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The current cost of providing health insurance to your employees hurts. You want to do this for your team. In some markets, you can't even attract and retain good, quality employees if you don't offer it. In a survey of PRO readers conducted earlier this year, 49% said they strongly agreed that getting and keeping employees was a critical issue in the landscape industry. While 33% said they strongly agreed that paying for benefits in general was a critical issue, 45% cited the cost of health insurance in particular as being critical.
While about half of respondents to the PRO survey said they thought this was a critical issue, a broader survey conducted by Aflac, the insurance company with a duck as a mascot, found that 70% of small business decision makers from a variety of industries are concerned about their company's ability to provide affordable health insurance coverage for their employees.
Beyond that, many (36%) said that their current health benefit offering has negatively impacted business, including: a drop in profitability (24%); the inability to attract new employees (11%) and the loss of good employees (7%). With employers saying they've lost employees because of a lack of health insurance or an inadequate or expensive offering, 37% said a high-quality, affordable health insurance benefit is the most important criteria in attracting and keeping good employees. The response was third behind compensation, 77%, and workplace environment at 47%.
Other than increasing deductibles or cancelling coverage — an option being considered by 11% of small business owners, according to a survey conducted by SurePayroll, an online payroll service provider — what can a contractor do to offer a decent benefits program?
PRO turned to Sandy Mathy, president of @butler & co., a benefits advisor in Little Suamico, Wisconsin, for advice and ideas. She came up with five prescriptions based on her work with contractors and individual employees of contracting firms that do not offer health insurance.
In a tight spot
Contractors are in an awkward position today, Sandy says. Because of the high cost of providing benefits, some are offering health insurance and some aren't. "We have a couple of issues that are key to contractors. One is they need a core of people who are experienced because the more turnover you have on the crew level, the more important having someone with experience supervising those crews becomes."
When she sees a lot of turnover at the entry level, she knows the employer has to keep management or team leaders because she recognizes a contractor can't have turnover in both, which leads to her first prescription.
Prescription one.
What are you trying to do for the business?
Sandy says benefits should enhance your company, not just create another expense like electricity and gasoline. "These are called benefits and we have to return them to a point where employers see them as something of an adjunct to their business plan and the employee sees them as something positive."
She cites an example of a company she worked with that really believed that once an employee was with them for three years, they became super valuable, because after three seasons, they would have acquired a lot of experience and exposure in both the equipment operation and management of crews. "We advised them that we could create classes within his company — even if the company has 25 employees at its peak and seven at the lowest. You can create a class of all employees who have been there three or more years and another class for all employees that have been there less than three years."
Once classes have been set, you can decide that certain benefits can be awarded to a certain class. This enables you to provide health insurance, for example, to employees with you for three years or more. "If you believe that replacing a person who has been with you for three or more years and has all this knowledge costs you, conservatively, $300 a month, would you consider going from paying that $300 a month for a replacement to $600 a month for a person who has been there for three years or more? That might cost you $300 a month more, but would the experienced employee then see that as a reason to hang around and not search out other opportunities?" Sandy asks.
Using benefits to attract certain classes of employees will become more important both because of the tax savings and the increasing demand for them on the part of employees. "If you want to attract a particular class of employee, you're better off if you can attract them by using premium, benefit and claim dollars than by using salaries," says Sandy. "The surveys are showing us that, in greater volume, benefits and in particular health insurance benefits, are perceived by employees as of greater and greater value. This is not surprising, because the costs of medical care are going up and we have an aging work population."
Prescription two.
Forget the pay raise.
Sandy says that there is great financial benefit to both employers and employees in paying for benefits with pre-tax dollars. "These are approaches they've never been trained on and it's really important. If I'm going to get a landscape designer, let's say I'm going to add $1,000 a month in additional salary to get a good one, it actually costs you another 10% because you have to match FICA and Medicare taxes. That actually costs you $1,100 a month."
She adds that if you gave them $1,000 a month in tax-free money to spend on medical, dental and vision expenses, and you can give it to them in a number of different ways, it's tax-free to the employee and a tax deduction to the company. "Now that $1,000 doesn't cost you $1,100 a month, it might actually cost you $800 a month. For the employee, instead of getting $1,000 in his paycheck and then paying about $300 in various taxes, he'd have a full $1,000 worth of benefits and his taxable income wouldn't go up," she says.
Prescription three.
Provide choices.
"If you do provide health insurance, provide at least two choices, because you're going to have 27-year-olds and may have a 57-year-old. As a business owner, you're not going to choose a plan that everyone will be happy with," Sandy says.
As owner, you need to decide how much money you can commit and then give your employees a choice of two plans — one more expensive and one less expensive — and they decide which plan to take, she explains. "Now you haven't blown the budget and could very well have a 27-year-old take a high-deductible health plan and have $10 a paycheck in payroll deduction and a 57-year-old who might take a different type of health plan and with a $50 per paycheck deduction. Both would perceive it as a value to them. In this way, you as a contractor aren't making the decision for the employee, but you're making the decision on how much to contribute."
Prescription four.
Encourage wellness and early diagnosis.
Sandy's company integrates a mandatory wellness program into its annual renewal procedure and it pays off for her clients. "The biggest issue with an aging population is not only using health care services without thinking about how much it costs, but it's the fact that we have a huge segment of the population that's diabetic and doesn't know it. We have a huge population that has high cholesterol and doesn't know it. The same for high blood pressure," she says.
Sandy points out that the landscape industry is male dominated, and that in the male population, health problems are worse because women have been conditioned to get regular physicals and exams. "The older men get, the more afraid they are to go in because they think they're going to have to have a colonoscopy."
When @butler & co. advisors travel to a company for the annual renewal of its health plan, they take a pin-prick blood sample and then process it in a portable analyzer. In five minutes, the employee gets measurements of total blood sugar and total cholesterol (good and bad). They then check the employees' blood pressure, height, weight and body fat content. After the 15-minute process, the employee gets a printout that tells him not only what his results are, but whether those results are awesome, terrible or in between. The employer pays $75 per person for the service, which includes the test, employee report and educational books and an employer summary report.
"They then get a bottom-line score, because you could have a little high blood pressure, a little high blood sugar and cholesterol that's kind of high, but when added together, you could be a walking time bomb. We would rather pay for cholesterol medicine than pay $57,000 for a bypass," Sandy says.
There are a couple of encouraging signs that the health care industry is working to find ways to get people needed checkups and simple treatments in a cost-effective way, according to Sandy, including new methods and places to deliver health care. "You will see spread across the U.S. like wildfire something called Minute Clinics. They are in grocery and department stores next to the pharmacy. They're staffed by nurse practitioners — highly skilled, specialized nurses who are able to prescribe medicine. They have taken high-volume, low-intensity office visits, including blood pressure checks, blood check ups, or ear infections and sore throats," she says.
In general, when seeking medical treatment, the bigger the building, the bigger the bill. Sandy says that, starting with hospitals that have all the expensive electronic equipment and other overhead you may not need, and working down, the health care provider that can care for what ails you without unneeded overhead is going to be the most cost effective. For example, she recommends asking your doctor if there is a sports medicine clinic available for certain rehabilitation treatment instead of using a hospital's rehab facility.
Another trend that should help at least contain the rising cost of health care is the information, most often provided by insurance companies, but at times by government and others, that allows patients to learn what various providers charge for care. Usually found on Web sites, the information allows patients to find the best combination of the most cost-effective treatments with the best outcomes. Known as consumer-driven health care, this will encourage providers to keep costs down and effectiveness high, Sandy says.
Prescription five.
Make information available.
If you can't commit at least $10 per employee per week, then you can at least make information available. Have an insurance broker or advisor come in and do a seminar outlining the options available to your employees outside the company, including the high-risk insurance pools available in each state.
"The next step you can take for them, even if you're not contributing any money at all, is to agree to make payroll deductions for them to help pay for some sort of medical coverage. The reason this is so important is that you are authorized to take money out of their paycheck before taxes. For example, if you said that instead of providing health insurance, you were going to increase everyone's pay by $40 a week, by the time employees get it, they're only going to get 60 cents on the dollar," she says.
The employee must then go out and try to find an individual health insurance policy for about $24 a week when the administrative fees and commission on an individual policy can be as high as 40% versus about 25% on a group policy.
The scenario is completely different if you withheld that money pre-tax and paid the premium for the employee. "If you can allow $40 to remain $40, that would be huge. By allowing it to be deducted by your payroll system, it would also save you, as a business owner, matching FICA on that, so the $40 would only cost you $40 because of the savings realized in not paying matching taxes. That's a big step," Sandy says.
You're not paying the employee more money (unless you've increased their pay), but you've agreed to take payroll deductions pretax for these policies and allow people to come into the business once a year to offer health insurance options for your employees, she adds. "You've made the policies more economical and provided a place for your employees to get information and agreeing to take payroll deductions for people who want coverage. You have no other commitment."
author: By Bob Warde