Addressing the Impact of High Medical Insurance Cost

on Small Businesses with 50-100 Employees and the Role of Human Resources in Mitigating the Medical Crisis

The escalating cost of medical insurance is an ongoing challenge for small businesses, particularly those with 50-100 employees in California. The California Employer Health Benefits Almanac 2023 sheds light on some alarming trends affecting the affordability and accessibility of health benefits for workers. Human resource (HR) departments must proactively alleviate the impact of high medical insurance costs to help employees manage healthcare expenses and ensure the sustainability of benefit programs.

The Medical Insurance Landscape in California

The report indicates that workers in California are more likely to enroll in Health Maintenance Organization (HMO) plans than their counterparts nationally, while enrollment in Preferred Provider Organization (PPO) and high deductible health plans (HDHPs) is less common. The average premiums in California for 2022 stood at $8,083 for single coverage and $22,818 for family coverage, which aligns closely with national averages. However, the costs of PPO plans in California are notably higher than PPO costs elsewhere in the United States. Given the high cost of living and medical expenses in California, these premiums place a significant burden on small businesses and their employees.

The Impact on Small Businesses with 50-100 Employees

Small businesses, especially those with 50-100 employees, find it challenging to absorb the rising costs of providing health benefits without passing a portion of these costs on to their workers. These businesses often struggle to match the benefits offered by larger firms, potentially leading to lower employee morale and retention issues. The need for affordable healthcare options becomes more urgent when firms face increasing premiums, higher out-of-pocket expenses, and limited plan options.

With HDHPs, although premiums tend to be lower, the higher deductibles can make it difficult for employees to afford necessary medical care. Conversely, while HMOs typically offer lower out-of-pocket costs, they can also limit the choice of healthcare providers, which may not suit every employee’s needs. The current trend shows that fewer small businesses are self-insured compared to larger firms, making them more susceptible to market rate fluctuations and reducing their flexibility to customize benefits.

How HR Departments Can Address the Medical Insurance Crisis

HR professionals play a pivotal role in helping small businesses navigate the complexities of healthcare benefits. Here are some strategies HR can adopt to support workers facing high medical insurance costs:

1. Explore Alternative Funding Options HR teams should evaluate alternative funding options, such as Individual Coverage Health      Reimbursement Arrangements (ICHRA), which allow employees to choose their health insurance plans while the employer provides a defined contribution. This model shifts the risk away from the employer and offers greater flexibility in managing costs. By allowing employees to choose a plan that best fits their needs, ICHRA can help address issues with high premiums and out-of-pocket expenses.
2. Offer Supplemental Benefits to Complement High Deductible Plans To alleviate the financial burden on employees with HDHPs, HR can introduce supplemental benefits like accident insurance, hospital indemnity plans,      or critical illness coverage. These programs provide financial support for specific medical events, reducing the impact of high deductibles.      Supplemental benefits can be offered at little to no cost to the employer,      making them an attractive option for small businesses.
3. Promote Wellness Programs to Reduce Healthcare Costs Investing in wellness programs can help mitigate long-term healthcare expenses by promoting healthier lifestyles among employees. Programs that focus on preventive care, stress management, and physical fitness can lead to reduced medical claims and lower insurance premiums over time. HR can also offer incentives for employees who participate in wellness programs, such as premium discounts or contributions to Health Savings Accounts (HSAs).
4. Leverage Telemedicine and On-Demand Health Services Incorporating telemedicine services can offer employees a more cost-effective way to access healthcare. Services like Recuro Health's on-demand counseling and telehealth options provide convenient access to medical professionals and reduce the need for costly in-person visits. By promoting these services,      HR can help employees manage their health issues proactively while minimizing medical costs.
5. Review and Renegotiate Insurance Plans Regularly Just as auto and home insurance should be reviewed periodically, HR should revisit medical insurance plans each year. By comparing quotes from different insurers during open enrollment, HR can negotiate better terms or switch to more cost-effective plans that provide comparable benefits. Regular reviews ensure that employees continue to receive competitive benefits, potentially improving loyalty and retention.
6. Educate      Employees on the True Cost of Healthcare HR can help employees understand the true cost of their healthcare by providing education on how insurance premiums, deductibles, and copayments contribute to overall medical expenses. Employees who are better informed about their benefits are more likely to make cost-effective choices when selecting providers and treatment options.

Why HR Must Act Now

With healthcare expenses continuing to rise, HR departments in small businesses cannot afford to remain passive. Without proactive measures, the burden of medical costs may increasingly shift to employees, exacerbating financial stress and potentially leading to delayed medical treatments. Given that nearly half of U.S. workers are financially unprepared for unexpected medical events, HR’s role in providing cost-effective solutions is crucial.

By implementing strategic initiatives such as ICHRAs, supplemental benefits, wellness programs, and telemedicine options, HR can help small businesses mitigate the impact of high healthcare costs. Moreover, educating employees and regularly reviewing insurance options will ensure that benefits remain competitive and tailored to workers' needs. These efforts are essential in a medical insurance landscape where affordability and accessibility continue to pose significant challenges, particularly for small businesses striving to compete with larger companies.

In conclusion, as medical insurance costs continue to rise, the role of HR is more critical than ever in supporting employees and maintaining the competitiveness of small businesses. By adopting a multi-faceted approach to benefits, HR can help alleviate the financial burden on workers, enhance employee satisfaction, and ensure that small businesses remain viable in the face of a challenging healthcare environment.

Source:
https://www.chcf.org/wp-content/uploads/2023/04/CAEmployerHealthBenefitsAlmanac2023.pdf

excerpt:

California Employer Health Benefits Enrollment of Covered Workers, by Plan Type California vs. United States, 2022 Compared to their national counterparts, covered workers in California were more likely to enroll in HMO plans and less likely to enroll in a PPO plan or an HDHP/SO plan.

Compared to other plan types, HDHP/SOs have higher deductibles on average but typically have lower premiums and a savings option. Over half of large firms (55%) offering health benefits offered a high deductible health plan (HDHP) with a health reimbursement arrangement (HRA), a health savings account (HSA), or both.

Covered workers in California were more likely to work at a firm that offered an HMO and less likely to work at a firm that offered an HDHP/SO, compared to covered workers nationally.

Both in California and nationally, covered workers enrolled in HMOs were less likely to be in self-insured plans than workers in other plan types. Overall, self-insured plans were less common in California, with 48% of covered workers covered by such an arrangement, compared to 65% nationally.

In 2022, the average premiums for covered workers in California were $8,083 for single coverage and $22,818 for family coverage, similar to the average nationally. The average premiums for single and family coverage in PPO plans in California were higher than those in PPO plans nationally.