Social Question

josie's avatar

Would you pass on insurance costs to employees, or fire somebody?

Asked by josie (30931points) September 6th, 2010

1. I own a business. We do very well in spite of the economic catastrophe that surrounds us. I provide my employees with a health benefits package. I pay the lion’s share of the premium, they pay a little bit, and the program has a reasonable deductible.
2. It is no secret that providers of insurance or pre payed medical plans are anticipating a dramatic jump in their payouts as a result of the changes in the market place brought about by recent legislation. I have checked around, but no matter where I look, the cost of providing similar coverage to employees is going to increase by an astonishing amount. Add to this the fact that the despised “Bush Tax Cut” is likely to vanish this year, and you have a potential problem with the bottom line.
3. The obvious solution is to increase my prices to my clients/cusomers and/or develop higher value, more expensive products. Neither of these is looking like an option in this economy, and certainly not if banks continue to be reluctant to loan, or if I become cash short for development as I attempt to keep up with insurance costs.
So here are my choices- I could pass through the premium increase to employees, and/or dramatically increase their deductible. Or I could let go of two employees and sort of maintain the status quo regarding insurance.
Most of my employees would begrudgingly accept their cost increases, but I have a couple of employees who are always griping about something, and I know that they would certainly hold a bitch-fest that would never end, and make my life miserable and poison the morale among my other staff if they had to pay more for their insurance. I really do not want to put up with their bullshit. If I get rid of those two, problem solved. But I don’t despise them, and I always feel sort of bad letting people go. I’ll get over it, but it’s still tough to do.
Anyway, that is the story, and I am pretty sure I know what I am going to do.
But, since I am here and you are too, what would you do?

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24 Answers

jaytkay's avatar

…the cost of providing similar coverage to employees is going to increase by an astonishing amount…

Citation, please.

john65pennington's avatar

Keep your employees and pass the increases onto them. employees expect this, but not a termination.

john65pennington's avatar

2nd Answer. i assume that you only have a “few” employees and not thousands, like in government. if so, why call an insurance meeting of all employees and present this situation to them? i promise that they will respect you for it. let them make the decision. their choice will be for an increase in insurance rates to all of them, rather than have one or two of their fellow employees lose this job. i know i would appreciate being involved in this decision-making process, if i were employed by you. give it a shot and see what happens.

janbb's avatar

Do you need all the mployees you have? If you don’t need them, you might want to consider letting the two go. My husband has been in a similar situation in his business, although his group health premiums have been going up dramatically for several years. He has done a variety of cost saving strategies over the years, including increasing deductibles, changing the coverage and slightly increasing the employee contribution. If I were you, I would go that route and explain to the employees why you are doing it. Then and only then, if the two bitchers and moaners do complain and poison the atmosphere, I would consider terminating them if they do not respond to warnings.

mammal's avatar

i am sympathetic toward small businesses, however you need to target the customer, your team should come first, they should be protected. That would be the decent thing to do.

tablack01's avatar

why not proportionately increase what they pay. I’m sure you pay part of the insurance, so why not increase what you pay and increase what they pay. I’m sure they would be more understanding if you explained to them that you were taking a hit also. They are essentially getting a raise.

kevbo's avatar

Just throwing out the possibility of “terminating” two employees from your group. Perhaps you can incent two employees to seek coverage through their spouse’s employer. It may be worth their while if they understand costs will increase.

WestRiverrat's avatar

I almost agree with @john65pennington. You should hold a meeting with the employees and explain the situation to them. Let them express their opinions, take what they say into consideration. But in the end it is your business, so you should be the one that ultimately makes the decision.

Neizvestnaya's avatar

Employees know increases are on the rise and most will still opt to keep their coverages instead of go completely without or foot medical costs on their own. You don’t have to like or despise employees who are negative and good at crapping out the rest of your team but you could put your team first, get rid of the two troublemakers. I know where I work there are a few people who produce well but are such a problem and irritation to everyone else that it would be an improvement to remove them from the whole.

Pass around a ballot for the team to choose the increase or write in the names of anyone they would rather be let go instead

wundayatta's avatar

I’m with the “let the employees decide” group. You want them to buy into the decision even if they aren’t happy with it. Indeed, they may come up with ideas where they don’t have to pay more (or as much more) and they keep their jobs. They also feel like you care about their input, which makes them feel better about their relationship with you. Although, if you do not plan on doing what they recommend, then don’t given them any choice.

Seaofclouds's avatar

I would present it to your employees, but leave out the termination of a few people. Instead, I would offer it as them choosing between these two options:

1) They start paying more out of their pocket to cover their insurance costs.
2) They receive a pay cut to cover the increased cost of their insurance.

Either way they are still paying, but one way involves them never seeing the money, while the other they see the money and then have to give it up.

CaptainHarley's avatar

Of course. The purpose of most businesses is to make a profit. The average profit for businesses in the US is between 5% and 7% the third year.

89% of businesses fail in the first year.. out of that 11% left, half of those fail in the second year… out of the 5.5% left, the only reason they succeed beyond that is because this was their 3rd or 4th or 5th business… 95% of businesses DO NOT make a profit AT ALL within the first 2 years. The percent of businesses which fail would be much higher if the employer did not have the ability to lay people off ( “Firing” someone in most states must be for cause, other than in right-to-wrok states ).

Dr_Dredd's avatar

Is there anyone close to retirement age? Maybe you could create an incentive for them to retire instead of firing anyone.

Simone_De_Beauvoir's avatar

I wouldn’t start or continue a business unless I could provide for my employees in terms of health insurance. Period.

CaptainHarley's avatar

@Dr_Dredd

There are many ways around the “layoff dilemma.” Encouraging employees with 20+ years to take an early retirement is one of them.

A friend of mine put it to a vote in his small business: lay off a ⅓ of the employees, or everyone ( including him! ) take a ⅓ paycut. The employees voted almost unanimously to take the paycut. I told my friend that I greatly admired him for doing that.

BoBo1946's avatar

Did not Obama address that last week…in that, there are going to be some tax breaks for small businesses which should give you some relief.

I agree with John…

Dr_Dredd's avatar

@CaptainHarley My mother, who taught high school for 30 years, took the retirement incentive and hasn’t looked back since.

Haleth's avatar

”...but I have a couple of employees who are always griping about something, and I know that they would certainly hold a bitch-fest that would never end, and make my life miserable and poison the morale among my other staff if they had to pay more for their insurance. I really do not want to put up with their bullshit.”

Wow, it sounds like these people do not deserve to be employed by you. Constructive criticism does have its place at work, but these people are not being constructive. They are being disrespectful and dragging everyone else down with their griping.

I agree with @Westriverrat’s idea that you get some input from your employees before you make your decision. It shows that you respect them enough to get their opinions, understand this is hard for them, but that in the end, it is still your decision. After all, you’re the one responsible for deciding what’s best for the business.

The solution doesn’t have to be totally either/ or. If you decide to raise the premiums, you could still fire the two employees or at least let them know you won’t tolerate their behavior. You could serve them with a written warning, have them sign off on it, and keep it for your files- that way if you ever do fire them, you’ll have evidence of their bad job performance if you ever need proof. The possibility of being fired could be enough incentive to keep them in line. If they’re hourly workers, you could also cut their hours as an incentive.

CaptainHarley's avatar

@Dr_Dredd

Good for Mom! I admire her! : ))

YARNLADY's avatar

@jaytkay source

In California, two insurance companies tried to raise their costs 39%, but the State insurance commissioner ordered them to show actual cause, and they backed down.

jaytkay's avatar

Thank you, @YARNLADY

The article says a survey of large employers expect health care costs to rise 8.9% in 2011.

And the increase is 89% NOT related to this year’s federal health care reform.

The president of the group which published the survey said, “Changes related to the health-overhaul law account for about 1% of next year’s additional cost increase” (Wall Street Journal link )

The survey publication is here – (National Business Group on Health – Large Employers’ 2011 Health Plan Design Changes link )

Ron_C's avatar

We have this meeting every hear. Our president tells us where we stand on profits, whether we will get Christmas bonus checks and what changes are necessary to keep insurance costs reasonable. Our company pays the full basic health insurance, they always have. The also offer a more generous plan for a reasonable monthly deduction. I take the better plan. We don’‘t single people out for layoffs and some people complain but we all understand that in lieu of a single payer system our company is tied to our health insurance.

The current employer provided health care insurance it the most unreasonable method to insure the public. As soon as the person looses his job government takes over and is unable to collect taxes to pay for health care so the unemployed get less but more expensive help in the emergency room. It will be a stupid and wasteful system as long as there are for-profit dispenser of health care. The only winners in this system are the insurers and they don’t care how much they raise premiums as long as profits are maintained.

I would tell my employees the truth about the costs and ask for bigger deductibles and keep the employees. Good luck, it sounds like you are doing your best with the worst possible health care system.

YARNLADY's avatar

@jaytkay You are correct, the difference between what the insurance companies want and what the government will allow are very far apart.

zen_'s avatar

Fire somebody. If you can, it means you should anyway.

If you absolutely need everyone, then pass on the costs, and take one for the team as well.

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