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Small Business Employee Benefits and HR Blog

10 Signs You Should Switch Your Employees to Individual Health Insurance

October 13, 2014
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Small businesses and nonprofits can't afford to pay the rising costs of group health insurance. Nonetheless, healthcare benefits are an important part of recruiting and retaining the best employees.10 signs

A major trend is for small businesses and nonprofits to drop their group health insurance to help their employees pay for individual health insurance policies purchased through the Marketplace. Here are ten signs your business or nonprofit should switch your employees to individual health insurance.

1. You Can't Afford the Price of Group Health Insurance

The cost of group health insurance has been steadily increasing over the past few years. In fact, small business health insurance costs have nearly doubled since 2009, with 91 percent of small businesses reporting increases in their health plan at their most recent health insurance renewal.

If you want to contribute to employees' health insurance expenses, but cannot afford a small group health insurance plan, then reimbursing employees' individual health insurance could be the right choice.

When you reimburse your employees' individual health insurance premiums, you can determine the amount to contribute to employees' health insurance allowances with no minimum contribution amounts.

2. You Need Customized Health Benefits to Recruit and Retain Key Employees

If you need to strategically offer different health benefits to different types of employees, then reimbursing employees' individual health insurance is a good choice. For example, if Senior Programmers are especially hard to recruit and retain in your competitive labor market, design your health benefits with a higher allowance for this class of employees

3. You Need Predictable Health Benefits Costs Month to Month and Year to Year

If you need predictable health benefits costs short term and long term then you should switch your employees to individual health insurance. As mentioned in #1, this allows your business to name the price. The healthcare allowance amounts can be adjusted to fit (or grow with) your budget. Additionally, there are no annual renewal increases or fees as is common with group health insurance.

4. You Have Limited Time and/or Personnel to Administer Health Benefits

individual health insurance is a smart choice for businesses with limited time and personnel to administer health benefits. This is especially common at small and growing businesses and nonprofits. Administering health benefits often falls on the business owner or office manager - time taken away from making the organization successful.

With a credible reimbursement software provider, the reimbursements take less than 5 minutes per month to administer online.

5. You Want to Get Out of the Health Insurance Business

Many business owners value offering health benefits, but find that researching and dealing with the health insurance is an administrative drain. Reimbursing employees' individual health insurance allows businesses to get out of the health insurance business and still offer employees a valuable health benefit.

With individual health insurance, your small business sets up the reimbursement plan, and allows employees to purchase their own insurance - just like car insurance. Employees can be reimbursed for their insurance from their stipend.

Reimbursing employees' individual health insurance premiums eliminates the business to insurance company relationship, and it allows employees to select the health insurance that best fits their unique health and financial situation.

6. You Want to Give Employees and their Family Members Access to Premium Tax Credits

Individual health insurance is a great choice for businesses who want to give employees and their family members access to the premium tax credits.

Under the Affordable Care Act, an individual health insurance allowance does not count as qualified health insurance, so having a individual health insurance stipend does not disqualify employees from premium tax credits. Employees can be reimbursed by their allowance for the non-subsidized portion of their health insurance premium.

With a traditional group health insurance plan, just offering health coverage (considered "affordable" and "qualified") disqualifies employees -- and often their family members -- from the premium tax credits... even if employees don't enroll in the offered coverage.

7. You Want to See a High Return on Investment (ROI) on Health Benefits

More and more, small business owners are looking to quantify their spending in all areas, including health benefits and personnel. If this describes you, then individual health insurance is a smart investment because you will see more value - and therefore higher ROI - on health benefits.

That's because individual health insurance premiums, on average, costs less than group health insurance premiums. A $200/month contribution to a healthcare allowance will go farther than $200/month to group health insurance premiums.

8. You've Seen Your Small Business Health Insurance Costs Increase, and Coverage Levels Decrease

If you've seen your small business health insurance costs increase, and as a result had to decrease coverage levels, pass more costs on to employees, or drop health insurance all together, then it is time to switch your employees to individual health insurance

That's because the costs are controllable and predictable. Many businesses who switch from traditional group health insurance to individual health insurance see their overall cost go down, and employees' coverage level go up.

9. You're Open to Using Innovative and Cutting Edge Solutions to Achieve the Same or Better Results

If you're open to using innovative and cutting edge solutions to gain a competitive edge, then you should switch your employees to individual health insurance. This is not a new strategy, but it is really taking off now due to the ACA's advantages to individual health insurance (guaranteed-issue and premium tax credits).

Businesses who see the benefits and take advantage of a individual health insurance approach are on the forefront of this new health benefits trend that is soon to become mainstream for small and mid-size employers across the U.S..

10. Your Employees Have Diverse Medical Needs

Lastly, you should invest in individual health insurance health benefits if your employees have a diverse medical and coverage needs. With traditional group health insurance, it's most common for small businesses to offer one health plan. Businesses with diverse health needs have a hard time meeting the needs of employees with a one-size-fits-all plan.

With individual health insurance health benefits, employees can work with a health insurance broker to purchase any health plan from any carrier, with access to their preferred doctors. 

Individual health insurance offers more choice and control to employees by allowing them to choose a plan that fits their own needs, including coverage level and network. Employees can choose their own plans to work with their budget. These plans can be customized to individual circumstances and age.

For example, if a young employee is relatively healthy and on a tight budget, a plan with a lower premium and higher deductible may be the right choice. On the other hand, for employees with more healthcare needs, a plan with a higher premium and lower deductible may be the better plan.

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