Why is health insurance so darn expensive?
If you are a small business owner, you know all too well the struggles of providing quality health insurance for your employees. With rising health insurance premiums and healthcare costs, it can be hard to afford the coverage your employees need without taking a hit to your bottom line. You’re not alone; the average employee is now spending 20% of their income on healthcare costs. But it doesn’t have to be this way. Join us for a look at why health insurance is so expensive, and how you can break the trend and save your business from unsustainable, skyrocketing healthcare costs.
As many of us are all too aware, this is not a new phenomenon. The cost of healthcare in the United States has been steadily increasing since the 1940s, when employer-sponsored health insurance became the norm.
Employer-sponsored health insurance first became common in the United States during World War II. In 1943, the federal government created a tax incentive for employers to offer health insurance to their employees as a way to attract and retain workers. This incentive has served as the foundation for employer-sponsored health insurance.
In the 1950s, people started getting new options for healthcare. Companies began to offer better benefits packages to people who worked for them, which meant that workers could get things like vision and dental care. This was great for people who had a job, but it was hard for retirees because the costs of healthcare were going up and they couldn't afford to pay for it. So in 1965, President Lyndon Johnson created Medicare and Medicaid to make sure that retired people and people with low-paying jobs could get the healthcare they needed.
Since then, the cost of healthcare has risen drastically, with no signs of slowing down. Advances in medical technology, an aging population, increased cost of prescription drugs, lack of competition, misaligned incentive, and government policies have all contributed their part to this problem.
In fact, according to a report by the Kaiser Family Foundation, the average annual premium for employer-sponsored health insurance has increased by more than 200% since 1999!
These rising costs have put a strain on businesses of all sizes, forcing them to either reduce benefits or pass on some of the costs to their employees. This has had an especially negative impact on small businesses, as they may not be able to afford the same level of coverage as larger companies. As a result, many workers are left with inadequate coverage or are forced to pay out of pocket for health care services.
The current state of healthcare costs in the United States is unsustainable, and there is an urgent need for reform. Increasing access to quality, affordable care is essential to ensuring that businesses of all sizes can continue to provide their employees with the coverage they need.
So what can be done to break this trend? The answer lies in risk mitigation strategies. Employers need to explore alternative funding solutions such as group captives, level funding, and self-funding. These strategies help companies save money by shifting the risk associated with unpredictable rate increases to a third party insurance provider.
At ThinkTank, we specialize in helping businesses explore their options when it comes to alternative funding solutions. We work with employers to create customized plans that meet the needs of their employees while also helping to lower their premiums and health care costs.
If you are a small business owner looking to take control of your health care costs, here are some action items you can take:
Educate yourself on alternative funding solutions and risk mitigation strategies.
Consult with an experienced insurance consultant who specializes in alternative funding solutions.
Develop a comprehensive plan that meets the needs of your employees while also helping you save money.
Re-evaluate your plan on a regular basis to ensure that it is meeting the needs of your employees.
Taking the time to explore alternative funding solutions can help small business owners lower their health care costs and better manage their internal spend. With the right strategies in place, companies can ensure that their employees have access to the care they need when and where it’s needed.
Marty has spent most of the last 20 years developing software in the marketing space and creating pathways for software systems to talk to each other with high efficiency. He heads our digital marketing efforts as well as oversees any technology implementations for our clients. As a partner, Marty is also responsible for internal systems in which help our team communicates with each other and our clients.