But here’s a different way to think about health benefits; offering health benefits can help your small business save money overall. And, there are new "name your price" models that make health benefits attainable.
This article is from our free resource, “10 Budget Pitfalls of Small Business Health Benefits.” To download the full resource, click here.
54% of Small Businesses Do Not Offer Health Insurance
The number one challenge small businesses face in offering health benefits is cost.
According to the Kaiser Family Foundation, the nationwide average group health insurance premium cost for small businesses in 2014 was $6,025/year, with the business paying $4,944 per employee. Over the last 15 years, the cost to cover employees with traditional health insurance has increased 174% (for single coverage).
As such, only 54% of small and medium sized businesses (with fewer than 200 employees) even offer traditional health insurance today.
But these statistics don’t mean small businesses are abandoning health benefits altogether. Instead, they are looking to new approaches to offering health benefits that allows for predictable health benefit costs.
Health Benefits Can Reduce Employee Turnover
The cost of employee turnover is expensive is estimated at the equivalent of 6 to 9 months in salary - that’s $20,000 to $30,000 for a $40,000 manager in recruiting and training expenses, along with the potential lost revenue from customers. Other studies predict the cost is even more - that losing a salaried employee can cost as much as 2x their annual salary, especially for a highly-educated executive level employee.
Health benefits are the number one fringe benefit offered by employers, and are an important part of employee recruiting and retention strategies. Many employers look at health benefits as an investment in employees. Employers can save approximately half of these expenses, $10,000 or more per replaced employee, with a health benefits plan that helps them recruit new employees and retain existing employees.
But, all of the advantages of offering health benefits do not mean anything if the business cannot afford them in the short term or the long term.
How to Afford Small Business Health Benefits
Group health insurance is out of reach for your small business, but that doesn’t mean health benefits are off the table. Instead of contributing to a group health insurance policy, reimburse employees for individual health insurance.
With this type of “defined contribution” health benefits model, your business names its price for health benefits. If the business wants to contribute any amount to employee health benefits, you can afford benefits. The cost of health benefits is now in your control.
Take control of your employee turnover costs by offering attractive, affordable health benefits tailored to retain your most expensive-to-replace staff. If group health insurance has been out of reach, evaluate more affordable solutions such as reimbursing employees for individual health insurance. Over time, you’ll see that health benefits just may pay for themselves.
Do you have questions about how to get premium costs under control or about small business health benefits? Leave a comment and join the discussion.