Open enrollment season marks transition and improvement for so many people and organizations — and small businesses are no exception. Now that open enrollment has just come to a close, one way to spark better employee recruitment and retention while remaining cost-efficient is to switch health insurance contribution strategies.
An employee contribution strategy is how a company chooses to pay for, or reimburse, their employees’ healthcare coverage. Open enrollment is the period of time when employees not already covered under a health insurance policy buy their individual insurance. If your company does not offer a group health insurance policy, most of your employees will have just finished selecting their individual health insurance policies for the year. This is why post-open enrollment is a critical time for small businesses to roll out a new contribution strategy.
Employee education is a major reason to roll out a new benefits contribution solution now. Employees are accustomed to doing their health insurance research around the New Year. Because of this, asking employees to learn about a new contribution strategy this time of year won’t seem as burdensome to your team as it would in the middle of the calendar year.
There are many available approaches to employer-provided health benefits. For small businesses, factors such as administrative time, overall cost, and employee satisfaction are always important.
Health Insurance Contribution Strategies
Group Health Insurance Plans
Traditional group health insurance plans usually are purchased by the company through an agent or broker, with costs shared between the employer and the employees. While these plans don’t require employees to go out and select their own health insurance, they are relatively inflexible with high premium costs. Price is the biggest driver of the small and medium-sized employer market moving away from group health insurance.
Defined Contribution Health Plans
With a defined contribution health plan, small businesses allocate fixed monthly allowance amounts by class of employee (there are no minimum contribution requirements). The big differentiators for this type of benefits solution include:
- Employees purchase individual/family health insurance policies on their own through the Health Insurance Marketplace.
- Employees are reimbursed for approved health insurance premium expenses, up to the amount available in their balance.
- Reimbursements from the employer are tax-deductible and tax-free.
Defined contribution health plans are becoming well known in the small business world for providing significant cost savings to employers and employees, as well as for giving the latter prime opportunities to personalize their coverage. On average, individual health insurance plans cost at least 20 percent less than group health plans.
Further, with a best-in-class software provider, defined contribution health plans take about 5 minutes a month to administer; much less time than almost every other type of health benefits solution.
Health Savings Accounts
A Health Savings Account, or HSA, is a financial account established by an individual or family to pay for qualified medical expenses — tax-free. HSAs must be opened in conjunction with a high-deductible health insurance plan.
With HSAs, taxpayers:
- Receive a 100% income tax deduction on annual contributions.
- Can withdraw funds tax-free to reimburse themselves for qualified medical expenses.
- Can defer reimbursements indefinitely without penalties.
A HSA doesn’t provide health insurance coverage, but it can serve as a valuable supplement to a benefits contribution strategy.
Consider Key Questions Before Changing Contribution Strategy Post-Open Enrollment
As you consider which health insurance contribution strategy works best for your small business and its employees, there are several questions to ask, including:
- What are your company’s upcoming goals for shifting costs?
- Are you meeting employees’ health benefit expectations currently?
- What are the demographics of your team?
- What are the potential ramifications — for your small business and staff members — of making a change?
If the answers to these questions all point to a needed transition in your small business health insurance contribution strategy, then consider making the change this time of year, when open enrollment is on the brain and employee interest is naturally high.
If you’ve been contemplating a switch to a new health insurance contribution solution, now is the best time of year to make that move.
If you have questions about the finer details of a particular contribution system, please leave a comment below. We will get back to you soon!