By Kent B. Utsey
CEO of American Health Resources
According to career resource website Glassdoor, when it comes to recruiting talent, nearly three in five (57 percent) people report benefits and perks among their top considerations. As a result, some of the largest companies are upping the ante, not only offering traditional benefits but free meals, paid parental leave and on-site acupuncture. This can put small businesses at a disadvantage when recruiting new talent if they do not have the resources to offer such extensive benefits.
But small businesses should not give up hope! When it comes to benefits, healthcare insurance still ranks number one – above all the fancy perks as well as vacation time, bonuses, paid sick days and retirement planning. And with new options today, small businesses can absolutely afford to offer health insurance to remain competitive in the talent market.
Using health insurance benefits to compete for top talent
Health insurance for small businesses has always been a tricky proposition. Group health insurance is a significant fixed expense, and premiums have increased much faster than the rate of inflation. Yet once an employer offers it to employees, there is no turning back: dropping group coverage is interpreted by employees as a sign of financial instability. It can trigger an exodus of employees, beginning with the most valuable ones who have the best employment alternatives.
The good news is, this has finally changed. In 2015 the federal government approved a way for companies to switch from group to individual health insurance, opening up opportunities for small businesses that increasingly see health insurance as an important recruiting tool.
Individual policies provide unique advantages for small businesses
There are multiple benefits of individual policies over group for the under 50 market including:
- Individual policies typically cost about 30 percent less than group insurance.
- The employer, not the insurance company, sets the budget and decides how much they want to fund each policy.
- Employer support of individual policies can be scaled up or down depending on how the business is doing.
- Employers are not chained to restrictive open enrollment time frames. They can change from group health insurance to an individual policy solution whenever they like.
Flexibility is crucial in times of economic uncertainty, and when trying to meet the health needs of a diverse workforce. Instead of facing the question of either continuing group coverage or dropping it entirely, the company can now change the amount of support they provide, adapting to meet labor market conditions and business financial realities. They do not risk triggering that exodus of key employees. And equally important, they maintain their ability to attract and retain top talent.
For many small businesses, helping employees pay for individual policies is a much better solution than group health insurance. Instead of becoming obligated to cover a very large and constantly growing fixed expense, the employer can set a budget and provide support tailored to the needs of each employee. That support can change each year, depending on the financial condition of the company.
How can small businesses get in on the action?
For employers looking to offer individual benefits for the first time, or to switch from group to individual, there are a few steps to take that will help facilitate the process:
- Conduct a cost analysis to set a budget. Some questions to ask include:
- How much can the company afford to fund each employee?
- Does the company want to give some employees more than others?
- Determine if an insurance agent is necessary. They can help:
- Identify the health plan choices.
- Navigate the enrollment process.
- Provide expert insight into compliance and regulatory issues.
- Help with claims, changes to the plan, etc.
- Use a “Benefits Savings Account” approach.
- Some employers choose to increase compensation to cover the cost of individual policies by adding it to the employee’s paycheck. In this case, many employees forget it is ‘benefits money” and consider it their take-home pay.
- To avoid this problem, employers can give each employee a “Benefits Savings Account.” This allows the employer to deposit money into an account and the employee can draw on the account to pay for the benefits they want and need.
- Focus on the each employee’s needs
- Allow them to use that account to assemble the benefits package that is the most attractive to them.
- Are there any special needs or health issues?
- What is the premium the employee can afford to pay?
- Consider using a Third Party Administrator to handle the plan.
- This will ease the administrative burden and help keep employers in compliance with the law.
- Communicate with employees.
- Employers should inform their employees that they are assembling a benefits plan that will allow them to choose the health insurance that they
- By involving them in this process from the beginning, employers will see greater appreciation and adoption from their employees.
Running a small business presents many hurdles, as most owners are responsible for everything from managing cash flow and developing pricing strategies to identifying new customers and creating marketing materials. Determining how to attract and retain top tier talent is one task that can be uniquely challenging, especially when competing against larger corporations that offer a full range of benefits and perks. Individual health plans give small business owners a powerful recruiting tool that helps entice prospects and keep them happy once hired. At the same time, existing employees will find the plans simple and flexible while owners will enjoy the cost savings over group benefits.