SMALL BUSINESS CONCERNS: Insurance Assurance

Insurance is a necessary business expense. Why? Because being a landscape contractor or lawn care operator can be a risky business. Just in the ordinary course of operations, you can easily identify sources of potential trouble – equipment misuse, spills, personnel nightmares, theft, regulatory infractions – you name it.

Even on the business side of things, each area poses its own types of hazards, from paperwork mismanagement to third party liability.

For this reason, insurance is a necessity, but as rising costs continue to become a challenge for small business owners to manage, landscape professionals must understand the current statistics as well as explore their options for cutting their insurance costs.

SMALL BUSINESS & HEALTH CARE. The percentage of businesses offering health insurance to their workers has declined steadily over the last five years, as the cost of providing coverage continues to outpace inflation and wage growth. That’s according to a recent survey by the Kaiser Family Foundation’s prestigious Health Research and Education Trust.

The survey found that only three in five firms offered coverage to workers in 2005, down significantly from 69 percent in 2000. The drop stems almost entirely from fewer small businesses (200 workers or less) offering health benefits. “It is low-wage workers who are being hurt the most by the steady drip, drip, drip of coverage draining out of the employer-based health insurance system,” according to Kaiser Family Foundation President and CEO Drew E. Altman, Ph.D.

According to the U.S. Chamber of Commerce, more than 45 million Americans are uninsured, with nearly 60 percent of those employed by small businesses. To make health care more affordable and accessible for small businesses, the Chamber promotes passage of legislation that would create federally regulated small business health plans, also known as association health plans (AHPs). Allowing small businesses to arrange their health benefits through associations can make coverage more affordable by spreading risk among a much larger group, strengthening negotiating power with plans and providers, offering insurance across state lines and reducing administrative costs.

Currently, Sen. Mike Enzi (R-Wyo.) chairman of the Senate Health Education, Labor and Pensions Committee is offering the Health Insurance Marketplace Modernization and Affordability Act. Similar measures have passed the U.S. House of Representatives a half dozen times before – but come up short each time in the Senate. In a positive note, the bill has gained the support of the National Association of Health Underwriters.

Another new wrinkle is the health savings account (HSA), designed to put consumers in charge of health care decision-making while curbing rising health care costs.

Folks with a regular health insurance plan or who are on Medicare don’t qualify for a health savings account. But for those who do qualify, both employees and employers can contribute. This year, the limits on contributions, which are tax deductible, are $2,700 per individual and $5,450 per family. The money grows and can be withdrawn tax free, and may be spent on qualified expenses such as drugs and checkups. There is one catch – to get an HSA, you must also buy catastrophic health insurance with a high deductible – about $2,000 for family coverage.

From the employer’s point of view, HSAs are generating savings on payroll taxes for companies that adopt them that mirror gains made in the shift to 401(k)s. On the other hand, while HSAs offer employees greater flexibility, they could hasten a shift of health care costs from companies to employees, increasing their financial burden and risk.

CUT YOUR PREMIUMS. Since insurance premiums are a part of all of our budgets, here are some ways to cut the cost of that line item.

Increase Deductibles. You can save money by increasing your deductible: Going from a $500 to a $1,000 deductible per general liability claim, for example, could save you hundreds in premium dollars each year. Raising auto or home insurance deductibles can save you from 15 to 30 percent, according to the Insurance Information Institute (III). And, with increased deductibles, some insurers have been willing to hold the line on their ever-rising health care premiums.

Reduce Limits. Similarly, reducing the amount of your coverage will also cut your premium. Go from a $1 million to a $500,000 general liability limit, and savings could range from a couple to a few hundred dollars. On older cars in your fleet, consider dropping collision and/or comprehensive coverage which, the III says, may not be cost-effective to continue on cars worth less than 10 times what you would pay for the coverage.

Share Costs or Self-Insure. Raising deductibles and reducing or eliminating certain coverages are really examples of self-insuring; you take on the risk, you save money. Many companies these days, large and small, are also sharing insurance costs – especially in health care – by raising employee annual contributions to individual programs and/or by increasing their per-visit co-payments.

Audits. Most general liability policies permit insurers to audit their books to see whether, based on their company receipts and/or payroll, they’ve paid too little in premiums. If you’ve done significantly less business than usual, you can request an audit and perhaps qualify for a refund.

More Rigorous Employee Screening. Technical advances have reduced the costs of background checks, making it cheaper to check somebody’s record beforehand rather than to fire them later – not to mention the lost time, payroll expense and management attention involved. Drug testing, motor vehicle record reviews, checking references – all can also save you money in the long run.

Garage Locations. Auto insurance rates vary depending on where you house your vehicles. Since each vehicle in a fleet is rated individually, make sure your policy accurately reflects where each one is garaged.

Review Loss Runs Annually. Take a moment to look back at your insurance loss record over the past 12 months. Try to figure what you might have been doing wrong. Making corrections now can help limit future losses.

Comparison Shop. Prices vary from company to company, so comparison shopping can sometimes pay off. Ask your broker, approach various companies directly, or access information on the Internet. Your state insurance department may also provide comparisons of prices charged by major insurers. Or the state authority that regulates your industry may keep a list of insurers who specialize in your field.

Another tip: Many companies offer discounts for placing multiple lines of coverage through them. Other things to consider: The expertise of your agent, what you’ll pay compared with the actual coverage you’ll receive (the value), the insurer’s industry rating and their claims service track record. Always ask around.

The author is president, Weisburger Insurance Brokerage, White Plains, N.Y. He can be reached at 800/431-2794, ext. 224, info@weisburger.com or via www.weisburger.com.