If you’re considering offering health insurance for your employees, this guide is for you
If you have 49 or fewer full-time employees, providing health coverage is optional in the United States. There are many different reasons to offer health benefits for your team. Beyond caring for employees’ well being, offering coverage is a crucial part of most recruitment strategies and can increase employee retention rates.
Employer-sponsored health coverage is the top perk that most job seekers care about, followed by paid time off, and employer-sponsored dental and vision.
While the pros are clear, offering health insurance is neither cheap nor easy. To see the results and benefits your desire, you’ll need plenty of time and resources to plan, strategize, and execute your health benefits program. Here are 8 questions to ask yourself to help you determine if providing coverage is right for you:
1. What is your goal and what do people need?
If you’ve decided that your small business is in a financial position to start offering health coverage, the next step would be to create a set of objectives. Each plan you evaluate will have its own set of benefits and drawbacks. Clearly defined goals will help keep you on track and your program within scope.
You can create goals around your program by referencing research from our Small Business Benefits Guide, and by having conversations with the people in your company to better understand their needs. Without understanding this kind of information, you might prioritize the wrong things and your program could miss the mark with your employees. Be clear about why you’re doing this and what benefits you would like to see for both your business and your employees.
2. What types of coverage do you want to include?
Once you have a better idea of your program goals, you can start to consider what types of insurance plan you’ll want. Choosing what will be included in your health benefits package (medical, vision, dental) and what types of group insurance plan you’ll choose will often be a balance between what you can afford as an employer, and what is most valuable to your team. Review page 22-25 of our employee benefits guide for an overview of different plans and what is included.
According to benchmarking surveys, Preferred Provider Organizations (PPO) are the most common plan for businesses in the U.S.
3. How many employees would you be covering?
It’s important to know how many people you’ll be covering as the amount of people impacts the deductible amount for your employees. According to the Zenefits Guide, the average deductible for small businesses is $2,271 versus $1,412 for large firms.
4. What is your total annual budget?
As we said earlier, offering a solid healthcare plan is not cheap and you’ll need to know exactly what’s in your budget to decide if you can afford your employer contributions as well as the resources allocated to maintaining the enrollment of the program.
5. How much would the employer contribute? And the employee?
In 2019, the average employer contribution for single-person coverage was $5,946 and $14, 561 for family coverage. The worker contribution was $1,242 for single coverage and $6,015 for family coverage. Based on these numbers as an average, you can calculate whether or not this would be within your budget.
The average annual premiums for employer-sponsored health insurance is increasing at a quicker pace (4% increase) than the average worker’s wage (2.6% increase). Understanding each of these plans and how to reduce costs for your employees will be vital.
6. How important are benefits to your recruiting efforts? How competitive is your industry?
According to the Kaiser Employer Health Benefits 2019 Annual Survey, 90% of U.S. workers were employed by a firm that offers health benefits to at least some of its employees. Depending on your industry, offering benefits might be necessary to keep up and hire the talent you need. If you’re having retention issues or not attracting the right candidates, this could be the reason why. Evaluate the market, and see how you stack up in comparison to other companies.
7. What resources will you allocate to the health insurance process?
When thinking about your dedicated resources, consider that you might have to hire someone to manage the process, as well as the enrollment each year. Benefits administration should not be an “off the desk” type of assignment that is handed to someone during crunch time. You can invest in different HR technologies to help offset the time and resources required to manage this.
8. Do you already have a broker?
You’ll want to make sure that you choose a broker who will work with your best interests in mind. When evaluating brokers, make sure whoever you go with will:
- Provide alternative plan options from competitive carriers
- Advice on strategies for employee/employer contributions
- Help you feel comfortable with the cost
Once you’ve considered all the above, and have analyzed whether or not you can afford to provide coverage, you can pick a date that you’d like to start your coverage, and get planning.