5 reasons your small business needs to offer health benefits

Written by: Caitlin Bronson
Originally published on November 20, 2018. Last updated November 16, 2020.

Fewer and fewer small businesses are offering health insurance to their employees.

Uncontrollable costs have ravaged small business coffers, and today, nearly 70 percent of businesses with fewer than 50 employees don’t offer group health insurance. While some businesses attempt to soften the blow with wage increases, many drop health benefits altogether.
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That approach worked for a while. During the recession’s tight job market, businesses could get by without benefits. Jobseekers just wanted a stable position, and current employees were so relieved to have one, they were willing to overlook the glaring lack of assistance with their health care.

That’s not the case today. The economy has rebounded and the labor market is humming. Come 2019, small businesses without health benefits will definitely fall behind.

In this post, we’ll go over five major trends shaping the labor market and how they relate to health benefits. We’ll also offer practical advice for navigating these complexities and offering a benefit that both fits your budget and ensures you’re in a position to succeed in the new year.

Let’s get started.

1. Employees want health benefits more than ever.

Health benefits have long been an important factor in where employees work, but today, they’re more important than ever.

This starts with jobseekers. The individuals you interview are evaluating your business closely—particularly when it comes to health benefits. Nearly 90 percent of jobseekers say health benefits are a top consideration when deciding on a company’s offer, and one-third say they’ll turn down an otherwise good offer if the health benefits aren’t up to par.

New employees aren’t the only worry. Current employees are reviewing your benefits too, often with increased scrutiny. Health benefits are by far the most important benefit in shaping employee satisfaction, and four in five employees say they’d prefer better benefits over a wage increase.

When jobs were scarce, your business could get by without taking heed of these preferences. That’s not true today, though, as these next trends will show.

2. The job market is netting nearly 200,000 jobs every month.

It’s no secret that the economy saw major growth in 2018. With economic health on the rise and even surpassing expectations, millions of businesses are attempting to grow their organizations.

This year, the job market netted a stunning 170,000 positions every month, including new jobs, quits, and other separations.

For jobseekers, that’s a lot of opportunity. For small businesses, that’s a lot of other offers to compete with.

To stand out from the crowd and gain the attention of the most talented jobseekers, your business needs to make a compelling offer. Trying to do that without a solid, formal health benefit in place is a losing game.

3. Employees are quitting at twice the rate they did during the recession.

Influenced by the booming job market, individuals who are already employed have been emboldened to reevaluate their current positions.

This year, 3 million employees quit their jobs every month—twice the rate at which they quit during the recession. While some employees are retiring, many more are seeking to improve their careers with a new company.

If your business isn’t offering benefits, you’re pushing your current employees out the door while simultaneously making it harder for yourself to replace them. If you’re planning on adding new positions in 2019, you’re fighting an even harder battle.

4. Baby boomers are starting to retire.

It’s tempting to write off these economic conditions as temporary, but most economists agree that recruiting and retention challenges are here to stay. One of the biggest reasons is the oncoming retirement of baby boomers.

Baby boomers are no longer the largest generation in the labor force—that’s millennials—but they’re not far behind. Twenty-five percent of currently employed individuals are baby boomers, and many are starting to retire. With a current median age of 60, millions more will do the same over the next decade.

This opens up a huge talent gap for businesses that employ these individuals. As baby boomers leave the workforce, these businesses will either need to hire new employees to replace them or keep younger employees engaged with the company long enough to grow into the roles the baby boomers left behind.

Even businesses that don’t employ many boomers will feel the effects; they’ll now be competing with businesses desperate to replace the retiring employees.

Again, health benefits will be a key factor in whether or not they succeed.

5. Your competitors are using health benefits to compete with you.

Many businesses recognize these economic headwinds and are already gearing up to compete in 2019 and beyond. Health benefits are a vital piece of their strategy.

In fact, two-thirds of HR managers say they’ve increased their organizations’ health benefits offerings over the past five years. They now offer more comprehensive coverage, more policy options, and supplemental wellness programs.

As the job market heats up, these trends are likely to continue—and even increase. To stay competitive, small businesses need to step up their game as well.

So what now?

Small businesses can no longer afford to go without health benefits. In 2019, the war for talent will escalate and those businesses without valuable benefits will suffer.

But it can be difficult for small businesses to face these realities. Without the resources of large businesses, many can’t afford to offer traditional benefits like a group health insurance policy. Even among those that do, more than 80 percent can’t afford to offer more than one policy option.

The good news is small businesses aren’t forced to choose between an unaffordable group policy and no benefits at all. In 2019, there are many health benefits options available to small businesses, including:

  • Group health insurance
  • Self-funded health insurance
  • Association health plans
  • Group-integrated health reimbursement arrangements (HRAs)
  • Qualified small employer health reimbursement arrangements (QSEHRAs)

This month, we’ll be reviewing these options to help you and your small business find the benefit that best suits your budget as well as your needs. It’s a small spoiler alert, but the QSEHRA is our favorite. With a QSEHRA, your business offers employees a monthly allowance of tax-free money. Your employees purchase the health care products and services that fit their personal needs, and your business reimburses them up to their allowance amount.

For more on the QSEHRA as well as these other benefits, you can subscribe to our blog or keep checking back for updates. You can also get that information now by downloading our latest eBook, The Small Business’s Guide to Health Benefits.

In the eBook, we walk you through each of these benefits, including how they work, how much they cost, their pros and cons, and how you can implement them. We also discuss how you can weigh these options against one another to come to the best possible conclusion for your business and your employees.

Download the eBook here or, if the QSEHRA sounds like a good fit, watch our on-demand demo video.

Originally published on November 20, 2018. Last updated November 16, 2020.


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