike.
There Is No Silver Bullet
The second is that there is no “silver bullet.” You will not find one single item that will reduce your rate dramatically. You will have to put together several strategies to reduce your rates a meaningful amount. Each one may reduce your premium by only 2 to 3 %. However, if you put three or four of these together, you may be able to save your business 10% a year. The effort can be well worth it.
For example, if you have six employees with each costing you $3500 per month (example taken from the 2006 New Jersey Banking and Insurance Department rate comparison chart), you would be paying $21,000 per month or $252,000 per year. A 10% savings would be $25,200 per year. Most of this would go right to your bottom line, since the savings would be pure profit.
You Cannot Rely On Outsiders
The third is that you cannot rely on anyone outside of your organization to find you the best deals available. You are going to have to do this yourself or delegate someone to put in the time necessary to find a package that is advantageous to you. This person will have to separate the good from the bad advice being presented as the gospel truth.
As an example, one such recommendation is to reduce your costs by increasing deductibles and employee co-pay. This is a bad piece of advice. Blindly increasing your policy’s deductible and co-pay is most beneficial to the insurance company not you. In fact, it maybe hazardous to your company’s health!
Part II of this series will review what you will need to be familiar with and what you should really be concerned about when evaluating quotes. Part III will explain what factors you can control and what factors you have no control over. Part IV will offer you some suggestions that may help you reduce your premiums. Part V will give you reasons why it is wise to offer your employees healthcare benefits
Copyright © 2002 Raymond D. Matkowsky
Raymond D. Matkowsky is the Chief Executive Officer of Data Stats, a consulting firm specializing in system or product improvement through mathematical and scientific modeling. He can be reached at rdm@datastats.com or through Data Stats’ web site at www.datastats.com |
