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Sweet marketing music

Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

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by Andrew Tellijohn
June 2004

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Health plans

business builder health plans  

HRAs can help
owners afford
to offer benefit

by James Fries  

When 15 percent of employees are driving 85 percent of a company’s health care costs higher, how can business owners provide a benefit that all employees will view as beneficial?

There’s finally good news. Two new health care plan options now offer more medical benefits with more tax advantages for employers and more rewards for employees who either stay healthy or closely monitor their health. The news is welcome relief from the pain of either cutting benefits or sharing cost increases across the organization.

Stabilize renewals
Business owners are often confused by the many options available for structuring medical benefits, which are usually decided before or in tandem with selecting the insurance company. Like a blueprint, the structure draws up who pays for which expenses (for example, care that requires co-pays and deductibles by employees or costs paid by the insurer). It is typically called a plan design.

The marketplace is moving toward the reimbursement plan design because it engages employees in making smarter health care decisions and sharing the responsibility of insurance increases from year to year. Renewals may stabilize, and can even reduce over time, when people understand the real cost of health care and the part they can play in keeping costs down for themselves and their fellow employees.

Under this plan design, for example, a frequent urgent care user will be able to see that it costs $175 per visit rather than the $15 or $20 co-pay that was paid under prior plans. This employee could positively affect the employer’s group insurance rates by, for example, using the 24-hour nurse line, waiting until the next day to see a regular physician, or improving personal health. Another typical example is an employee who manages medication correctly so multiple clinic or numerous emergency room visits are unnecessary.

Recent legislation established two reimbursement plan designs that share many attributes yet differ in who controls the purse strings. One is called a Health Reimbursement Arrangement (HRA), which the IRS established in June 2002. The other is called a Health Savings Account (HSA), which was authorized by the Medicare bill in December 2003. Both are structured as follows:

• Employers establish a high-deductible medical plan for all eligible employees. For example, a typical plan design would be a $1,000 deductible for single coverage and $2,000 deductible for family coverage.

• Each employee gets an underlying health account that is used to reimburse medical expenses and satisfy the high-deductible plan.

• Individuals manage their own health care dollars. If they have money in their health accounts at the end of the year, a portion can be rolled over into the next year’s plan. This rewards the employees who stay healthy.

Employees can get more through these reimbursable plans. First, these health accounts are pre-taxed funds, which can accumulate from year to year to help further reduce employee out-of-pocket costs. Second, these plans have lower out-of-pocket maximums. Third, medical expenses under the high-deductible plan, such as physician office visits, are paid out of the health account first, not the employee’s pocket. And fourth, wellness and preventative coverage, promoting better health in the long run, is paid at 100 percent without touching the health account.

Employers can get more flexibility as they weigh the advantages of which plan to offer based on the major difference between the HRA/HSA options. An employer’s contribution into an HRA never becomes vested to employees, whereas it does with the HSA. For business owners with larger staffs or high turnover, it rarely makes sense to fund an account and then allow those dollars to walk out the door if a worker leaves six months later.

In that case, the HRA would be the better option since the employer controls the money. But for those business owners with smaller, more loyal staffs, the HSA provides a more substantial benefit and added incentive to stay.

A third option to consider is setting up an HSA to help owners, partners and other key people to save for medical expenses in their retirements, while offering an HRA to the remaining staff.

Those who have a major stake in the business, and are most likely to stick around until retirement, will be able to put more tax-deferred dollars into their Health Savings Account for funding a medical retirement account. This account will be able to pay for Medicare premiums, as well as medical expenses, without tax. It also reduces the insurance premiums by implementing a high-deductible plan.

[contact] James Fries is an account developer with Schwarz Williams Cos. Inc. of Golden Valley, which specializes in employee benefits and human resource services for small businesses, nonprofits and associations throughout Minnesota: 763.591.5822; jfries@swcnet.com; www.swcnet.com