What Are The New Alternate Options for Small Business Health Benefits?
The Affordable Care Act, commonly referred to as “Obamacare”, created an initiative to supply small businesses with health care for their employees. In theory, it sounds like a great idea that would cause small businesses across the country to rejoice, but sadly that has not been the case. The ACA’s Small business Option Program or SHOP has fallen short of its enrolment expectations.
SHOP is largely unpredictable when it comes to small businesses; premiums can go up, and employees’ wages can go down. Businesses that employ older employees, or employees with a history of smoking, are more at risk for annual premium increases. In fact, according to a recent survey by the National Federation of Independent Businesses, more than 60% of businesses polled saw a premium increase within the last year. Due to the rising cost of health care coverage many small businesses are unable to offer it to their employees.
What’s more, smaller businesses have been victim of disproportionate geo-targeting by the insurance carriers. In a traditional health plan, small businesses are lumped in with all other small businesses identified by geographic diameter. This pool of businesses often includes other companies that have employees with higher levels of health risk, penalizing the small business owner with a healthier company headcount.
These higher costs place a toll on businesses beyond their inability to land decent health benefits for employers. The businesses themselves are placed at a competitive disadvantage, especially since 60 percent of human resource leaders said an attractive benefits package is "very important" in recruiting and retaining quality employees according to a Harvard Business Review Analytic Services survey.
So what other options do small businesses have? How can employers offer their employees fairly priced health care coverage?
One option gaining steam may be a level-funded benefit program. This type of benefit program appears as a hybrid between a traditional small group health plan and self-funded concepts typically reserved for large corporations. Small businesses with a headcount of five or more can cover their employees on their own with the added security blanket of a stop-loss policy from an insurance carrier that handles the plan’s administration and excess risk above a certain limit. All a business has to do to provide this type of coverage is simply set aside the cash to cover the anticipated claim expenses. With a level-funded benefit program, monthly premiums remain the same during the whole year and if claims are less than the funded amount, a rebate or credit is issued at the end of the year. On the other hand, if claims go over the funded amount, the business is protected by the stop-loss policy.
This segment of the insurance market is just starting to emerge as a viable option for small business struggling to provide health benefits for their employees, but once more employers realize the benefits, it will positively change how small business view health benefit programs overall.
Russ Carpel is CEO of LevelFunded Health, an innovative national health insurance agency offering small business-focused benefit alternatives to the Affordable Care Act. For more information visit www.LevelFunded.com.
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