(This column originally appeared in the Daily Herald)
When it comes to your company’s health insurance, there’s good news and bad news.
The good news is that, according to a new report from the Kaiser Foundation, the average premium paid for family coverage stayed relatively stable in 2022 at around $22,463 per year. The bad news is that — thanks to inflationary pressures — this is soon about to change, with other surveys forecasting significant health insurance rate increases in 2023.
“I’m already starting my February and March renewals,” says Cara Kahan, the CEO of 1706 Advisors in Northfield. “And we’re seeing on average renewals between 4 and 8 percent. Inflation’s hitting everywhere.”
As an employer, providing health insurance is a critical benefit, particularly in these times of tight labor. Our challenge is to offer competitive benefits without breaking the bank. So what are some strategies for 2023 to keep our companies’ health benefits costs under control?
“One thing to consider is a “Level Funded Plan” for your business,” says Matt Byrne, an executive vice president with Chicago-based Byrne Byrne and Company who serves hundreds of clients in Cook County and elsewhere in the area.
A Level Funded health plan is an insurance arrangement where you, as employer, pay in a fixed monthly payment that covers the “estimated” costs for potential claims, administrative expenses and any big-ticket items like surgery or health treatments.
If your employee demographics skew toward a younger age with few health issues, then you could get money back at the end of the plan year if there are less claims and expenses than estimated. Any overages would be built into future premiums.
“It’s a form of self-insurance and kind of a win-win for employers,” Byrne says. “And it’s become much more popular with my clients over the past few years. I’ve seen some groups save as much as 50 percent compared to other insurance plans, depending on their age group and history.”
Another consideration is an ICHRA, or Individual Coverage Health Reimbursement Arrangement. With an ICHRA you still pay for your employees’ health insurance. But instead of forcing them into a plan that you choose for them, you reimburse your employees for the health insurance they choose to buy on the health care exchanges or through another broker. And because you’re giving them the ability to buy their own health insurance you avoid all the time and costs involved to choose and administer a group plan.
“If administered by someone who knows what they’re doing, and if you’re being advised properly as to which plan is best suited for an ICHRA, you will almost invariably come out on top,” Byrne says.
TJ Bullock is also a big fan of ICHRAs because of the big tax advantages that comes with these plans.
“An employee doesn’t pay tax on the money going in, they don’t pay tax on the money coming out and they don’t pay tax on any interest earned,” Bullock, who owns Bullock & Associates, an employee benefits firm in Oakbrook Terrace, says. “Plus the employer gets a tax deduction.”
In addition to ICHRAs and Level Funded Plans, Bullock recommends that his clients consider Health Savings Accounts that are paired with their high deductible plans.
“This way people can put money away pretax for unreimbursed expenses like eyeglasses and acupuncture,” he says. “And even if they don’t use it all, the money grows tax free and they can carry it over to the next year.”
Bullock also encourages his clients to expand the use of the online consulting services many insurance companies are now covering so employees can get medical consultation online and to step up their mental health benefits using platforms like BetterUp and Teledoc.
“Mental health, in particular, is a huge issue that can seriously hurt both your employees and your business,” he says. “There have been numerous studies showing how untreated mental health conditions hurt productivity and cost employers billions every year and that physical health problems tend to be more expensive if there’s also an untreated mental health condition.”
Controlling costs will certainly be important this year, but cost isn’t everything. In many cases it’s not as important as providing the right type of health benefits that best caters to your organization.
“When it comes to health insurance, you need to decide on your priorities,” Kahan says. “Is it cost? Is it deductible or out of pocket? How do you, as the employer, feel about contributing? What do you think your employees can afford?”
Most importantly, she says, is to work with a good benefits adviser to figure out what others in your market are doing.
“Once you’ve done that, you have to go back and look in the mirror and say, do my benefits mirror the culture of my company and my own personal ethos,” she says. “If you’re just shopping a number, you’re always going to fail.”