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Employees and Vendors

The Evolving Health Insurance Market

The evolving health insurance market - by the numbers. When asked which workplace benefit would help them reach their financial goals, health insurance was picked by 48% of millennials (age 20-37), 54% of Gen X (38-53) and 71% of baby boomers (ages 54-72). Type of health care plans offered in 2019 are 85% PPO, 59% HDHP linked to a HASAHRA, 33% HMO, 19% HDHP not linked to an HASAHRA, 8% POS and 5% Indemnity Plans. Strategic concerns - 66% of small business owners offer coverage to help them hire and retain the best workers, 43% feel a moral obligation, 27% feel it encourages productivity, 26% offer benefits because employees cannot afford coverage on their own, 11% offer coverage for tax benefits. Top considerations for picking a health plan. 34% of small businesses choose a plan based on affordable monthly premiums, 30% cite affordable co-pays and deductibles, 11% cite premiums their employees can afford, 10% cite a strong network of medical providers. Health Insurance Dos - shop around and compare costs for you and your employees, explore customized health and wellness benefit options, seek employee input, offer voluntary insurance benefits and explore new options. Health Insurance Don'ts - ignore what your competitors are offering, overlook workers compensation and disability insurance which are mandatory.

The Evolving Health Insurance Market

In today’s highly competitive labor market, attracting and retaining skilled employees can be a special challenge if you own a small business. Worker turnover can severely disrupt productivity and impact your company’s bottom line. The time and training you invest in each new employee can add up to thousands of dollars in additional costs.

So, what can you do to keep good employees from jumping ship while incentivizing new hires to come on board? The 2019 Employee Benefits Survey conducted by the Society of Human Resource Management (SHRM) reported that employees consistently rank health benefits as the most important benefit category. This finding was confirmed by 86 percent of employers who rated health-related benefits as very important or extremely important to their employees.

Similar insights were reported in the eHealth survey of costs and trends in the small business group health insurance market. More than half of the employers surveyed cited the ability to hire and retain the best workers as the most important factor in their decision to offer health coverage.

Health care landscape

The small business insurance market and overall employer insurance market have remained stable in recent years, according to eHealth. Gone are the days of double-digit premium increases to be replaced by more moderate increases in the 4 percent to 5 percent range.

That’s good news for businesses that share the cost of health insurance premiums with their employees. Overall, 70 percent of employers in the SHRM survey indicated that their health care benefits stayed the same in 2019, while 20 percent of employers, regardless of size, increased benefits.

The bad news is that small business health plans continue to be impacted by significant deductible increases, eHealth reported. The individual deductible for small business plans rose 14 percent from 2017 to 2018, causing companies with fewer than 30 employees to shift costs onto out-of-pocket costs while increasing premiums slightly.

Citing concerns over future cost increases, 63 percent of small business owners told eHealth that a return to double-digit increases of 15 percent or less in health insurance premiums would make their current plan unaffordable.

Health care plans

Although preferred provider organization (PPO) plans are the most common health care plan in the overall employer market, they were the third choice of small businesses in the eHealth survey. Point of service (POS) and health maintenance organization (HMO) plans accounted for nearly three-quarters of all small business plans, while PPOs accounted for 15 percent.

The flexibility offered by PPOs, which have fewer restrictions on out-of-network care and referral requirements, can result in higher costs. Small businesses prefer insurance plans that offer affordable monthly premiums and out-of-pocket costs, eHealth explained.

Some employers are turning to high-deductible health plans (HDHPs), linked or unlinked with a health savings account (HSA) or health reimbursement arrangement (HRA) to manage health care premium costs. The high-deductible health plans are replacing traditional health plans or being offered as an additional choice to employees.

Small business health plans are usually bundled with prescription drug coverage, supplemental insurance benefits for short-term and long-term disability, dismemberment and accidental death, as well as optional benefits such as dental and vision coverage.

Explore new options

In addition to traditional health insurance plans, there are newer small business options that may be worth your time to investigate.

One concept finalized by the U.S. Department of Labor in 2018 allows small businesses and self-employed workers to join an Association Health Plan (AHP) in order to access health care coverage as though they were a single large employer. AHP members enjoy the same economies of scale as large companies, resulting in increased bargaining power to purchase health insurance at a better price. You can learn more about AHPs by visiting the Department of Labor.

Another option is the Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) which are available to small business owners and employers who don’t offer group health coverage to employees. Under the plan, qualified employers can offer a pre-tax contribution for insurance premiums and health expenses to all eligible employees.

Check out these other options on HealthCare.gov: health savings accounts (HSAs), Health Flexible Spending Arrangements (FSAs), Health Reimbursement Arrangements (HRAs), short-term health insurance and the Small Business Health Options Program (SHOP).

About the Author: Clint Sporhase leads First National Bank’s efforts to serve small business owners. Clint has 25 years of sales, marketing and strategy experience.

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