Some small companies that dropped group health insurance for their employees are reversing course, driven by a tightening labor market and rising costs and fewer choices for individual coverage. Retaining employees means employers have to provide them with compensation packages including a strong benefits offering.
For example, we spoke with a small business owner with 10 employees who dropped group coverage in 2014, not only because of the cost but also the complexities of picking the right plan within a short deadline, and the endless confusion surrounding the Affordable Care Act. Instead, she gave her employees a raise that they could use to buy their own health plans, sparing her from choosing for them.
Now she is looking at adding health benefits to make her business she launched this year more attractive to potential employees. If she makes the change, she says she would offer coverage to employees of both of her businesses. Companies are looking at various options for not only health plans, but to ensure a long term and strategic approach to their benefits. Programs such as voluntary benefits, an EAP program, and more can round out a strong benefits offering.
People are looking for good benefits, and are routinely turning down jobs that do not offer any health insurance. Now, small businesses that stopped offering health benefits are looking to bring them back.
Unlike large employers, small businesses—those with the equivalent of fewer than 50 full-time employees—aren’t required to offer health benefits under the ACA. Many do so anyway, to be competitive in the job market or because they think it’s the right thing to do.
Chris Carey, president of Modern Automotive Performance in Cottage Grove, Minn., eliminated group health coverage in 2014 in an effort to rein in costs. “This made a dramatic impact on our culture, as employees felt they were missing out on a benefit that was standard in other organizations.” The online auto-parts retailer and manufacturer backtracked last year and now pays 50% of the premiums for its 38 employees. (via Wall St. Journal)
Small businesses are confused. Transitional rules that allowed certain companies to continue offering existing plans that don’t meet certain ACA requirements expire at the end of 2017.
At the same time, prices for individual coverage are climbing and insurance companies are dropping out of the state and federal marketplaces that sell individual coverage. For example, Aetna Inc. said it would withdraw from 11 of the 15 state exchanges on which it currently offers coverage, making it the latest major insurer to pull back from that business. In short, the marketplaces put in place by the government are not working.
Estimates of how many small businesses offer group coverage vary. Fifty-four percent of companies with three to 49 workers offered health benefits last year, about the same as in 2014 but down from 66% in 2000, according to a 2015 Kaiser Family Foundation survey.
Companies with three to 50 employees paid an average of $15,602 annually for each worker who elects family coverage, according to Kaiser, up from an average of $12,809 in 2010.
Before the ACA, insurers often denied coverage to individuals with existing conditions, one reason costs were often higher for small groups.
Individual coverage, meanwhile, has grown less attractive as insurers narrow options for physicians, hospitals and prescription drugs in an effort to cut costs. Zach Obront, founder of Book In A Box LLC in Austin, Texas, added group coverage in July in an effort to reduce stress on his 13 employees.
Consumers have had bad experiences, like showing up at a hospital and a doctor and being out of network. But finding affordable coverage remains a challenge. Many businesses are in extremely competitive environments, and insurance and benefits are becoming a critical factor in gaining and retaining employees.
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