George Murphy on Cutting Health Insurance Costs for Auto Aftermarket Businesses

Chandler Kohn: Let’s jump into it. So, you know, you know, I work with a lot of folks, you know, businesses across the automotive aftermarket, and many of them attract and retain talent through their health insurance programs, which can be 1015, you know, 20% of their overall expenses. I was looking at my client base yesterday before we hopped on this and it looks like they run about 1516% overall, essentially covered health insurance to to, you know, attract and retain their employees, particularly on the labor side of things. Want to jump in to this ’cause you have a unique angle here and, you know, help our listeners understand how they can essentially, you know, optimize their insurance spin while continuing to attract and retain talent.

George Murphy: Sure. So I think starting off, one of the things is I’m sure many of you use a broker and I think what’s key in the broker is getting a broker who is lined with your thoughts and visions on how you want to provide healthcare benefits and how much do you want to provide in the way of benefits. There’s a number of ways to both cut costs at the same point in time while offering plans out there for folks. What you’re finding in the marketplace is that it really had an interesting inflection point right now because even as we were setting up for this, there’s come become some rule changes out of the DOL that might help particularly small employers who are under 50 who really have no leverage in the marketplace. You’re stuck with a variety of programs that really look at providing an insured marketplace and you’re really stuck at the whim of the local carriers who offer insured products in your marketplace. So I think it’s, as I said earlier, as key to looking at finding a broker who one can find you some of those insured products or maybe even locally offered products that you could use and help explore those. And we’re going to talk about a couple of other products that are out there that if you want to provide more flexibility and perhaps reduce your costs in the healthcare market, you can look at. I think one of the ones that’s really is gaining a lot of steam these days are the health reimbursement accounts. These feature a number of of advantages. They’re really, they’re tax deductible to employers. The employees who use the reimbursements out of these get to get the money coming out as a tax free benefit, which is always nice. The dollar goes a lot farther. And then of course, what you have as an employer is you have the ability to set the amount of money that you want to contribute to an employee for their use in the healthcare market. And then they’re able to take that money and they can go to any of the state-run exchanges to purchase healthcare benefits. There can obviously use that reimbursement to spread the cost between perhaps themselves and a spouse on healthcare. But it gives the employee a lot of flexibility on how they spend that money and what they spend it on. And of course, these can be spent on if you have employees that are married or have domestic partners, they can spend it on other things like deductibles for if they’re on their spouses or significant others plan. So it makes it pretty, a pretty nice vehicle for folks to use in the marketplace. Obviously you can put in the health risk arrangement reimbursement arrangements in conjunction with high deductible plans. This encourages your employees to go around and shop for healthcare costs and and get their better dollars. I would, while I would say that these were great plans conceptually, they are part of the challenge for a lot of folks is that when they go to their doctors and ask them how much do certain things cost, their doctors are kind of flummoxed too about it. Because they’re so used to dealing in an insured environment or a self insured environment. They actually are not sure how much they should charge for their goods and services. But again, as they said, you know, this allows people to be better stewards of how they spend their money. Now, obviously if you add in the high deductible plan, you are going to get more expenses there for your employees. So I think they’re the design is really critical to think about. Some people design the plans so that there’s a gap between them and then the money, then the insurance cover picks up later on. There are others that go to an even higher deductible and they almost look like a catastrophic plan. So they’ll pick up the 1st 2020 five, $100 a cost. But then if an employer has to fill that middle spot, but if for instance, on a catastrophic approach, if they get over 10,000, then that plan picks up and it covers the employees. So it makes it helpful to them to be able to use that in in an effective manner.

Chandler Kohn: So that’s my understanding is they kind of came out and became an option around 2020, Is that correct?

George Murphy: Yes, yes.

Chandler Kohn: And, you know, just did a, you know, quick search on the Internet and my understanding is, I think, you know, only 20 to 30% of people know about them. Maybe a few more have heard about that, but but overall don’t really understand. My, my father owns a a small business, 20 employees. And, you know, I asked him if he knew about the HRA. He said he actually did, but he said he wouldn’t addict because, you know, of budgeting and cash flow. And I think that’s probably a, you know, if I was a listener, I would be thinking that would probably be not my number one question, right? You know, how do I budget? You know, how do I have, you know, I’m so used to having a flat expense, predictable expense. You know, how do I manage an HRA when I don’t know what the expenses are going to be?

George Murphy: Yeah. I think, you know, there’s obviously ways there’s funding approaches to this. And as as I said, I think this is where, you know, having a broker come in and help you strategize and think about how to set up your healthcare program. And this is where it becomes important for that individual to participate. I again, I think it’s, you know, when I think of all the permutations that you get when you start to think about healthcare and all the different variables and the strategies and you know, we’ve, we’ve talked a little bit about this, You know, for many, many years there was this and this was the introduction of high deductible plans. There was a view of shifting cost to employees that would make them better stewards. But what we have found over times is that if employees don’t get the preventive medicine or preventive programs that they need, that they end up not saving any money, in fact costing more. And so I think thinking about a way to set up, OK, here’s my high deductible plan, should you choose to use one of those which can eliminate that, eliminate some costs. Well, there’s another thing we need to talk about from the Department of Labor. But then, you know, you can budget putting in money over the course of the year that you’re only you’re contributing HRA dollars on a paycheck cycle so that you can in fact budget that for your employees and, and thinking about it that way in a budget manner. Now, I’ve I’ve talked a couple times about the Department of Labor. One of the things that was done today or actually was done I think on Monday is the new administration has come out and said that they’re going to allow the use of short term health insurance. And what that is and the, and the what they’ve done is instead of trying to mandate or change the laws around the ACA requirements or better known as Obamacare or try to get this to Congress, what they’ve simply said is they’re going to stop enforcing the requirements for ACA. And and for those of you who are in the automobile industry, this approach probably looks pretty similar because it’s what they said for the CAFE standards, they would simply stop enforcing the rules around them. Well, the short term health insurance programs are tend to be significantly cheaper. And the reason they’re cheaper is because the underwriting of them can in fact, reject people with high, high degrees of healthcare problems. They can eliminate things like acupuncture, chiropractic care, fertility, male pattern baldness. And these are things, depending upon the states you’re in, that somebody has over time lobbied for and have gotten them included in the minimum coverage of the healthcare plans. So you might, you know, again, shopping with a broker, you should pursue these because these might be a viable course where you can in fact offer your employees a healthcare plan that’s been slimmed down, doesn’t have all of the bells and whistles that may be a mandated or an ACA plan has, but it would cover the basics where somebody gets sick or I’ll they get covered under the plan. So I think these are something that will be that are going to make a reassert re emergence and they should be out there. The nice part about it is the deductibles are going to be a lower and they’ll provide coverage again through the whole major medical policy. So I think they’re important.

Chandler Kohn: Excellent. Thank you. Is there anything else that the listeners, you know, think automotive shop owners should be listening to or any other auto market business owners should be listened to thinking about rather?

George Murphy: Yeah, I think what’s interesting to to think about and this could come in many ways. One is, you know, sometimes, depending upon where you’re located, local hospitals will run a medical plan that can be That could be attractive for those of you who know what Seema is. Seema offers a number of insurance programs for the aftermarket care. They don’t offer a benefit program, but they do offer some other insurance programs that might allow you to reduce your overall health insurance costs. Look at your local Chamber of Commerce or you know other programs out there that you might be a member of. They might offer healthcare programs. We know the one in Las Vegas offers a healthcare program that you can buy into that has better benefits at a cheaper cost as well. So there’s some things like that if you get creative and want to look at that can help you reduce your costs. And again, as I said, you know, generally if you got a good broker, they’re they’re bringing these types of things to your business into you as an owner on ways to think about how do you maximize your spend and get good healthcare coverage through them. Excellent.

Chandler Kohn: Really appreciate that. If we had to leave the listeners with one thing as they think about, you know, maintaining that talent pool, attracting talent and trying to drive down those expenses, what should they start with?

George Murphy: Yeah, Yeah. I think one of one of the things is really understanding your competitive marketplace that you operate in and making sure you’re getting the benefits that matter. Years ago, I did some work in Eastern Europe and we had, we used what they call Maslow’s hierarchy of benefits. And it didn’t make sense to provide retirement programs to our employees there because their healthcare was so bad that the fact that they might never even see the use of a of a retirement program. So I think thinking very carefully and asking your employees what is what, what do they really need in the way of benefits so that you get the right benefits, purchase the ones that would make the most sense. I think beyond, beyond healthcare benefits for many of these automotive shops where people are working around tools and cars, you know, some thoughts around maybe a skinny short term disability plan might might be something to consider. You have long term disability through Social Security and so, so make sure you’re buying the right amount of coverage and you’re not over buying insurance. I think would be the big take away that I would would encourage people to think about.

Chandler Kohn: Excellent, George. Well, thank you, George Murphy B to B Products. Thank you for joining us today.