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Friday, November 25, 2011

How Cost of Health Insurance Is Affecting Business

This is part 2 of my 3 part post. 
If you are a small business owner you know how hard it is to keep good employees.  One way business’s have done this is by offering employee benefits.  The cost of these benefits have gone up every year, the biggest driver of these is healthcare insurance.  The following shows what has happen to these cost.

This information is from the Kaiser Report (EMPLOYER HEALTH BENEFITS 2010 REPORT) 

The key findings from the 2010 survey, conducted from January through May 2010, include increases in the average single and family premium, as well as in the amount workers pay for coverage. About a quarter (27%) of covered workers have a deductible of at least $1,000 for single coverage and a greater proportion of workers are enrolled in high-deductible health plans with a savings option (HDHP/SO) than in 2009. Firms responded that they increased cost-sharing, or reduced the scope of coverage, or increased the amount workers pay for insurance as a result of the economic downturn. The 2010 survey continues to track the percentage of firms offering wellness benefits or health risk assessments and also included questions on health plan quality indicators and benefit changes made as a result of the Mental Health Parity and Addiction Equity Act.
The average annual premiums for employer-sponsored health insurance in 2010 are $5,049 for single coverage and $13,770 for family coverage. Compared to 2009, premiums for single coverage are 5% higher ($4,824) and premiums for family coverage are 3% higher ($13,375). Since 2000, average premiums for family coverage have increased 114%. Average premiums for family coverage are lower for workers in small firms (3–199 workers) than for workers in large firms (200 or more workers), ($13,250 vs. $14,038). Average premiums for high-deductible health plans with a savings option (HDHP/SOs) are lower than the overall average for all plan types for both single and family coverage. For PPO's, the most common plan type, the average family premium topped $14,000 annually in 2010.
As a result of factors such as benefit differences and geographical cost differences, there is significant variation around the average annual premium. Twenty percent of covered workers are in plans with an annual total premium for family coverage of at least $16,524 (120% of the average premium), while 19% of covered workers are in plans where the family premium is less than $11,016 (80% of the average premium).
In 2010, covered workers contributed a greater share of the total premium, a notable change from the steady share workers have paid on average over the last decade. Covered workers on average contribute 19% of the total premium for single coverage (up from 17% in 2009) and 30% for family coverage (up from 27% in 2009). As with total premiums, the premium shares contributed by workers vary considerably around these averages. For single coverage, 28% of workers pay more than 25% of the total premium while 16% make no contribution.
Fifty-one percent of workers with family coverage pay more than 25% of the total premium; only 5% make no contribution.  Looking at dollar amounts, the average annual worker contributions are $899 for single coverage and $3,997 for family coverage, up from $779 and $3,515 respectively in 2009. Workers in small firms (3–199 workers) contribute about the same amount for single coverage as workers in large firms (200 or more workers), ($865 vs. $917), but they contribute significantly more for family coverage, ($4,665 vs. $3,652).
NOTE: There was another 10% increase in cost in January 2011. There is no sign that these increased costs are going to slow down anytime soon. Individual plans have followed suit in cost increases.
The following is an example of what happens to your insurance dollars.
ABC co. inc. insures 100 employees. The national Average for a single person is $5000 per year. Cost to the company is $500,000.00 for the 100 employees. On average 90 employees will get about $450.00 annual benefit, 3 employees will get about $5000.00 annual benefits and 7 employees will need be hospitalized.
Average cost for a hospital stay is $30,000.00 of which the insurance co. will pay an average of $10,000.00 after they take there provider network discount. So company wide average benefit paid out is $125,000.00 annually. This means only $.25 of each dollar paid out in premiums goes to your actual healthcare.

As small business owners Jo Anne and I had to find an answer to this problem.  This is what leaded us to starting JE Health Care Solutions.  There are answers out there that puts us in control of our healthcare and cost, but if you don’t know what they are it is hard to deal with.   We went several years with out healthcare coverage because we could not afford it, and were lucky that we did not need it. 

The purpose of this series of posts is to try to give you the information that everyone needs to know.  The 3rd post will give you some answers to the problem that I hope will give you some options to consider.

Remember you can download my e-book for free at the following link.

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