In business, as in life, improvement only happens through measurement. For small businesses in particular, meticulous attention to detail is essential to thrive and survive in a competitive market. While paying close attention to what’s going on in one’s own shop, or among closest competitors, it’s easy to lose sight of larger national trends. As reported in a health benefits survey in a recent podcast, successful small business owners keep an eye on the economy as a whole, and wisely use that information to stay ahead of the competition.
The business community is fortunate that the Kaiser Family Foundation (KFF) produced an annual Health Benefits Survey, a comprehensive overview of the health benefits environment. The 2017 survey provides an honest, and somewhat hopeful, picture of the health insurance market. Here’s a summary of the 2017 report’s main findings, with specific guidance for small business owners.
According to the report, employer-sponsored health insurance premiums continued a six-year trend of annual increases. The good news is that the magnitude of premium increases has been less than anticipated. In 2017, the average annual premium for employer-sponsored family coverage rose 3 percent. For individuals, the premium increase was 4 percent. That’s the good news. The bad news: This increase was greater than that of inflation (2.2 percent) and the average rise in employee wages (2.2 percent), according to the Bureau of Labor Statistics (BLS).
For businesses with fewer than 200 employees, the average employee premium was $17,615. That figure compares favorably with the $19,235 average premium for large firms. Small employers are looking for value, as are their employees.
Gold-level plans, Healthcare.gov explained, have higher premiums, but they tend to be less expensive at the point of care. At the other end of the spectrum, bronze plans tend to have the lowest premiums, but they carry large cost-sharing burdens in the form of high deductibles. Small employers should assess the overall health — and age — of their employees. Companies might consider offering bronze plans if the majority of their employees are young, healthy and unlikely to use health services much in a given year.
Regarding employee cost-sharing, the Health Benefits Survey had mixed news, as well. Cost-sharing, in the form of deductibles and copayments, is now firmly entrenched in the culture of employer-sponsored health insurance. The days of 100 percent employer sponsored health care are nearing the end. According to KFF, 81 percent of covered workers now pay deductibles for health services. Even employees without deductibles are exposed to other forms of cost-sharing, particularly copayments and coinsurance.
For small businesses, the average deductible in 2017 was considerably higher than that of larger firms ($2,120 compared to $1,276). There are several reasons for the discrepancy, not least among them the price-sensitivity of smaller firms. This sensitivity may have steered them away from gold or silver plans.
The best way for small business executives to manage employee expectations regarding cost-sharing is to be transparent. HR decisionmakers should meet with employees one-on-one and have frank discussions about anticipated health needs. For example, does a married couple plan to have a baby? Pregnancy and delivery are expensive, and a young couple with limited resources can quickly blow through even a large deductible. For employees with higher anticipated needs, lower-deductible plans may make more financial sense.
Screening for Wellness
KFF noted that increasing numbers of large companies are moving forward with health screening programs, including questionnaire-type health risk assessments and individual biometric screenings. Many companies offer incentives, including cash, for employees to become involved in health and wellness programs. However, for small businesses, adoption of wellness programs has lagged, particularly because of concerns over a lack of evidence that incentives have a positive effect on employee health outcomes.
Until more data are available, small business executives should use caution in their approach to wellness programs, particularly ones involving incentives. As intuitively obvious as the concept sounds, there are too few data to support widespread adoption of incentivized wellness programs. That isn’t the same as saying such programs aren’t good ideas. There are potential ancillary benefits to such programs, such as team building and employee satisfaction.
At the end of the day, every business wants to find and retain happy employees that show commitment to the enterprise. The same is true in spades for small businesses. If current trends continue in 2018, look for premiums to rise faster than wages and plan for a continued shift in cost-sharing toward employees. Make sure your workforce is prepared for what lies ahead.
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This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.