How to Choose a Health Plan for Your Small Business
There has been much debate about health care this year as elected lawmakers in Washington, D.C. consider making structural changes to the Affordable Care Act, which is the signature piece of legislation from the Obama Administration. ACA mandated small companies with at least 50 employees must provide health insurance for their employees or pay a fine – the legislation has driven up costs for small firms and sparked a national conversation.
Let’s begin with a small history lesson – prior to the 1930’s, the American public paid their medical costs directly. With the exception of a few industries, employers were not incentivized to provide health coverage. During World War II, the landscape altered, Congress pass the 1942 Stabilization Act to combat inflation – the legislation was designed to limit employer’s freedom to raise wages. The law made it difficult for companies to attract scarce workers based on pay alone, so employers instead started to offer health benefits as incentives.
In a perfect world, every company would provide their employees with health insurance, but in reality it’s almost next to impossible. Cost remains the major opposition to small businesses being in position to offer employer-based health care. Among companies with fewer than 10 employees, less than 45 percent offer health plans.
Undoubtedly, there are compelling reasons for a small business to offer health insurance, it can be a powerful recruiting tool that allows you to retain the best and brightest talent – but also keep in mind that a healthier employee is a more productive employee.
Here are some helpful tips to keep in mind when you’re ready to select a health plan for your growing small business:
- Determine your budget and your needs. Some experts say costs are most important, while others encourage companies to match their competition. Early stage companies with young workers may get away with covering employees, but not their families. Mature enterprises with older employees may have to offer family coverage. Either way consider how much you want your employees to contribute – most insurers will require you to pay at least half the premium. A large number of small businesses spend around 8 percent of payroll on health care.
- Clearly understand your options. A good insurance agent can help navigate you through a maze of possibilities, but you need to carefully research any options before making a decision.
- Independent versus captive agent. Independent agents sell policies for many carriers, whereas a captive agent represents a single carrier. Most likely you’re in a better position with an independent agent who can help you comparison shop.
- Consider purchasing a high deductible plan. These plans require more out of pocket expenses, but offer lower premiums for small companies struggling to cover their employees.
- Setup a wellness program. The most optimal method to reducing premiums is helping your employees to become healthier and less reliant on physician care. Encouraging healthy behavior reduces claims substantially – so premiums don’t rise as fast.
If you’re not able to provide health insurance, consider providing a cash bonus to employees to help them buy individual policies in the open marketplace. Also you may want to consider joining a trade association that offers individual policies to member companies. Neither option will be superior to group coverage in terms of cost.
If you’re starting a new business or wanting to grow an existing one, then I’d love to hear from you.