Science / Rising Health Care Costs
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Autor: anton 12 November 2010
Words: 792 | Pages: 4
Rising Health Care Costs for Small Employers
One of the biggest problems small employers face today is the steadily rising costs of health coverage for its employees. This paper covers how health care premiums have risen in double digits for the past five consecutive years, how many small businesses are forced to drop health care coverage for their employees because of the out of control costs, and what small businesses are doing to control the costs and still offer health care coverage to their employees.
The good news is that small businesses have been doing better than the overall economy. During the past few years, they have overcome rough times and developed a resiliency that is serving them well. The bad news is that the rising cost of health insurance is one issue that they may not overcome. In 2005, employees health insurance premiums climbed a bit less in than in recent years, but continually rising costs have prompted many small businesses to drop health benefits altogether. In 2005, health care premiums raised an average of 9.2 percent, falling from the 11.2 percent increase in 2004 and ending four straight years of double-digit escalation. While the earnings of a minimum-wage worker in Minnesota is at $12,792 per year, the average cost of health coverage for family coverage is $10,880, with employees paying $2713.00 of that. Premiums are 73 percent higher than they were five years ago . Also troubling is the drop in employers who offer health insurance driven almost entirely by small companies that have given up coverage. Today, sixty percent of employers offer health insurance to employees, down from sixty nine percent in 2000. Most of the employers are small businesses that are forced to drop coverage because it is unreasonably affordable. Growth in health insurance costs outpaced inflation and wage growth. Between 2003 and 2004, premiums increased an average an average of 11.2 percent, significantly faster than other economic indicators: inflation rose 2.3 percent and wages rose 2.2 percent.
There are many reasons small businesses are finding it difficult to provide coverage to their employees, with cost the most significant one. The small businesses characteristics, including whether a small firm is a component of a larger business, the composition of its workforce, and the industry of which it is a part, are the most important factors in determining an employerâ€™s ability to acquire affordable health coverage for its employees.
Despite the high cost of premiums and the cost of administering the benefit, small employers state many important business reasons for offering health insurance coverage to its employees. Most say they provide health benefits because it helps with employee recruitment, increases employee loyalty, and decreases turnover. They also note that these benefits positively affect employee attitude, performance, and health. The most important reason for offering health insurance coverage, small employers say, is that â€œit is the right thing to do.â€ The most significant reason for a small business employerâ€™s decision not to offer health benefits however is the skyrocketing costs.
So what can a small business employer do to maintain its health care coverage for its employees? Possibilities are reducing benefits, shifting more of the cost of the premiums to its employees, requiring employees to pay high co-payments when they visit a doctor, switching from a PPO to a HMO, and covering only employees rather than including family members. Higher deductibles and out-of-pocket expenses may be another option to ease the burden on the employer. To offset the cost increases of prescription drug coverage, employees can also ask employees to pay larger co-payments at the pharmacy. Another option may be to implement a health savings account, where the employer contributes a preset amount to an employees health resources (personal account.) The money put into the plan can be used against out-of-pocket medical expenses, and employees can roll over the money in an account from year to year when their costs are less than the amount set aside. Finally, flexible spending accounts allow employees to pay for part of their co-payments and other non-reimbursed medical expenses with pretax dollars.
After all is said and done, there remains a very strong incentive for small businesses to provide affordable employee health care insurance. Their ability to hire and retain talented employees, as well as the mental and physical well being of current employees. Roughly 9% of small businesses have stopped providing benefits altogether as a way to manage health care costs. Until a cap is put on the steadily rising health care costs, employees will have to share more of the burden of their health insurance costs. This is not an attractive solution, but one that for now, can act as a temporary fix and allow Americas small businesses to continue to fuel our economy.
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