The 2017 Mercer National Survey of Employer-Sponsored Health Plans shows the average total health benefit cost per employee rose by 2.6% to $12,229 per employee. That also equates to 14% of total payroll in 2017. Does it seem like your group health insurance costs have been spiraling out of control? Even if your premiums have risen modestly over the last several years, health insurance coverage is a huge expense for employers. Although employers recognize the importance of benefits in attracting and retaining talent, many were forced to make changes to their health care plans just to keep costs down. As employers move toward high-deductible health plans to try to reduce costs, employees are now paying about 24% of the total cost of coverage.
Here are 3 ways companies tried to contain healthcare costs, according to Wells Fargo Employee Benefits Trend Study:
- Adding a high-deductible plan option
- Increasing employee contribution percentage
- Increasing co-insurance features
For 2019, the trend of rising costs isn’t changing. Some companies are seeing premium increases over 19% for 2018 while PEOs have held steady for over a decade with single-digit changes to premiums.
Economies of Scale – A PEO
As a businessperson, you know economies of scale give you cost savings. Whether you’re producing more widgets with the same per-unit fixed costs or buying health insurance, the theory holds true. A Professional Employer Organization (PEO) offers client companies lower employment costs by pooling benefits to reduce expenses. By bundling many companies into one large group, PEOs have buying power that can’t be achieved by a single business with only 10, 50 or even 300 employees. PEOs have their own master health insurance policies with their own premiums. These plans and premiums are not available on the open market. Businesses – especially small businesses – can afford to provide optimal health plans when they partner with a PEO. The efficiencies gained lower overall employment costs which means employee job security also increases. Benefits cost savings is not the only advantage a PEO provides. The PEO also manages the plan by administering enrollments, facilitating claims and negotiating annual rates. This ensures your health insurance plan is efficient, cost-effective and continually monitored – and gives you back time to focus on your core business objectives. Get the best health insurance plan for your employees while keeping costs down – contact PEO Consultants. We will find the right PEO for you.