Why small businesses are dropping health insurance, and what you can do

file marked with insuranceMany small employers are dropping health insurance. There are plenty of reasons for this trend. Here are a few that might sound familiar to you. Then keep reading to learn what solutions small employers are turning to instead to control costs while keeping employees happy.

Here are the Top 5 reasons small employers drop health insurance:

  • Cost. Health insurance costs have been ridiculous for a while now, and they are increasingly forcing more and more small businesses and non-profits to eliminate or greatly reduce employee benefits. The high costs are also a burden on employees who want to insure their families.
  • Hassle. If you run a small business or are involved in HR, you know that employee benefits can be a pain in the rear. The regulatory burden from government requirements is only increasing, and compliance issues can be time-consuming to manage, and expensive if there’s a violation.
  • Participation problems. Insurance companies typically require a certain percentage of eligible employees to be on a group plan in order for it to remain in effect. With increasing costs and shrinking benefits, many employees are opting out. They can’t afford the benefits or no longer see the value. The result is that the group doesn’t meet participation requirements.
  • The Affordable Care Act. The “employer mandate” has been waived for 2014 and 2015, and it never applied to those with fewer than 50 employees anyway. The ACA has unfortunately driven prices up while adding to the hassle-factor described above. Additionally, if you offer group health insurance, your employees’ dependents are ineligible for subsidies to help them pay for individual insurance in the new health insurance marketplace. On the positive side…
  • Employees now have other options. The positive effects of the ACA are that you know your employees can get individual health insurance, and if they qualify for subsidy (“premium tax credits”), it will likely be a lot cheaper than the group plan. Before the ACA, some employees were unable to get insurance due to pre-existing health conditions, so a group plan was their only option. Those limitations are now gone, meaning if you drop coverage your employees can get their own elsewhere.

There are probably other factors, but you get the idea. Many employers genuinely want to provide some benefits to their employees, but health insurance just no longer makes sense. So it’s time to think outside the box.

Alternatives to Health Insurance for Small Businesses

Many employers who opt out of health insurance are utilizing one or more of these alternatives:

  • Telemedicine. One of the biggest trends in healthcare and in employee benefits is telemedicine. These services provide your employees with access to consult with board-certified doctors in your state 24/7 via phone or video over the web. It saves time (eliminating time out of the office, too), money, and hassle for your employees. Telemedicine will only cost you $10/month per employee.
  • Dental insurance. If we’re honest, dental insurance is not always the best value for the money. But it is inexpensive compared to medical insurance, and it’s a benefit your employees will use at least twice a year. Employees love having it and will be grateful you provide it, and it’s much simpler to manage.
  • Supplemental insurance. The most popular of these coverages is accident insurance, but you could also elect cancer/critical illness insurance or similar lines of coverage. These plans will help employees cover their share of deductibles and out-of-pocket costs should something unexpected happen. You can set these up as employer-paid plans or voluntary benefits (all you do is payroll deduct).

Next Steps

If it’s time to drop group health insurance, then providing some kind of alternative coverage to your employees will make the transition much smoother. We previously wrote a guide on how to drop your group health insurance plan, and the advice we provided then still holds true now. Go check that out. Then talk to us about the process. We can help you evaluate the alternative options discussed above and also help your employees find individual health insurance plans. Start the conversation now.