Small business health benefits are an important component of recruiting and retaining key employees. And yet, budgeting for health benefits can feel overwhelming. That’s because with the wrong approach, health benefits are expensive and do not meet the benefits expectations of employees. With the right benefits approach, however, small businesses can take control. This article outlines the top five common small business health benefits blunders and how to avoid them.
Blunder #1 - Not Shopping Around at Renewal Time
If your business currently offers employees group health insurance, you are likely familiar with the annual renewal process - receive a notice about premium changes for the next plan year and meet with your broker to discuss plan options.
If annual renewal time also means strategizing on how to deal with rate increases, you are not alone. A recent survey found 90 percent of employers are facing health plan premium increases, with nearly a quarter (23 percent) of employers seeing rate increases in the double digits.
The fix is easy:
- Shop around for more affordable plans,
- Work with your broker to negotiate your premium rate, or
- Transition employees to individual health insurance and set up a premium reimbursement arrangement to contribute. This is the most effective and permanent fix, because you’ll never be surprised with an annual increase again.
Blunder #2 - Assuming Employer-Provided Health Insurance is the Only Way
Whether your small business has offered health benefits in the past, or want to offer benefits for the first time, it is common to believe traditional group health insurance is the only way to offer quality health benefits. However, assuming group health insurance can be a big blunder.
Why? Group health insurance is expensive. According to research by the Kaiser Family Foundation, the cost to cover a single employee has increased 220 percent since 1999 – up to $6,251 per year in 2015. As a result, only 54 percent of small businesses (with fewer than 200 employees) still offer traditional group health insurance.
The good news is there are new, more affordable health insurance options available for small groups including:
- The SHOP Marketplace and Small Business Healthcare Tax Credits
- Co-Ops or PEOs
- Individual Health Insurance (with or without a premium reimbursement contribution)
Blunder #3 - Not Having Control of Annual Costs
When you have unpredictable costs year after year, budgeting for health benefits is hard - if not impossible.
And when you can’t budget for health benefits reliably, you also can’t confidently tell employees you’ll be able to offer benefits in the long run.
Not having control of your annual health benefits costs is a big budget pitfall.
To avoid this blunder and to take control of your health benefits budget, one trend is to switch to individual health insurance and a premium reimbursement plan. With this model of health benefits your company can:
- Set any contribution amount toward employees’ healthcare (there is no minimum contribution).
- Change your budget on your terms only.
- Reliably budget for health benefits in the short-term and in the long-term.
Blunder #4 - Spending Too Much Time Administering Health Benefits
You’re a business owner or an HR manager. You’re a jack-of-all trades. So, why are you spending such a big portion of your week dealing with health benefits? Administering health benefits can be a time and budget blunder. But it doesn’t have to be.
Small businesses can get out of the business of purchasing and administering health insurance by switching to individual health insurance and premium reimbursement.
With this approach, the business simply manages the reimbursement plan and employees choose and manage their own health insurance. With the right reimbursement software, you’ll only spend 5-10 minutes a month administering health benefits.
Blunder #5 - Ignoring Compliance Requirements
Did you know there are various federal rules and regulations your small business needs to follow when you offer health benefits?
This is true whether you offer a group health insurance plan or a premium reimbursement plan. And, the compliance requirements have only increased with the Affordable Care Act (ACA).
By ignoring compliance requirements (or simply being unaware of them), you are setting your business up for expensive penalties - a major health benefits blunder.
To avoid costly fines for being out of compliance, brush up on your compliance requirements under ERISA, COBRA, HIPAA, and the ACA.
If you offer group health insurance, work with your broker to make sure you are in compliance.
If you offer a premium reimbursement plan, work with a reimbursement software provider to ensure the plan is set up and administered in a compliant way.
The number one challenge small businesses face in offering health benefits is cost, however, escalating premium costs do not have to be the death of your operating budget. Avoid - or fix - these five health benefits blunders to be well on your way to offering an affordable and attractive benefits package.
What small business health benefits blunders would you add to the list? What questions do you have? Leave a comment below!