Businesses are inundated with insurance considerations. Not only do companies have to obtain liability, property, and employment practices liability, they have to manage employee insurance benefits or seek an outsourced firm that can. With all the changes associated with healthcare reform, many businesses are trying to assess the costs they and their employees must incur. They are likely to find that cost is influenced by a variety of factors.

Based upon data projections from the Bureau of Labor Statistics in 2009, one benefits brokerage group recently estimated that a comprehensive benefits package for a single employee might cost as much as $7.98 an hour, or over $16,500 a year when extrapolated across a 40 hour work week for an entire year! (Source). While that figure is certainly eye-popping, the article goes on to point out a multitude of ways in which that cost can be mitigated through a variety of techniques such as mandatory employee contributions into their own benefits programs, declined coverage for benefits, and the denial of optional benefits such as 401k matching and vacation pay/PTO (paid time off) depending on local laws and ordinances. Nonetheless, there are a variety of other considerations that may impact cost:

Insurance Type
A company’s health insurance costs are impact by the types of health insurance it offers to employees. Indemnity plans tend to be the most expensive. Conversely, managed care plans (i.e. HMOs) are regarded as the cheapest. Some employers, however, offer combination plans. These, however, cost more than HMOs, but are often preferred among employees. Companies can work with benefits experts to determine which route is best for them to go concerning employee benefits.

Demographics / Location
Businesses are uniformly impacted by their location and the demographics of their employees. Many insurers impose a surcharge based on employees’ health histories. Moreover, this charge is usually applied regardless of the plan the business chooses. “Some states regulate the practice of rating by medical history; others limit the possible range between the highest and lowest rates.” (Source). Generally speaking, employers can also expect that older employees will have higher premiums than younger employees.

Coverage Considerations
Some companies are opting not to provide additional coverage when they can. Many small businesses, for example, are choosing not to extend coverage for spouses or families. When employees pay higher co-payments, employers typically pay reduced premiums; however, businesses can expect to pay more when employees’ out-of-pocket expenses are capped.

Benefits Management
Companies often employ special personnel for the management of benefits. Full-time staff is expensive and does not always provide the business with the expertise it needs in these times of healthcare reform. Some businesses have found it more cost-effective to work with an outsourced group that specializes in benefits administration. Not only can a business save money, but they can obtain the expertise they need. Tapping an expert may result in cost-savings when it comes to benefits.

The benefits landscape is changing for many companies throughout the nation. It’s more important than ever to understand the costs associated with employee benefits so that they can be managed effectively.