A top financial hurdle for many small business owners is (surprise!) health care.
And the most common way to deal is to not deal.
Small business owners are increasingly putting the financial burden of health care onto their workers. About 85% of small business owners polled in a new survey by the Discover Small Business Watch actually say they don’t offer any health benefits to their workers. That’s up sharply from 77% in 2008 and 74% in 2007. And even of those who do offer benefits, more than a third say they’re considering ending coverage because it’s too darn expensive. According to the America’s Health Insurance Plans or AHIP, businesses with 26-50 employees had an average monthly premium of $311. Those with less than 10 employees paid an average $378 per month.
“It’s rough and it’s wrong,” says Rieva Lesonsky, CEO of GrowBiz Media. “It’s fundamentally wrong that we take this whole group of small business owners the so-called 'heart of the economy' and we don’t give them the provisions to provide healthcare to their families and themselves.”
If you’re struggling with how to afford a plan for your staff, consider these cost-saving tips.
1. Offer a high deductible plan and a health savings account (HSA). More small businesses are offering high deductible plans as a way to stem overall medical costs. A high-deductible plan requires your workers to payer a higher deductible in exchange for lower monthly premiums. With a high-deductible plan, employees can also participate in a Health Savings Account, or HSA, which lets workers spend pre-tax dollars on uncovered medical expenses, like cough syrup, band-aids, crutches, eyeglasses, etc. An HSA is a self-administered account, too, which is good news for small business owners since it means the administrative costs will be low. Check out the Small Business Administration’s web site for more information on HSAs. You can also check out HSAFinder and HSAInsider.
2. Offer voluntary benefits. Voluntary benefits are rising in popularity. With this option employers let their workers pick from an a la carte menu of insurance benefits (such as dental, disability and life). The employee pays for the benefits, based on a group rate, through payroll deductions. Like with a high-deductible plan, this option shifts a good deal of the cost burden onto employees, the only costs employers have to worry about are administrative. UnitedHealth Group (Stock Quote: UNH), Assurant Employee Benefits (Stock Quote: AEB) and MetLife (stock quote: MET) are just a few of the insurance companies offering voluntary benefits.
3. Share responsibilities with a PEO firm. Professional Employer Organizations help small business manage their human resources tasks including health care, payroll, legal liabilities, 401(k)s, etc. There are roughly 700 PEOs in the country working with more than 100,000 small businesses, according to the National Association of Professional Employer Organizations. The average PEO client has 17 workers. You pay an annual fee which can be up to 8% of your payroll and in return you and your employees get access to a more affordable group rate for health care, a rate the PEO has negotiated and settled. Some of the country’s largest PEOs include Adminstaff, ADP Total Source and National PEO.
4. Check with your state health department. Some states may provide a subsidy for the insurance premiums for your small business. For example, last year the state of Maryland, in partnership with certain carriers like AETNA (stock Quote: AET), Care First Blue Cross Blue Shield, Coventry Health Care (Stock Quote: CVH), and United Healthcare (Stock Quote: UNH) expanded health insurance coverage for small business workers under the “Working Families & Small Business Health Coverage Act.” Eligible businesses may receive a subsidy of up to 50% of the premium.
Meantime Montana’s Small Business Health Care Affordability Act offers a subsidy on sliding scale and tax benefits to small business employers offering health care.
And Rhode Island’s WellCare insurance plan costs an average 18% less than similar health benefit packages on the market.
5. Contact your industry association. Inquire your industry or trade association about group health care benefits. In some cases you may be able to extend group rates to your employees, says Lesonsky.