Fighting Healthcare Costs

By: Robert Valentine

Succeeding in a small business in America can be a daily battle.

The U.S. Department of Commerce has reported that out of every ten small businesses that are created, only two remain after ten years.1 And while a 20% survival rate can be scary enough to deal with, so can employee benefits costs, mainly, healthcare.

Healthcare costs continue to skyrocket across the board. And while big companies and small businesses continue to struggle to keep costs low, it's usually small businesses that get hit the hardest. Healthcare costs continue to rise, sometimes with double-digit increases every year.

But that doesn't mean there aren't options available. Recently, more light has been shed on additional options to help small businesses save money and still offer healthcare.

Several options exist to help small companies reduce costs. One of the most popular is encouraging employees to get individual health insurance. Instead of you, the employer, subsidizing a large percentage of it, the cost of healthcare is shifted to the employee. And on average, individual premiums are less expensive than those of group plans.

And employers can help the employee out by giving a reimbursement to cover some of the costs, or by helping the employee handle their Section 125 deduction. Either way, the small business owner can reduce costs a great deal using this method and oftentimes it can be a less expensive route than the one currently used.

Another increasingly utilized option is to offer Section 105 plans to employees. Section 105 plans allow the employer to purchase a higher-deductible, (but lower cost), insurance coverage for their employees. The high-deductible is offset through an employer-controlled, tax-advantage fund that pays claims to the employees for medical costs below the deductible. The result is savings for the employer and the employee.

But not all companies will benefit from a Section 105. As with all plans, it's important to consult with a financial professional to decide what type of healthcare savings can be achieved in your small business.

Section 105's and encouraging the purchase of individual insurance are two ways to potentially save your small business money, at a time when small businesses are getting hit the hardest by healthcare costs. Making the tough decisions in all aspects of your business, and studying all your healthcare options to reduce costs as much as possible may just be one of the things that keeps you in the surviving 20% of small businesses.

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