A recent study found that most employees of small businesses are not satisfied with their health benefits. If you're a small business owner, HR professional, or health insurance agent, this might not surprise you. But the good news is there's a solution.
According to the recent Aflac Workforces Report for Small Businesses, only 12% of small business employees say they are extremely satisfied with their benefits, with only 14% say their benefits package meets their current family needs extremely well.
And most business owners aren't satisfied either.
The cost of traditional health insurance has been on a steep increase the last decade for both small businesses and employees. It's estimated that since 2009, the cost of small business health insurance has nearly doubled. Combine this with declining benefits and increased deductibles, and traditional group health insurance is a lot less lovable than it used to be.
Yet, the importance of health benefits for small businesses remains. Just like larger businesses, small businesses value offering a health benefits package to recruit and retain the best employees. This need only increases as the workforce becomes increasingly competitive and mobile.
The good news is we are not at a dead end. There is a solution that allows employees access to better, more affordable coverage, and allows small businesses a way to offer affordable health benefits. But it requires a shift in how we think about small business health insurance.
The solution is to switch employees from group health insurance (a defined benefit) to a healthcare allowance to spend on individual health insurance (a defined contribution).
With this solution the business sets up a reimbursement plan, usually a tax-free Healthcare Reimbursement Plan, to reimburse employees for their individual health insurance expenses up to a set monthly allowance. Businesses can set different allowances, eligibility criteria, and waiting periods for different classes of employees, designing the program to optimize their recruiting and retention needs.
Individual health insurance, on average, costs up to 60% less than comparable group health insurance coverage (see this state-by-state comparison of health insurance costs). So, the business's contribution toward employees' healthcare goes further.
For employees, this is a better benefit too. Employees are able to select any health plan (from any carrier) and choose the level of coverage and network of doctors that best fits their needs. And, if they are eligible, they can shop on the Health Insurance Marketplace and access the premium tax credits.
The bottom line is that with individual health insurance and a defined contribution allowance, both the small business and employees have controllable, affordable healthcare costs.
So, what's next? See: How to Cancel Group Health Coverage (and Make Employees Happy)