The Benefits of Benefits

Many small business owners believe they can’t afford health insurance for their employees. But experts say a growing number of options can make it possible—which is good news for employers who want to retain productive employees.

When a firm offers benefits, it decreases the probability of an employee leaving in a given year by 26.2 percent, and increases the probability of staying an additional year by 13.9 percent, according to a recent study by the Small Business Administration’s Office of Advocacy.

For lower costs than traditional plans, businesses can now pick from a variety of employee health-insurance options, such as health savings accounts, mini medical plans, self-insured plans, partially self-insured plans and health reimbursement arrangements.

"[Mini-medical is] an alternative to not having insurance at all—a very good alternative, actually," says Pete Embry, an insurance broker with Paychex in Rochester, N.Y., who deals with Southwest Florida clients. He says a policy that normally could cost a business $300 a month per employee can in some cases be bought for as little as $50. Insurance companies that offer these plans do not pay for catastrophic care.

"It’s not major medical," he says. "If you had to go in for brain surgery and it cost $250,000, this insurance wouldn’t cover that kind of thing."

USNow provides this "managed limited benefit plan," which offers employees basic healthcare coverage, a prescription card, a national PPO network, and healthcare discount services programs.
Embry says the rates charged in these plans depend upon the age and gender of the employees.

"Older people with kids are more expensive than single males. Women cost more than men for healthcare insurance," he says.

Another option, a health savings account, allows contributions to tax-advantaged medical savings accounts in high-deductible plans. Contributions to the account are not subject to income tax at the time of deposit. Funds may be used to pay for qualified medical expenses at any time without tax liability.

Health reimbursement arrangements are employer-funded plans that reimburse employees for medical expenses that are not covered by the company’s standard insurance plan. Distributions are considered tax deductible to the employer. Reimbursement dollars received by the employee are generally tax free.

Dan Thompson, a client advisor for Gulfshore Insurance Inc. in Naples, says just about any small company can afford health insurance for its employees. Catastrophic plans can be purchased for $100 a month, with the employer and employee splitting the cost.

For instance, Blue Cross Blue Shield’s "Blue Options Network" allows the employer to purchase a catastrophic insurance plan, which targets 18- to 24-year-olds, who often don’t take insurance because they don’t believe they need it. "They are also the segment of society who can least afford it, who are living paycheck-to-paycheck and starting careers," Thompson says.

These types of plans might have a $1,500 deductible and a $35 co-pay for a doctor visit. "If they had a $40,000 hospital bill, they would pay $2,000," Thompson says. "That’s it. The carrier would have to pay the $38,000 difference."

Garrett Gardi, a group benefits provider for Insurance & Risk Management Services in Fort Myers, says he has several clients who offer three or four plans to their employees. Even a company with only 10 employees could offer a few insurance plan options—including a high-deductible health savings account product, which could help employees lower payroll deductions, and a more expensive co-pay product, which might be a better choice for employees with dependents, Gardi explains.

Employers can also fund or partially fund a health insurance program, though usually only large organizations fully self-insure. In a partially self-insured model, which can be ideal for companies of 50 or more, the business pays up to a certain amount before insurance kicks in, which can result in real savings, Gardi says. For example, under a fully insured model, a business owner might pay $300 per employee every month. Under the partially insured option, this amount could be lowered to $150.

"Let’s say it costs me $100,000 for a fully insured premium. Maybe I’d only spend $70,000 on a partially self-insured model because a lot of my employees didn’t utilize the health plan," Gardi says. The dollar amount paid by the employer can increase as claims increase.

Business owners should sit down and determine what they can afford in health insurance, just as they determine how much they can pay in salaries.

"Once a dollar amount is established, then design several plans around that dollar amount," Gardi says.