In Tight Economic Times, How Do You Carve-Out Your Medical Benefits?

If I am a business owner operating in this climate and I am looking at overhead costs to cut, are benefits one of them? The unfortunate answer is, yes. There are a few ways you can do this and some are more palatable than others. Hopefully, this economy is not forcing you to get out the cleaver, but only a finely sharpened paring knife. Let’s examine a few ways to accomplish the goal of saving what you can. Keep in mind that it is of utmost importance to keep the participation in your group plan balanced with older and younger populations.

I always recommend looking at the level of benefits you are offering first. If you must save on cost, an easy fix is to lower your level of benefit for health insurance. Take your $500 deductible and raise it to higher levels; $1,000, $1500 or higher. The national average for PPO deductibles is now $1,000. Just over two years ago it was at $500. Next, look at your co-pays. Doctor’s office visits and prescription co-pays will offer some of the most dramatic savings. Unfortunately, gone are the days of $10 and $15 office visit co-pays. Generic prescriptions still hover at these levels; however, I am starting to see carriers start at higher offerings. An office visit co-pay of $30-$35 dollars for general physician visits can lower your premium much faster than the deductible alone. 

This method better allows you to keep your current population of participants by keeping your contribution towards premium at the current level or even higher. Keep your group in-tact and try to encourage participation by maintaining contributions at the highest levels possible.

Another avenue to go down if you are cash strapped, but still want to offer benefits: carve-out key employees. Carve-outs are based on being able to provide tax and wage information showing a clear indication of individuals on salary vs. individuals on hourly wage.  You can also carve-out based on job title (management vs. non-management). As far as full-time vs. part-time, most carriers who allow carve-outs require the group to set their specific guidelines on the amount of time that is considered full-time or part-time.  If the group indicates that everyone working 25 hours or more is full-time, then only the people working at least 25 hours are eligible.

One negative effect of carve-outs is the imbalance of population. Supervisors and management groups tend to be on the older side of the population. Older populations lead to higher rates.

Most nurseries I deal with try their best to compete for quality employees and offering health benefits is one way to do so.  Of course, the above mentioned methods are meant to deal with the current health insurance model. With health reform looming, business owners may be forced to offer benefits to all employees and all employees will get a certain level of health benefits. 

Recently, the federal government reacted to Wellpoint’s Anthem Blue Cross of California announcement of rate hikes up to 39 percent for individual policy holders. The White House called for new federal powers to block “excessive” rate increases. The insurer could not have done this at a worse time, giving the health care debate new evidence that the free market is not able to offer what the public needs in the eyes of the Obama administration. Anthem could only state that healthy Americans that have hit hard times are dropping coverage, leaving mostly the unhealthy that need coverage. 

This whole thing is a balancing act. If you take from one side the scales tip to the other.  If you cut here to save there, consider how it will affect you in the long run. Because at some point you may not get to make the decision anymore.

Western Growers is endorsed by the Arizona Nursery Association to provide health benefits and property and casualty insurance to its members.