With such dramatic increases, it's not surprising that 37% of small businesses cite health insurance costs as their top concern. Footnote Open Overlay While large companies may be able to absorb rising prices, smaller employers often don't have the same resources or ability to fund health care coverage. Therefore, employers like you may be faced with difficult choices about how to cover rising prices.
For many, this means shifting higher costs onto the shoulders of employees. In addition to paying higher insurance premiums, employees of small businesses have an average deductible $1,000 higher than employees of large businesses. Footnote opens overlay , and a quarter of small business employees pay $12,000 or more a year just to enroll in family insurance. Footnote opens over lay These costs can make health care unaffordable for some of your employees, even if it is covered.
The right financing strategy can help you save money
While you can't control costs, you can choose a financing strategy that can help you save money while maintaining quality coverage. Familiarize yourself with a few common financing options:
- Professional Employer Organization (PEO)
A PEO specifically works with small businesses to outsource critical HR functions, including benefits administration, to them. By representing multiple employers, a PEO can offer more favorable group rates and savings than what individual companies could obtain on their own. However, this model may leave you with less decision-making power. - Individual Coverage Health Reimbursement Arrangement (ICHRA)
ICHRA allows employers to reimburse their employees for eligible health care expenses and allows employees to choose the health care plan they want. The employer sets the reimbursement amount, making the cost predictable, and employees can choose from a wide range of plans to meet their needs. While this model gives each employee the freedom to choose coverage, some people may find it confusing. - Self-funded
Self-funded plans typically offer the greatest cost savings and individualized coverage of any health care option, but they can carry a high level of risk and administrative burden. Employers who self-fund their benefits are responsible for all health care costs and take on the burden of designing and administering many aspects of their plan. - Tiered funding
Under a level-funded plan, employers pay a set monthly contribution that provides predictable short-term cash flows. If annual claims are lower than expected, employers can receive a refund of the surplus or a credit. If claims are higher, however, higher premiums can be set in subsequent years. Equal-funding plans are often a stepping stone to self-funding.
A good benefits broker can help you make decisions that are best for your business. Learn more about how to choose a benefits broker (PDF) , Opens overlay.
Maximize the value of your employee benefits
If you've developed a funding strategy, you're already halfway to maximizing the impact of your benefits. After that, it's all about clear and consistent communication to employees.
Health insurance is an investment in your employees that you want them to take advantage of. By creating opportunities to communicate the value of coverage, you can make sure the benefits are not forgotten by your employees. Regular updates after the enrollment period, whether through emails or informal reminders, can encourage everyone to make the most of their insurance options.
Be sure to provide employees with resources they can turn to if they have questions. Many benefits brokers offer services to help employees navigate their health care plans. These services can help your employees understand what is covered, allowing them to keep costs down and take full advantage of their benefits to improve their health.
Make an informed decision about benefits
Choosing a benefits package is a critical business decision that has a significant impact on employee experience and budget. Research information and counseling, and you don't have to make this choice alone.