4 Ways New England Small Businesses Can Start Looking for Health Care Savings

4 Ways New England Small Businesses Can Start Looking for Health Care Savings

by on 30 Mar, 2016

Small businesses that struggle to find a workable group health plan have several options to help their employees afford coverage. The fact that some of them still struggle is due more to the system’s complexity than the affordability of alternatives.

The American health care system has over one thousand health insurance companies, four hundred health maintenance organizations (HMOs) and nine hundred preferred provider organizations (PPOs). A multitude of private companies, government agencies and health care providers are involved in the financing, payment and delivery of services. Expenditure levels are guessed at, and potential premium shortfalls underwritten. Systems of managed care, integrated health, long-term care and public health overlap.

High administrative costs and scaling difficulties force small businesses to spend a greater share of their resources than larger ones on navigating health care. That’s on top of an already expensive system: America pays more per capita for health coverage than any other rich country and nearly four percent more in GDP above the Organization for Economic Co-operation and Development (OECD) average.

The smaller the business, the less likely it is to offer health benefits -- and the less likely it is that its employees will utilize them. Although a majority of small businesses with under 50 employees offer a medical plan, less than 2-in-5 small business employees obtained coverage through their employers in 2012.

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Small businesses need to look for savings where they can. The cost of robust group health plans is rising. Although many other plan types exist, their availability, effectiveness and price may vary from company to company, city to city, and state to state. Knowing what’s available and whether it fits your business is an essential first step towards adopting a plan that suits employees’ needs without emptying the business health care budget.

Here are four options small businesses have to find affordable health care:

1. Obtain Group Coverage Through a Shared Buying Relationship

Advantages: Group health plans generally provide wider networks and easier access to care. Employees still view them as offering the best coverage available, which can influence hiring and retention. Better coverage leads to healthier employees and quicker recoveries.

Disadvantages: Larger companies with defined risk profiles and greater bargaining power have access to the cheapest group plans, whereas small businesses pay 8 to 18 percent more on average for the same policy, according to the National Conference of State Legislatures, an NGO.

What small businesses should know: Small businesses can lessen their group health coverage costs by lowering their risk profiles and opting into economies of scale. Workplace wellness programs can help maintain a healthy workforce, lowering claims payouts and overall premiums. Entering into a co-employment model or purchasing cooperative bolsters small business bargaining power.

2. Small Business Health Options Program (SHOP)

Advantages: Businesses with less than 50 employees are eligible to offer SHOP insurance exchange plans through Obamacare. Open Enrollment limitations may not apply to these programs, which means employers could offer them at any time of year.

Drawbacks: Employees in small employer exchange plans are not eligible for premium assistance as are those who obtain plans through the individual marketplace. Billing and employee participation must pass through the employer.

What small businesses should know: To qualify for year-round enrollment, small businesses must meet a minimum worker participation rate that varies by state. Employers who contribute toward premium costs may receive an additional tax credit.

3. HDHP + Gap or HRA

Advantages: Combining a high-deductible health plan (HDHP) with a gap plan or health reimbursement arrangement (HRA) can lower overall premium costs per employee while maintaining a healthy benefits package. Employers have the option of allowing workers to keep the money in their HRAs from year to year or take it with them when they leave the company.

Drawbacks: Savings aren’t guaranteed, but increased complexity for businesses and employees is. Employees and applicants will likely be even less enthusiastic about such combination plans than individual options.

What small businesses should know: High-deductible plan combinations are one way businesses are changing their benefits arrangements in response the approaching 2018 “Cadillac” Tax on high-value health plans.

4. Dispense With Your Plan Altogether

Advantages: This doesn’t mean giving employees nothing. But instead of managing health options though the front office, many businesses choose instead to give employees a one-time “raise” for the express purpose of obtaining health coverage. This offers workers a wide range of choice, which can be a plus for those who dislike being stuck with whatever their business would otherwise offer.

Disadvantages: Although it is possible to save on health care costs in this way, choosing to forego a health plan puts the administrative and shopping burden on employees, a turn-off to those who consider health coverage an essential benefit.

What small businesses should know: Workers expect health insurance options from their employers, even if those options are slim. Choosing to forego health insurance coverage is likely to impact hiring, retention and morale.

Small Businesses Can Compete With the Bigger Players

No single resource can match the perfect health care plan to a particular business model. Every business is unique, and the variables are far too many. Finding the right plan takes patience and expertise. For companies short on either, seeking the professional assistance of a consultant or outsourcing company can help speed up an endeavor that, even at its simplest, can turn HR departments upside down.

If you found this article helpful, please give us a comment or contact us for a free consultation. May we also suggest:

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Disclaimer: this article does not represent expert advice and is provided for informational purposes. Please get in touch if you would like expert HR advice.

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