Reinventing your small business’ approach to health insurance

StethoscopeMy company’s story

No matter what your political slant, as a small business owner you are most likely also a Pragmatist.

As a company owner with a great staff, mostly full-time, I have always felt a responsibility to provide competitive benefits, including access to health insurance. Health insurance is of course expensive, whether or not employees share the expense. As a company with fewer than 50 employees, we are not obligated to provide this benefit, but this hasn’t historically struck me as a solution in line with the way I wanted to treat my excellent staff.

Then, in June, we received a whopping 34 percent premium increase notice from our health insurer. The previous year, the increase had been 15 percent. Paying such increases year after year was becoming untenable.

(Apparently, van Schouwen Associates was not alone. Huffington Post had predicted, a year before, “Big health insurance companies are predicting huge premium increases next year for small employers and people who buy coverage on their own, citing rising health care costs and new mandates from President Barack Obama’s health care reform law.”)

We needed to make a change. First, we got group insurance quotes from other carriers, including those with high-deductible plans. The prices were considerably higher than the steep premiums we were already paying.

We then looked toward Affordable Health Care options for small businesses. Again, the group premiums were too high, especially because our employees are too highly paid to allow our company to get a tax credit for buying a business plan through the state Health Connector. (However, depending on your employee base, that tax credit could be a boon for your company. Check it out.)

Next, we considered a different approach. We went back online on our state’s Health Connector site (Massachusetts) and surveyed the rates for individual and family plans similar to our then-current business health insurance. Voila! The costs were considerably lower, and could allow us to “hold the line” on our bottom line – even if we continued to foot roughly the same percentage of the overall health insurance cost as in year’s past.

So, here’s what we did next:

-We estimated the “real costs” of covering our employees’ expenses for the same percentage of a similar-to-current (but individually purchased) health care plan

-We held an employee meeting, explained the situation frankly, provided written tips for transitioning to personal health insurance, and offered support along the way

-We gave each employee a pay increase to cover roughly the same percentage of costs for a plan similar to the one they’d had through the company; we even discussed the tax and payroll withholding implications

-We cancelled our group plan prior to the Big Rate Increase and provided employees with documentation of the cancellation to share with The Health Connector

What’s next:

– Annually, we plan to revisit the costs to our employees of purchasing insurance through the Health Connector in case we want to make further salary adjustments for that expense

-For new hires, we will explain the system and provide a salary that is “X” dollars higher than we would have offered if health insurance were directly funded by the company

How do our employees feel? Generally, the response has been positive. By picking their own carriers, they can assure the providers and services they want are in their networks. Those who don’t use much health care at present may opt for a higher out-of-pocket cost and keep the extra money in their pockets. In general, they are glad we’ve found a way to continue to support their health insurance needs.

The one concern has been withholding, because while they will likely get money back via tax returns, some have felt an initial pinch because they now pay for insurance out of post-tax income. This is likely being corrected by tweaking withholding amounts. It is a work in progress.

I share this tale because it may be useful to other small business owners as they grapple with what is often the single largest employee benefit expense. I’ve since learned that our solution may be no more unique than our problem. According to one recent article in IBJ.com, many small firms are opting out of providing health insurance for 2015. Some, like us, are supporting employees in getting insurance through the Affordable Health Care health connectors.

Explore your options. As you’ve seen in other Succeeding in Small Business posts, “we’ve always done it that way” is not an adequate reason to assume you will continue to do the same. Sometimes, problem – or a benefit – can be better managed than in the recent past.

Michelle van Schouwen is president of van Schouwen Associates, LLC (vSA), a B2B marketing company based in Longmeadow, MA. The company is known for vSALaunch, its proprietary, modular and scalable system for B2B marketing launches, as well as its expertise in integrated marketing for B2B. Contact Michelle at michelle@vsamarketing.com.

1 comment

  1. Trish says:

    Every state will be different but this was a smart solution. It pays to check it out from all angles.

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