The health care pinch

Health care seems to be a regular headline in the news. Like many small business owners I must know enough about a topic, like health care insurance, to make purchasing decisions and administer the benefits for the company. This certainly does not make me an expert on the topic – but like many, I am a consumer and purchaser of the products and services and have some very personal experience with the process.

As the owner of the company I’ve made the choice that offering benefits is an important part of the compensation structure for our employees. I believe that we are able to attract and retain excellent talent in part because of these benefits. Not all landscape service companies offer or provide insurance coverage to their employees.

Beyond major medical plans which includes an HSA option, we offer dental, vision and term life insurance. We also provide long term and short term disability plans. We just began offering an FSA (Flexible Savings Account) so that employees can use pre-tax dollars for all medical related expenses.

Our renewal rates are scheduled to increase approximately 12% this year, which I’m told is in line with the national average. This is on top of an increase from last year of 18% and similarly the year before.

I’m not sure what the solution is to continuing to provide health insurance and related benefits to our employees. I’m committed to making the insurance available to our employees and their families. However, our customers are facing increasing costs in their personal budgets and are not interested or able to simply pay us more for the landscape services they receive simply because our costs are rising.
What is a company to do? In order for us to remain competitive in the market place for customers we need to provide excellent value and keep our pricing in line with the market. We also must remain competitive in the market place for employees by offering benefits. We are not just competing with the landscape industry, but other prospective employment offerings where our talented people may go if we can’t offer what they need. Lastly, we must make our forecasted profit so that we can continue to reinvest in the operations of our business.

Do we increase prices? Coupled with rising fuel prices this has happened to some degree already. I’m not sure the market will support significant price increases. Do we cut benefits and/or compensation to our employees? Will our employees be willing to accept these cuts and will they stay with the company to serve our customers? Do we accept lower profit margins as our costs increase? I’m not sure this is a sound strategy if we intend to stay in business for the long term.

The answer is more complicated I’m sure and not so cut and dry. For the time being we have focused on increasing our efficiencies. We are investing in becoming more efficient, and as we grow, the impact of the improved efficiency will pay larger dividends.