Milwaukee-area residents are no strangers to the challenges presented by the costs of health insurance.
Ask anyone who works for a small business, and they will tell you that coverage is hard to come by. According to the Kaiser Family Foundation, just 59 percent of small firms offered employee health benefits in 2005. Among the smallest employers (fewer than 10 workers), the percentage plummets to 47 percent. Alarmingly, these percentages are dropping annually.
One of the most successful solutions for employers searching for affordable employee coverage is the consumer-driven health movement. By implementing consumer-driven health care and changing plan designs, small businesses can achieve immediate reduction in premiums as well as tax advantages.
Yes, raising deductibles increases risk for employees. But, it also reduces monthly premiums. Employers reduce premiums to continue offering benefits, involve employees in their health care decisions and can contribute direct funds to assist employees in financing their health care.
The most popular consumer-driven approach is the health savings account (HSA), which allows employees and their employers to put away money for future health care expenses on a tax-free basis. The money in these accounts belongs to the employee and employees can take it with them when they change jobs or retire.
Another consumer-driven health plan model, the health reimbursement account (HRA), is less known among small business, but equally effective. Funded solely by the employer, this account remains with the employer when a covered employee leaves.
Since 2002, mid-sized and large employers have been using HRAs to realize significant cost savings and advance consumer engagement. Employers across Wisconsin, regardless of size, can realize similar benefits. One approach would be for employers to pair a non-taxable HRA with an insurer’s medical plan. Employers determine the funding level of the HRA, which employees apply toward health care purchases.
Early indications show that employers with HRAs consider making higher contributions, typically $1,000 or more, to employee accounts. In some ways, those figures are surprising because conventional wisdom suggested small businesses would contribute less than that because they have fewer dollars available.
It makes complete sense, because as employers spend less on premiums, they can afford to pump part of that savings into their workers’ accounts. This ensures workers have access to funding for medical expenses. Couple that with preventive care coverage and consumer-based tools designed to give individuals more information about their health care options, and it is likely to encourage wise health care and lifestyle choices.
Larger employers have seen such results. A UnitedHealth Group study of 20,000 HRA enrollees found they were more likely than individuals with traditional health plans to utilize preventive services and are less likely to use emergency services, specialist visits, outpatient surgery, radiology and lab services. This illustrates more selective, responsible use of health services.
There’s no reason to doubt those trends will hold true among smaller businesses as well.
By offering an HRA, a small business will have lower premiums, tax advantages, easy HRA administration with auto rollover from the health plan to the HRA fund, and unique employer design options that fit the specific need of individual small business employers. At the same time, they can help make health care more affordable and more accessible for their employees.
While there is still no silver bullet to end the health care affordability crisis, all Wisconsin residents deserve a basic level of health care coverage. Until the system undergoes fundamental changes, HRAs have the potential to help make that vision a reality for small businesses and their employees.
