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The Cost of Offering Employer-Sponsored Health Insurance to Your Employees
Lively · August 14, 2019 · 3 min read
As the open-enrollment season nears, you might be wondering what it’s going to cost you to offer health insurance benefits to your employees. If you have less than 50 employees, that number could be 0, since you’re not required by law to offer employer-sponsored health insurance to your workers. But you might want to offer this benefit anyway since it could enable you to attract the necessary talent to your workforce.
If you do decide to offer employer-sponsored health insurance to your employees, it turns out there’s not much of a difference between the cost large (200+ employees) and small (3-199 employees) employers pay.
Total Cost for 2019
On average, the cost of offering health benefits to employees reached $14,800 per employee in 2019, up from $14,099 in 2018. This represents a five percent rise in costs for the sixth year in a row. In contrast, wages rose 2.6 percent, on average, and inflation was 2.5 percent for the same time frame.
What’s Included in that Cost?
Employers contribute to the cost of their employees’ health plans in the form of premiums and prescription drug benefits. And like anything healthcare-related, the cost of premiums depends on multiple factors: location, employee demographics, number of plan participants, plan carrier, plan structure and network providers. For example, a high deductible health plan (HDHP) costs an employer $5,004, on average, for an individual, while a preferred provider organization (PPO) will cost $5,653, on average. Also, workers at small companies have cheaper family coverage than workers at large companies ($18,739 per employee vs. $19,972 per employee).
Now for one of the costliest elements of health benefits: prescription drug coverage. Specialty drugs account for 50 percent of most employers’ prescription drug spending, even though on average, only 1.5-2 percent of their employees take these drugs. That means a relatively small portion of the participants is driving the majority of the cost. In fact, in the Kaiser Family Foundation Health Benefits Survey for 2018, employers cited drug prices as one of the primary reasons for the rising cost of health benefits.
How Can Employers Lower Costs?
Offer virtual solutions. One way benefits managers suggest lowering health benefit costs is to offer a way for employees to receive care for things like cognitive and behavioral therapy, lifestyle coaching and chronic disease management virtually. This type of care is usually cheaper than an in-office visit and can help to significantly lower the overall cost of your plan.
Use targeted specialty pharmacy management for high-cost drugs. Since specialty drugs are a significant driver of cost, benefits managers recommend partnering with specialty pharmacies that typically cost less than the average drug store chain.
Implement Account Care Organizations (ACOs) or High-Performance Networks. ACOs are groups of doctors, hospitals and other providers who voluntarily come together to give coordinated, high-quality care to patients. High-Performance Networks offer limited in-network doctors, clinics and hospitals to offer cost-effective care.
While you’re looking to lower your costs, keep in mind the American Care Act (ACA) gives three parameters for acceptable health coverage:
The lowest-priced plan (based on an individual employee’s premium cost), must equal 9.56 percent or less of your employee’s household income.
Your plan(s) must cover at least 60 percent of total health services.
Your plan(s) must include substantial coverage for physician and inpatient hospital services.
The Bottom Line
Offering employer-sponsored health benefits to your employees is a costly endeavor, especially if you employ more than 200 people. But there are ways to reduce your annual liability. Remember, a healthy workforce is a productive workforce, so employee health benefits are a cost well-spent.
Benefits
2024 and 2025 HSA Maximum Contribution Limits
Lively · May 9, 2024 · 3 min read
On May 9, 2024 the Internal Revenue Service announced the HSA contribution limits for 2025. For 2025 HSA-eligible account holders are allowed to contribute: $4,300 for individual coverage and $8,500 for family coverage. If you are 55 years or older, you’re still eligible to contribute an extra $1,000 catch-up contribution.
Benefits
What is the Difference Between a Flexible Spending Account and a Health Savings Account?
Lauren Hargrave · February 9, 2024 · 12 min read
A Health Savings Account (HSA) and Healthcare Flexible Spending Account (FSA) provide up to 30% savings on out-of-pocket healthcare expenses. That’s good news. Except you can’t contribute to an HSA and Healthcare FSA at the same time. So what if your employer offers both benefits? How do you choose which account type is best for you? Let’s explore the advantages of each to help you decide which wins in HSA vs FSA.
Health Savings Accounts
Ways Health Savings Account Matching Benefits Employers
Lauren Hargrave · October 13, 2023 · 7 min read
Employers need employees to adopt and engage with their benefits and one way to encourage employees to adopt and contribute to (i.e. engage with) an HSA, is for employers to match employees’ contributions.
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