It’s important for employers to educate their staff about the rising costs of their benefit plans. And one good way for employers to better manage rising health-care costs — while enhancing choices for their employees — are HRAs and HSAs.
Almost every company — pest control or otherwise — looks at employee benefit offerings as one of the best ways to attract and retain the best workers. Employers want productive, satisfied and healthy people working for them and most offer a benefits package to full-time workers to accomplish that objective.
Top-tier employee benefit offerings usually include comprehensive medical and vision plans, health care and dependent day care flexible spending accounts, life insurance offerings, and accidental death and disability coverage. Also sometimes included are 401(k) retirement plans, employee assistance programs, supplemental insurance plans, and employee perks such as shopping and entertainment discounts.
That’s all well and good, but the cost to businesses have continued to increase dramatically over the past decade and are a legitimate concern of employers. So, just how do pest control employee benefit plans measure up in terms of quality, quantity and type? And what can be done to curb those rising costs?
Curbing Costs. Chris Kramer, vice president of Diversified Benefits Services, a long-time, third-party benefits administrator and consulting company located in Hartland, Wis., says health-care costs will continue to rise and emphasized the importance of curbing them. “Costs rise,” he says, “for a multitude of reasons: government regulations, an aging population, the continuous development of better healthcare technology and better prescription drugs. And as baby boomers start to retire, you can be sure they’re going to demand more and better health care.”
He says flexible benefit plans such as Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) can help slow rising costs and increase savings for both employers and employees. “They’re not the ‘silver bullet’ by any stretch, but are important parts of a solution,” he says.
“HRAs are helpful because employers can direct how the HRA dollars are spent. This is an incentive for employees to be more discerning consumers of health care, and can potentially help control those rising insurance costs. HRAs are also helpful because of the numerous plan design options that are now allowed,” he says. “Under Section 105 of the IRS Code, employers can reimburse employees tax-free for medical expenses, if and when they are incurred. Organizations of all sizes have incorporated higher deductibles and co-insurance amounts into their health plan design to lower the premiums. They then implement an HRA that reimburses them a portion of the deductible or co-insurance if the employee incurs the expense.”
Monies, he emphasizes, are only reimbursed if the employee incurs the expense. If not, the monies stay with the employer. “Statistically, most employees aren’t high users of health insurance, so often the employer’s premium savings is larger than the amount reimbursed,” he states.
“If I had to point to one thing to slow down the rising costs, it’s wellness — getting people to eat better, exercise and take better care of themselves. Employers more and more are seeing the value of wellness programs in the workplace, including health screening and online nurse services,” he said. “We see a lot of HRA plans that are tied to wellness initiatives. If employees prove they are doing wellness activities, such as getting regular medical check-ups, employers will give them access to a HRA. If not, they won’t get the reimbursement.”
How Does Your Healthcare Plan Stack Up?
Rising health care costs continue to challenge employers, who weigh the options of absorbing higher premium costs or sharing them with their employees.
The nationwide trend, according to global human resources consulting firm Towers Watson, is for companies to shift more of the health-care cost burden onto the employee. Based on results of its 2012 Employer Survey on Purchasing Value in Health Care, U.S. employees are paying, on average, 9.3 percent more toward their health insurance premiums in 2012 than they were in 2011, and they are contributing 40 percent more for health care than they were five years ago (employers are paying 34 percent more over the same time period). As costs continue to trend upward at twice the rate of inflation, many employers are also adding spousal surcharges — in other words, upping employees’ contributions toward dependent coverage.
All told, employees are paying 34.4 percent of their health care costs, including premiums and out-of-pocket costs — a rise from 33.2 percent in 2011, reports Towers Watson. — Donna DeFranco
Kramer says that HSAs were created and designed to provide people with more control of where health-care dollars are spent. “The rationale is this: An employer buys a health plan with a high deductible. Because of that deductible the insurance coverage costs less than traditional plan designs. The employer and the employee then contribute money into a tax preferred HSA to cover health care expenses. If that money isn’t utilized, it rolls forward to the next year,” he explains.
“The money in an HSA is placed in an individually held tax-exempt trust, where the dollars are owned by the employee. This incentivizes them to become better consumers of health care because they can keep any unused dollars.”
Kramer points to the significant medical plan design requirements for an HSA. “To be eligible, a person must have a specific level of deductible. Also, all medical care costs covered, such as prescription drugs and office visits, must be applied toward the deductible. An exception, however, is made for preventative care. This type of insurance design keeps the cost of premiums more affordable.”
He also calls attention to the fact that some people are poor savers. “Switching to an HSA plan may lower the premium paid for health insurance on employees’ paychecks, but like retirement plans, if employees don’t save up a little, they’ll be unpleasantly surprised in the future.”
Kramer also emphasized the importance of employers educating and informing their people about their benefit plans. “It’s a really good idea for management to hold in-person meetings with employees and to take advantage of today’s technology utilizing such services as webinars and video conferences to reach employees who aren’t close by.”
HRAs and HSAs can enable pest control employers to better manage rising health-care costs while enhancing choices for their employees, he says. “They present a variety of plan design features as well as potential tax advantages. That’s something to seriously consider.”
About this State of the Industry Report
The data used in this report were collected via a direct mail survey.
In May of this year, PCT mailed a questionnaire to 1,000 randomly selected subscribers. A follow-up letter was sent in July. We received 266 responses to the survey. The charts from the direct mail survey reflect the following statistics:
- Eighty-seven percent of the respondents were male.
- Most of the respondents (83 percent) classified themselves as owner or president.
- Ninety-five percent of the respondents represent an independent, privately held business.
- Eighty-seven percent had one office.
- Fifty-nine percent of respondents are older than 55 years old.
The articles in this state of the industry report were all written by frequent contributors to PCT magazine: Donna DeFranco, Kristen Hampshire, Anne Nagro and Jordan Fox. PCT Associate Editor Bill Delaney also wrote several pieces for this report. NPMA’s Bob Rosenberg and Gene Harrington, as well as ASPCRO’s Derrick Lastinger, contributed the article on the industry’s regulation by the states.
Many thanks to Dow AgroSciences for its advertising support of this special report. Without Dow’s commitment, PCT’s State of the Industry report and its accompanying research would not be possible.
The author is a freelance writer based in Milwaukee, Wis. He can be reached at email@example.com.