Small firms that don't offer health benefits could be making a strategic mistake, Janet Trautwein argues. (Elaine Thompson, Associated Press)
Health benefits are tough to come by at small businesses, according to a new report from the Kaiser Family Foundation.
Less than half of employers with three to nine workers offer health insurance. Conversely, nearly all firms with 1,000 or more employees offer some type of coverage to at least a portion of their workers.
Small firms that don't offer health benefits could be making a strategic mistake. Providing insurance is one of the most effective, economical ways for employers to support the health of their workers — and to retain them, too. Even better, small businesses have more coverage options available to them than ever before — including some new ones created by the Affordable Care Act. Employer-based coverage offers several key advantages to both firms and workers.
For starters, premiums covered by employers are tax-deductible, and employer payments toward coverage are not considered taxable income to employees. Individuals don't get the same tax benefits paying for insurance themselves.
That tax exemption cuts the price of insurance for employers by up to 40 percent, on average. Those savings allow businesses to provide more generous coverage than individual workers might be able to secure on their own.
Employer-based coverage is often more comprehensive than the standard mid-level plan available in the individual health insurance market, according to a recent analysis from PricewaterhouseCoopers.
Employer-sponsored coverage is also less expensive to administer. According to the National Bureau of Economic Research, the administrative load for employer-sponsored insurance is half that for individually purchased policies.
That shouldn't be surprising. After all, it's easier for insurers — as well as agents and brokers — to work with one business owner representing eight staffers than to service eight people individually.
Most importantly, for many Americans, the mere act of choosing an insurance plan is challenging. Indeed, a recent study published in the journal Health Affairs reported that "more than 60 percent of those targeted by the health insurance exchanges struggle with understanding key health insurance concepts."
Employers usually work with agents and brokers to find coverage for their employees. In most states, a broad range of coverage is available to employers of all sizes.
The Affordable Care Act also created another way for small businesses to secure health coverage for their workers — the Small Business Health Options Program (SHOP). Firms with 50 or fewer employees can select from among several health plan options. They can sign up at any time during the year. Businesses with 25 or fewer employees can qualify for tax credits that cover as much as half of their insurance tab if they purchased coverage through the SHOP program.
SHOP's online system allows employers to choose how much to contribute to worker premiums and what level of coverage to offer. Features like dental insurance and dependent coverage are optional.
In some states, employers will have the option to offer coverage that will allow employees to select from several different insurance plans. Starting this year, workers in 14 states will be able to choose their insurance provider.
Fortunately, whether employers want to explore their options through SHOP or other options for coverage, they can turn to licensed agents and brokers to help them with coverage options, manage the enrollment process for them, and serve as their expert benefits counsel throughout the life of the insurance policy.
In fact, HealthCare.gov's SHOP exchange allows small businesses to search for agents directly on the website, or they can find someone in their area on the NAHU website at www.nahu.org.
There's no better time for employers to explore the options available to them for offering coverage than now.
Janet Trautwein is CEO of the National Association of Health Underwriters.
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