9 million small businesses are afraid they may have to shut down for good because of the Covid-19 pandemic. Forbes highlights health benefits as one of the top reasons companies have been bleeding out cash. But because of its tremendous importance for both staff retention and talent recruiting, most small business owners feel completely stuck in their current plan. What small businesses are starting to figure out, though, is that a small but significant change to employer health benefits included in the American Rescue Plan Act of 2021 has brought a unique opportunity to provide high quality benefits while still controlling costs better than ever before. But just because there’s hope doesn’t negate the current landscape of small business health insurance. Before we get to the good news, it’s important to review where many currently stand.
1. Health benefits are more expensive than ever.
Would you pay an employee more if they kept doing less and worse work for you? Absolutely not! That’s just bad business. So why do we continue to do the same thing for our health benefits?
Small businesses are bleeding. The New York Times and the Kaiser Family Foundation provide a decade lookback at inflation, workers’ earnings, premiums, and deductibles. These shocking numbers are proof that traditional insurance costs are unsustainable and downright outrageous. Change must come.
Inflation has gone up by about 20% and average earnings in the same timeframe have increased by 25%. However, when it comes to the cost of health insurance premiums for families, it’s gone up by 50%. Worse yet, deductibles have gone up over 200%.
2. Employees are quitting because of poor health benefits.
46% of individuals say they will choose their job based on the quality of health benefits offered with their compensation. This means that, in order to be competitive, you need to have a great health benefits package. Which generally means that you need more and more money to make the plans more and more competitive. Not good news for small business health insurance.
56% of current employees will determine whether to leave or to stay based on the quality. This means that cash is not the only thing small businesses are losing due to health benefits—they are also losing their team members, too.
Small businesses must find a solution before employees depart in search of better benefits.
3. Small businesses are leaving money on the table.
Harvard Business Review just released data that suggests a paradigm shift has occurred in small businesses health benefits. Whereas the traditional route was to provide a group plan to the entire staff, HBR highlights the better approach is akin to the shift from pensions to 401(k) in the 1980s for retirement benefits.
Instead of giving the employee the actual product itself, they give the employee a budget to purchase the product on their own. The projected savings that HBR suggests based on their data hovers around a 25% decrease.
The defined contribution approach as opposed to the defined benefit approach for retirement benefits has proven to be a more personal offering that puts the employee in the driver’s seat, while still allowing the employer to provide a benefit—helping with both recruitment and retainment.
Building the budget around spending power and flexibility is something healthcare has needed for quite some time. But the flexibility is not the only benefit of opting for the Individual Marketplace; it’s the huge discounts that are made available as well.
Subsidies on individual health insurance have been law for 11 years. These are Advanced Premium Tax Credits (APTCs) that go directly from the IRS to the insurance carrier on behalf of the individual to decrease the cost of their chosen product.
Keep in mind, these discounts are not available using the traditional group method of health insurance for small businesses; they’re only available through the Individual Marketplace.
In the past, there was a cutoff on who could receive these subsidy discounts (based on income and household), which meant it wasn’t always worth it for the employees or the employer to opt for the Individual Marketplace.
But now, The American Rescue Plan Act of 2021 just removed that former threshold limit on subsidies, which means that every employee now qualifies for a subsidy. The most recent numbers show that small businesses and families can expect around 30-40% of savings against previous group plans on the Individual Marketplace thanks to the American Rescue Plan.
Don’t Miss Out, Act Now
As a small business, it’s important to evaluate new solutions to solve old problems. By rethinking your small business health insurance, you could save money and provide better benefits to employees.
Moving from the outdated traditional group plan into the new managed individual style of health benefits is trending in the small business world, and rightfully so. What if you really could help your employees find better coverage that actually costs less? It’s at least worth checking out.
Our consultants are ready to provide an objective analysis on what you’re currently doing and show a comprehensive overview of what can be possible for your small business. Stop bleeding out the resources you need to get your company healthy again. Don’t miss out—act now.
Important Notice: Remodel Health does not intend to provide specific insurance, legal, or tax advice. Remodel Health always recommends to consult with your own professional representation to properly evaluate the information presented and its appropriate application to your particular situation.