In a 2009 study by the White House, small businesses pay 18% more in premiums for health coverage than their big box competitors per employee. As a small business owner are you surprised by this statistic?
Of course you’re not.
Small business owners have been living the health benefit nightmare for many years now, perpetually caught between a rock and health coverage.
Happy Employees
Small businesses are no different than large businesses when it comes to providing a work environment that is conducive to happy employees… And small business owners strive to have the same high quality employees that large companies have.
However, providing the benefits that attract top-tier talent is often a struggle. This is because a small business employee’s salary, vacation time, and health benefits have more significant impact the business’s bottom line.
So as a business owner, you either pay the high cost of health coverage or lose top-tier talent to large companies that can afford the benefits higher caliber employees desire.
Health Benefit Hope is Not Lost
Fortunately, all hope is not lost. Health carriers are starting to realize the strain that high health insurance premiums are putting on America’s small businesses. In an effort to decrease the health benefit burden health carriers are rolling out new benefit options such as hybrid and high-deductible plans in addition to the traditional HMO, EPO and PPO plans of the ’80s and ’90s.
These hybrid and high-deductible health plans do not by any means have rock bottom, bargain basement prices, but the savings on a monthly basis can be substantial as compared to a traditional HMO.
So What’s the Catch?
The catch is this, these alternative health insurance plans make force the employee to take on some of the upfront cost for any health related issues that may arise.
One of the most popular high-deductible plans right now has a $1,500 upfront deductible. This means that the employee is responsible for paying the full upfront cost for all health care for the first $1,500 spent during the policy period.
That sounds like a lot of money. However, you might save twice that per employee in monthly health care expense. This is why when choosing a health insurance program it is crucial to review your workforce demographics.
For a healthy, young workforce that does have many medical costs beyond an annual check-up the high-deductible is a fantastic option. For an older workforce that relies heavily on health benefits, this might not be an appropriate solution.
Hybrid health insurance plans may also be a good option as they have reasonable co-pays for doctor visits, but use a deductible for hospital visits.
Another popular option is taking a high-deductible plan and using supplemental voluntary benefits to fill in the gap in coverage, this is sometimes referred to as a medicalbridge. This allows employees who do not need the bridge to save and employees that do still have the option of being covered.
The Rub
Basically it comes down to this, health insurance is a major expense for any business, there is no denying that.
But if you take the necessary time and work with your insurance broker and allow them to show you non-traditional, non-HMO options there are opportunities to save cash flow every month and still provide a more than adequate health benefit to your employees.
Good luck!
Health Care Photo via Shutterstock
It’s an unfortunate reality, but I personally take care of my health insurance needs. With the frequency with which people change jobs, etc. I’m surprised we don’t have more of a dialogue about improving personal health plans (and figuring how to bundle them up to reduce the risk).
Robert,
The real problem is the Cost of Health Care. It would be impossible for Health Insurance carriers to rate risks if everything was done on an individual basis, plus truly sick individuals would never be able to afford their care.
Thanks for the comment!!
Ryan H.
This is for sure because small businesses have to survive and make their value in market so they are forced to give some extra incentives to their employees which lead them to success.
A very insightful post. If people are not happy, they get sick. They get sick, they don’t perform well. If they don’t perform well, the business suffers.
Dave
Actually, individual policies are less expensive for healthy individuals than group insurance. The states have set up pool coverage for those with health insurance issues. Small employers should adopt a defined contribution approach to health coverage and let the employees choose the level of coverage they want. If done properly, the employer gets the tax deduction and the premiums are not taxable to the employee. Best of all, the employer gets out of the health insurance business.
Dave,
That is a good solution but not available in every state. If you theses options in your state than I encourage all small business owners to at least entertain… Unfortunately every state hasn’t embraced an individual pool.
Thanks,
Ryan H.
I wonder why it is more costly for us small businesses to insure our employees? Is it that carriers think we make too much or is it that they think we are not as healthy as big corporations? This is a case of “singling us out” or descrimination against us and our employees… I wonder if Wasington is even aware of this or if they even care.
Claudia,
It has more to do with not being able to spread out Risk over a larger number of people. The Law of Large Numbers (this is very simplified) allows carriers more accurately predict losses… Where small businesses are not able to do this when only insuring say 10 people.
Does that make sense?
Ryan H.
Dave
There is a Federal pool.
Very interesting post. Health care is always going to be an issue and always will be a bit of a burden in some ways. But I suppose we can’t always expect things to go our way. Thanks for the info!