In today’s competitive job market it is imperative to offer health insurance to employees, but many small employers find it hard to budget.
“Whenever I talk to clients about health insurance, it sucks all the oxygen out of room,” said Hank Peck, president of Hank Peck & Associates. “It’s the most expensive benefit, and probably the most necessary.”
Now there are a number of affordable options for small employers, holding a range of price and plan options.
University Physicians Healthcare Group offers health insurance for small companies, having one to 50 employees.
This state-sponsored program allows employers and employees to choose between three HMO-type plans, depending on the range of coverage needed.
“The program is great because employers can pick one plan and the employees can pick another plan,” said Kathleen Oestreich, CEO and plan administrator of University Physicians Healthcare Group. “The plan is affordable for employers to provide and it is probably the single most important benefit to the employee.”
The three levels of coverage are Classic Healthstyle, Secure Healthstyle and Active Healthstyle.
Classic Healthstyle is for those who have a condition requiring ongoing care. The Active Healthstyle plan is for young, healthy individuals willing to pay higher co-pays.
Also, the premiums are not based on pre-existing conditions, but instead the rates are adjusted annually based on the need for health-care within the county.
“In Arizona over 90 percent of businesses are small and many are uninsured,” Oestreich said. “That is where this product is targeted. The goal is to get more people in Arizona to have health insurance.”
According to Oestreich, health insurance keeps employees healthier, creating a better, more productive work environment.
The Pima Community Access Program is another means of providing health coverage.
This not-for-profit healthcare service is for uninsured, low-income individuals.
Medical providers across Pima County offer services at a discounted rate, requiring fewer out-of-pocket expenses for the patient.
The program, which was implemented in September 2001, has over 600 specialists offering discounted medical services.
“Basically, health providers are giving their services for free,” said Jill Bullock, the community relations liaison for Pima Community Access Program. “They want to keep people out of the emergency rooms by offering them continual health care.”
The Pima Community Access Program estimates there are 140,000 uninsured adults and children in Pima County, with two-thirds of them low-income workers.
According to Bullock, medical bills and expenses are the number one reason for bankruptcy.
The program is available for individuals making less than $23,925 per year and for families of four making less than $48,375 a year.
Business owners can participate by paying the $40 a year fee for applicable employees.
The program is available for business owners to provide health care benefits to their workers who make too much to qualify for AHCCCS and not enough to self-insure.
When deciding how to insure employees, it is important for the small-business owner to understand their market.
“You have to sit down with someone you trust and determine priorities,” said Peck, whose company specializes in group benefits and financial planning. “Insuring employees goes beyond pure cost. You have to look at what kind of organization you are, what kind of recruitment needs the industry has and how important it is to retain employees.”
According to Peck, there is a plethora of options available for employers and their employees, ranging from HMO plans to PPO plans.
“If your market isn’t that competitive then you don’t have to offer Cadillac benefits, whereas if you are in a very competitive field, then it is important to offer a first-rate plan,” Peck said. “Absolutely, without a doubt, having benefits creates a better office culture and benefits are just part of the package now.”
Who is uninsured
Many entrepreneurs do without health insurance because of rising costs. Share of workers without insurance, 2003:
Fewer than 25 workers 32.6%
1,000 or more 12.8%
Source: Kaiser Family Foundation
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Retirement plans improve work atmosphere
By Ashley Nowe
Retirement benefits have become ever more important as Social Security threatens to dwindle, creating a way to save tax-deferred money.
Andrew Avella of Retirement Portfolio Specialists said the government is making it easier for small-business owners and employees to save.
“The government really wants all of us to save for retirement because the reality is Social Security is diminishing,” Avella said. “They are increasing the limits we can put in and making it easier to put away more money.”
Since the Economic Growth and Tax Relief Reconciliation Act of 2001, the contribution limits for various IRA and 401(k) plans have increased and are set to increase further through 2009.
Having a tax-deferrable retirement account offers three main benefits, Avella said. It reduces tax expenses, meets retirement needs and protects assets.
The most popular savings plans among business owners are the 401(k) plan and Simple IRA account.
Investing in a 401(k) is beneficial because money can be borrowed from the account without penalty and it has a higher contribution limit than other plans. However, many small businesses turn away from this product because there are pricy set-up fees, annual maintenance fees and the employer must pass ongoing legal testing.
The plans are closely regulated to ensure that the higher-ups in the company aren’t receiving all the benefits.
Sole proprietors and independent contractors can set up more affordable individual 401(k) plans, which are not subject to testing, allow for contribution flexibility and have a loan option.
Many smaller companies with employees choose a much less demanding product, such as the Savings Incentive Match Plan for Employees, more commonly know as a Simple IRA.
A Simple IRA allows for employees to select a percentage of their annual salaries or a flat-dollar amount to contribute tax free.
“The great thing about these plans is that you can beat Uncle Sam,” Avella said. “The money comes out of your gross income, not your net, which allows for fewer of your dollars to be taxed.”
The Simple IRA plan requires employers to match employee contributions dollar for dollar up to 3 percent of each employee’s compensation up to a maximum of $10,000, or $12,000 for those 50 years and older. There is no legal monitoring with the Simple IRA, but there is also no loan option.
Money cannot be taken out before age 59 without having to pay an early-withdraw tax penalty.
“It is very important to diagnosis the needs of a company before deciding on a plan,” Avella said. “I’m like the coach. I try to direct people to the right plan, because many don’t know all their options.”
According to Samuel Hawtree, owner of Hawtree Financial Services, it is imperative to have a retirement plan for employees because it creates a better work environment.
“It is very scary as a small business to start a plan and promise to make contributions,” Hawtree said. “The bottom line is that the employer has to realize that it is the employees that help them make the money. Offering retirement plans will help you maintain worthy employees.”
Employers who offer retirement benefits should also provide ongoing financial education for employees, said Hank Peck, President of Hank Peck & Associates.
“People that have retirement plans should participate to the best of their ability because of the phenomenal tax advantages,” Peck said. “Retirement accounts should be the first place you should go to save.”