Health insurance is one of the biggest costs an employer can incur and can be prohibitive in some cases. In 2019, according to the Kaiser Family Foundation, the average cost for an employer was $5,711 for a single person and $14,069 for a family.
Unfortunately, not offering health insurance is not always an option. Any company with 50 or more employees must provide minimum coverage under the Affordable Care Act (ACA), and health benefits are significant to employees when making their decision to stay or leave. Low quality or unaffordable coverage drives away talent, making it harder to hire good people and even harder to keep the people you have. There is a distinct tradeoff: poor-quality health insurance makes you less competitive when attracting and retaining top talent.
So, how can you lower your rates?
Lowering Rates With a Tradeoff
First of all, here are a few ways to lower rates that do have a tradeoff, and which ones are likely to have the most impact.
Reducing coverage is the most obvious way to cut your rates, but it is also the most damaging. Employees who have a family or who have health problems may find that they are unable to afford to continue to work for you. You also increase your risk of losing an employee to a medical problem or to a family's medical problem which negatively impacts retention.
High Maximum Out of Pocket
You can also lower rates by keeping the maximum out-of-pocket limit as high as possible. For ACA plans in 2021, the maximum is $8,550 for an individual and $17,100 for a family. Your employees will have to pay for doctor visits, prescriptions, etc, until they hit the maximum. This also has a tradeoff, although not as damaging (as the most expensive things will still end up being covered). Healthy employees might not be as turned off by this, but some definitely will.
High Deductible Health Plan
Similarly, raising the deductible will also lower premiums. This means that your employees will again pay more out-of-pocket per incident, but the most expensive services will be covered. Pairing it with a HSA (health savings account) or FSA (flexible savings account) can make a high deductible plan more palatable. High deductibles, however (as well as high out-of-pocket limits) can discourage employees from seeking care, which can turn a small and cheap problem into a larger and more expensive one. This can then cause your rates to go up on renewal because of the larger claim and can also result in the insurance company not paying all or part of the claim. That leads to financial hardship for your employee and a blow to your reputation as an employer.
Increase Cost Sharing
You can also make your employees pay a higher percentage of the premium. The ACA does have some limitations on cost-sharing, and some states also limit it. Bear in mind that any time you increase cost sharing, you are essentially cutting your employees' take home pay. Changing it can, therefore, increase turnover and lower morale. That means it's important to find a balance between cost sharing to keep your costs down and ensuring that your employees can afford the premiums you are asking to pay.
Increasing cost sharing can also result in more employees opting out, for example, if their spouse has better insurance. That shrinks your pool of employees and may result in a premium increase overall.
Decrease Network Coverage
Switching to a Health Maintenance Organization (HMO) so that more things are out-of-network can also reduce costs. In some areas you might be able to get away with this; consider carefully what the HMO covers before making the switch. Can your employees still get the care they need? You might end up forcing employees to travel longer distances for care.
All of these are going to make you less competitive to some degree, but you may be able to finesse them to create a better situation.
However, none of these are necessary actions. Instead, consider ways to lower group health insurance that don’t come with a tradeoff.
Lowering Rates Without a Tradeoff
There are two primary ways to lower your rates that don't come with some level of tradeoff.
The fewer claims you make, the less your premiums will increase when it comes time to renew. A good employee wellness program can help reduce the number of claims. Keeping your employees healthy is one of the best things you can do. It also has the side benefits of reducing absenteeism and improving productivity. A properly-designed wellness program can also help develop a good workplace culture. However, this only impacts increases on renewal (although some insurers will give a small discount for having a wellness program that meets certain parameters).
Join a PEO
The absolute best way to lower your healthcare premiums without a tradeoff is to partner with a Professional Employer Organization (PEO). Doing so gives you access to their group health master plan. This allows you to benefit from economies of scale (when added together, a PEO's clients may have thousands of employees). That allows your PEO to negotiate better base rates. Because there are more employees in the master plan, the impact of individual claims is much lower when it comes time for renewal.
This allows you to pay less and provide better benefits to your employees, letting you compete better with larger firms in today's strong marketplace.
Lowering your health insurance costs often involves tradeoffs that can increase turnover and reduce morale. The only significant way to bypass this tradeoff between employee satisfaction and health insurance rates in a significant way is to join a PEO.