Business Law Articles

By Rieva Lesonsky

It remains to be seen whether all or part of President Obama’s Patient Portability and Affordable Care Act (PPACA) will be struck down by the Supreme Court, and how any changes to the law would affect small business owners.  But as we wait to hear the Court’s ruling, one thing is certain: The cost of providing health insurance is going up. Unless you’ve got money to burn, this is a concern. How can your small business contain the rising costs?

Towers Watson/National Business Group’s annual survey of how large businesses about how they are handling the rising cost of health insurance offers some insights that can help small companies, too. Here’s what you can expect for 2012 and beyond:

There’s good news and bad news. Health care costs are increasing, but at least the rate of increase is fairly stable—5.9 percent in 2012 as opposed to 5.4 percent last year. The average cost per employee of providing health insurance will reach $11,664 in 2012, up from $10,982 last year.

Both employees and employers are sharing the burden of these cost increases. Employees’ share of costs have increased 40 percent compared to five years ago, while employers’ share of costs has increased by 34 percent.

What are employers doing to keep costs from spiraling out of control? In general, big businesses in the survey were planning some big changes to their health care benefits in the coming years. The key trends:

• 40 percent are focusing on developing a company culture where employees are accountable for their own health.
• 40 percent are focusing on reviewing their overall benefits mix.

Making Employees Responsible: Companies that encourage employees to take accountability not only for their health but also for the cost of the health care services they use have had a much lower increase in their average health-care cost—just 2.2 percent over the past four years. These companies are providing employees with more information about the costs of different choices, restricting access to narrower networks of providers, and providing incentives to promote healthy lifestyles.

More than two-thirds of respondents in the survey already offer incentives, but in the future, companies say they are more likely to add penalties for unhealthy behavior. (Twenty percent of respondents already use penalties.)

Reviewing Benefits Mix: With the future of the PPACA still uncertain, 34 percent of companies are closely monitoring the outcome of the court’s decision and focusing on compliance. The current options for employers under the PPACA include discontinuing health insurance for employees, offering insurance to only part of your staff, or giving employees a defined contribution they can use to purchase insurance from state Exchanges.

The survey found just 3 percent of employers are somewhat to very likely to discontinue health care plans for active employees in 2014 or 2015 without providing a financial subsidy. But 45 percent of employers are somewhat to very likely to offer coverage to only a portion of their workforce and direct the others to buy insurance through Exchanges.

Other tactics businesses will use to cut costs include increasing employee contributions for dependent or spousal coverage, and adding Account-Based Health Plans (ABHPs) that enable employees to put aside money for health care costs. Fifty-nine percent of companies currently offer an ABHP today, and 11 percent plan to do so next year.

What tactics will you use to keep costs of health coverage low?

Image by Flickr user Images of Money (Creative Commons)