It’s no secret that rising healthcare costs are a major challenge, especially for small and medium-sized businesses in Alabama. A recent Kaiser Family Foundation report revealed that premiums for family plans increased by 55% over the past decade, twice as fast as worker pay.
For small business owners, these costs can be extreme. In fact, a survey from eHealth shows six out of 10 small businesses feel that an increase of 15% would make their current plans unaffordable.
Fortunately, there is a solution for your Alabama business: partnering with a professional employer organization (PEO). With the help of a PEO, you can offer a quality yet affordable healthcare benefit that assists in hiring and retaining the best employees.
The Current State of Healthcare Costs
Right now, consumers pay more money in premiums, deductibles and additional expenses than ever before. The Kaiser report shows that in 2017, annual family premiums for employer-provided health insurance rose to $18,764 – an increase of 3% from 2016. Also, when cost sharing, employers are bearing more of the burden, with workers contributing about $5,714 to family plans, accounting for their share of the premium.
Why are Premiums Rising?
There are a number of factors contributing to high healthcare premiums. According to a study by the Journal of the American Medical Association in 2017, these factors include:
- Population growth
- Population aging
- Prevalence of disease or incidence
- Medical service utilization
- Service price and intensity
Service price and intensity, including the rising cost of pharmaceuticals, make up over 50% of this increase. Additionally, two most-cited reasons according to the National Conference of State Legislatures (NCSL), are lifestyle changes and government policy.
Other factors vary by type of care and health condition. However, on average, healthcare premiums have increased for the majority of businesses and their employees.
Lowering Premium Costs with a PEO
PEOs can help alleviate high healthcare premiums by lowering the costs related to employee benefits. When partnering with a PEO, the organization becomes a co-employer and shares certain rights, responsibilities and risks with the employer. However, the company’s ownership, structure and foundational elements remain the same. PEOs have the ability to leverage economies of scale, and this gives businesses access to a wider variety of healthcare options at more competitive rates.
How does that work?
PEOs may have hundreds or thousands of employees, allowing them to negotiate for better rates. This establishes and enhances their relationships with major insurance companies. Once they receive competitive rates, those options are offered to small and mid-size businesses who would not have been able to afford these same benefits operating under their current structure.
For these businesses, being able to offer the same types of healthcare benefits and plan options received through Fortune 500 companies elevates their standards, providing incentives for prospective, new and existing employees. By paying less for these benefits, small- and medium-sized businesses can use those cost savings to drive business growth.
Growing healthcare costs is always a concern, but using a PEO partner for your Alabama business may be a viable solution to offer quality and affordable healthcare. Learn more about PRemployer and see how we can help you find suitable health care plan options for your business, as well as provide additional HR services.
