By Dan Malachowski,
recently released from Salary.com's 2005 Small Business Basic Medical
Coverage Survey show that nearly 90 percent of small businesses
are paying more than last year on basic medical insurance for their
employees. And these soaring healthcare costs are forcing small
businesses, in many instances, to adopt measures that lower employee
take-home pay. But there may be something you can do, as an employee
with alternatives for healthcare coverage, to cause a swing in the
other direction: Talk to your employer about exchanging your benefits
for as much as 10 percent in extra pay.
Win For Employees
Doyle is the Human Resource Manager at Colorado State Employees
Credit Union in Denver, Colorado. CSECU is one of the rising number
of American small businesses (200 employees or fewer) that are either
offering employees significant incentives not to participate in
the company medical plan, or actively encouraging employees to enroll
in their spouse's plan. Doyle opted out of her company's health
plan because her husband's plan costs the couple less in monthly
premiums and co-pays. CSECU happens to offer up to $100 per month,
$25 for each dependent, to every employee who chooses not to participate
in the company's health plan. While that may not be a huge amount
of money, Doyle feels that "it is nice to have that available to
pay for other benefits such as life insurance, or other insurance
projects offered through my employer".
study found that incentives such as lump-sum salary increases, cash
rebates, and contributions to other employee benefit accounts, such
as a 401K plan, are offered by 14 percent of small businesses to
employees who opt out of company medical plans. Some companies that
were surveyed indicated that they give the cash value of the savings
on their health benefits to plan non-participants. This can add
up quickly. Richard Cellini, Head of Research at Salary.com, estimates
that "many companies could offer employees a 10 percent salary increase
(in lieu of plan participation), and still lower total payroll expenses
in a given year".
the benefits section of Salary.com's Salary
Wizard to calculate the average amount your health plan costs,
based on job title and metro area. Keep in mind that data in the
Wizard reflects pay practices at companies larger than those
covered in the survey discussed in this article.
Win For Employers
rising trend of employees not participating in company health plans
isn't just a win for employees. Employers also benefit. Doyle estimates
that healthcare costs at her company have risen 10 to 20 percent
in the last year. She is seeing a growth in employees opting out
of her company's health plan because the plan may be more expensive
than the alternatives. "As health costs increase for us, perhaps
premium payments under spousal coverage are easier [for employees]
to handle," says Doyle. About 12 percent of her workforce has
chosen to opt out of medical coverage.
businesses like CSECU are able to transfer some of this cost to
larger businesses, which pay smaller premiums for employee health
insurance, because of volume discounts. In addition, double or unnecessary
coverage is eliminated. Most employees who opt out of their company's
health plan know they can be covered somewhere else, whether it
be from a spouse's plan, parent's plan, or college/university plan,
if they happen to be a part-time student.
you are able to obtain health coverage from somewhere else, ask
your Human Resources department what kind of incentives, if any,
you can earn by opting out of your company's health plan. Who knows,
you may be able to put a few extra dollars in your pocket. Perhaps
enough to cover those rising commuting costs due to gasoline prices-
or much more!
to download Salary.com's 2005
Basic Medical Coverage Survey.
interesting survey results:
Few Companies Band Together to Purchase Group Insurance:
Only 1.7 percent of participating companies report joining forces
with other companies through a buyer's cooperative to purchase basic
medical insurance. Still, survey results show a substantial uptick
in the number of small businesses willing to seriously consider
this strategy in the future - making group healthcare purchases
a new trend-in-the-making.
Three Clear Winners Have Emerged: Despite the variety of
medical plans available today, three plan formats have emerged as
favorites among small businesses: Preferred Provider Organizations;
Health Maintenance Organizations; and Point of Service providers.
Less than 10 percent of small businesses responding offer any other
Micro-Employers Offer the Most Generous Plans: "Micro-employers"
(1-20 employees) lead all small businesses when it comes to picking
up the full cost of medical coverage. 32.2 percent of Micro-Employers
offer fully-funded medical coverage (requiring employees to pay
nothing toward the cost of medical care premiums). As companies
grow in size, fully-funded medical coverage becomes increasingly
rare. Less than 3 percent of the largest small companies (200+ employees)
offer fully-funded medical plans.
Micro-Employers Also Offer the Least Generous Plans: Micro-Employers
are also most likely to disappear altogether when it's time to settle
the tab for basic medical coverage. 31.7 percent of Micro-Employers
(more than any other small business segment) offer completely unfunded
medical coverage (requiring employees to pay 100 percent of all
Straddle Companies Experience the Worst of Several Worlds:
"Straddle" companies (100-150 employees) occupy the awkward mid-range
of the small business category: too large to be lean, yet too small
to enjoy economies of scale. Straddle companies report the highest
per-employee healthcare costs (17.7 percent of gross annual payroll,
versus an average 14.6 percent for all small businesses). Additionally,
Straddlers report a higher rate of increase in the cost of medical
coverage (11.4 percent for 2004/2005) than almost any other group
of small businesses. Perhaps as a result, Straddlers offer employees
the smallest contribution toward the cost of medical coverage (45.2
percent on average). Straddlers are also more likely than any other
small business segment (except Micro-Employers) to offer employees
completely unfunded plans (with 28 percent of all Straddlers offering
Giant Midgets Stand Tall: The largest small companies (200+
employees) are able to leverage their relative size for the benefit
of employees. On average, these so-called "Giant Midgets" pick up
62.5 percent of the cost of medial premiums - one of the very best
deals offered in the small business category.
Small Business Survey Methodology
Small Business Basic Medical Coverage Survey was conducted in July
2005. Approximately 300 small businesses (each employing 1-200 individuals
in the United States) completed the survey. The full survey results
are available at research.salary.com.
invited a cross-section of small businesses across America to participate
in the survey. Companies were grouped into the following size categories:
1-20 employees; 20-50 employees; 50-100 employees; 100-150 employees;
150-200 employees; and 200+ employees. Salary.com compensation professionals
reviewed the data for consistency and accuracy, and excluded data
that appeared to be invalid.