HEALTH CARE: How much does health insurance really cost?

Have you been grumbling about paying for your employees’ health insurance? We’re going to show you how to save a bundle.

According to a recent survey by the Small Employer Health Benefits Survey (SEHBS), 57 percent of employers weren’t aware that they could deduct all the money spent on employee health insurance.

The 2000 study, which consisted of more than 950 companies with two to 50 employees, also found that 65 percent of employers didn’t know these amounts are deductible as general business expenses. So rethink whether offering health benefits is really too expensive. Many small businesses seem to think so, but they’re overestimating the actual cost.

What are you really paying for?

“I think more businesses would take the initiative if they understood that what they paid for health benefits is 100 percent tax deductible,” says Paul Fronstin, a senior research analyst the Employee Benefits Research Institute (EBRI), which co-sponsored the survey with the Blue Cross and Blue Shield Association, and the Consumer Health Education Council.

Even though these benefits are deductible, health insurance is still expensive. Every time you look at an insurance statement, you can’t help but notice that costs have been rising and are going to continue to rise. In fact, a recent study by the Kaiser Family Foundation found that the average monthly cost of health insurance premiums rose 10.3 percent between spring 1999 and spring 2000 for employers with three to 1,999 employees.

Despite the rising health insurance costs, however, many small businesses are offering, or considering offering health benefits for their employees, particularly those who’ve never offered health insurance before. The SEHBS survey found that 29 percent of small businesses not currently offering health benefits are considering offering health benefits within the next two years. And those numbers could rise.

“As long as the economy stays strong, and the labor market stays tight, this upward trend will continue,” says Fronstin.

Why offer health insurance?

Offering your employees health insurance is a great way to recruit and retain the best people, and it costs your business less than you may think. Before deciding whether or not to offer health insurance, or any benefit, consider the following:

* Establish what you are trying to achieve by offering a new benefit

* Educate yourself about the various benefit programs

* Learn about the true costs of offering a particular benefit

* Find out what other employers in your area and industry are offering

* Discover what benefits matter to your employees

Remember that regardless of what benefits you decide to offer, make sure your company is taking advantage of the available tax deductions. You’ll save a bundle and keep your employees happy at the same time.

Henry Strada, Esq., is Special Projects Editor for,which has in-house experts on payroll, managing employees, legal compliance, healthcare, pension and fringe benefits. Strada is licensed to practice law in New York and Connecticut and can be reached at BN