Employee health care costs don’t have to be out of control

3 methods for saving on employee health care costs

Your company can reduce employee health care costs when you get a better handle on who handles them. There is no doubt that recent changes in federal law will have an effect on the cost of employee health care. However, there are things a company, especially those with 200 or fewer employees, can do to reduce its cost of managing the growing costs.

The Current Picture of Employee Health Care Costs

As has been reported in past years, the 2009 surveys of employee health care costs indicated that roughly 78% of the costs are borne by business owners through subsidizing the cost of employee premiums in the group policy. The remaining 22% is paid by individual employees through partial payments and co-payments. Naturally, the overall cost burden in dollars has grown because of the continued increases of the medical cost base.

Health care is taking more of the pie

Additionally, employee health care costs as a portion of the overall cost of employment is taking a larger and larger piece. The increased complexity in reporting requirements, documentation, and overall administration is also growing disproportionately. That creates an affordability gap as the fixed costs are not really fixed; they are growing. Buying power for both companies and individuals shrinks against those so-called fixed costs in benefits which are actually rising at about 6% per year.

3 major areas of cost exposure

The three major costs to a company for employee health care are:

• The cost of providing that 78% of the burden
• The cost of a company managing what they provide
• The cost of lost time of people diverted from profit-focused activities

All 3 items directly affect bottom-line profits. A fourth area of expense, that will become part of the future, would be the penalties imposed on companies who try to contain costs by not providing employer-based health care programs to some or all employees. Using a PEO is one of the best ways to deal with this crunch. CBR can help your company become more profitable.

Employee Health Care Plans under a PEO: Get more; pay less

One way to alleviate the higher costs for smaller companies (200 or fewer employees) is to group together through a PEO (Professional Employment Organization) such as CBR. By grouping a number of companies together under a common plan, the buying power that is usually only available to larger, high performing companies becomes available to you. You can effectively reduce the employees’ health care costs when you can supply the benefits through economies of scale.

Shifting the burden to a PEO reduces administrative costs

An additional benefit to using a PEO such as CBR to carry the burden of hosting the group insurance is that they are also staffed to administer the plan. That reduces the ever-increasing number of work hours a company spends on shopping, overseeing plans, answering employee questions, resolving claims issues, and meeting the increased need for documentation. A PEO like CBR can do these tasks more efficiently because they do them on a large scale and as a matter of routine.

Refocusing employee activities increases profits

Employees who have been hired or moved into administrative roles to deal with the increase complexity of employee health care costs and programs can be returned to activities directly focused on making more profits for the company. This manpower can be refocused and redirected because the burden of administering claims and issues is moved to the PEO.

A PEO can also take on some of the other parts of administration that can even further improve the bottom-line picture. Providing employee health care has a relationship to payroll and tax reporting. These are two other areas of activity that because they are interrelated, their administration by a single source will have some synergism, further saving the company money.

CBR can address the three major areas of cost burden related to employee health care costs by:

• Reducing costs through larger-scale buying power
• Reducing employee work hours focused on administering programs
• Allowing redirection of employees to profit-making activities

CBR can also help you reduce administration in other areas, helping you to free up time for employees to focus on the company becoming higher performing. For example, while handling payroll, charge-outs for benefits, employee and employment taxes, and regulatory reporting, and workman’s compensation can also be taken out of the burgeoning administrative area. Much of a company’s administrative headaches once again become predictable fixed costs in an environment where administration and costs of benefits bulge a little more every year. To see just how CBR can provide this kind of relief to your company, give as a call at our toll-free number, 888-700-8512 and give us a chance to show you how you can improve your bottom line, and free-up employee time to make your company more profitable.

For more information about how we can help you with your Human Resources and hiring processes, call us at 888-700-8512, request a proposal or contact us