How Employee Benefits Can Impact Your Small Business

by Samantha Stutsman

As a small business owner, making difficult decisions is part of the job description—including whether or not to offer benefits to your employees.

For those who employ fewer than 50 people, the choice is yours to make, as state and federal laws don’t require small businesses to provide health insurance or other benefits for their employees.

Steve Stutsman, the owner of a small restaurant and hotel in Nashville, Indiana, stands by his decision to stop offering health insurance to employees.

“We went from being not profitable to profitable by excluding that one line item,” he says, adding that health insurance just simply isn’t suited for a business of his size.

On the other hand, those with 50 or more employees are required to provide health insurance, a mandate that’s gotten costlier in recent years. Health insurance costs have risen nearly 200 percent over the past 15 years for employers, according to PeopleKeep.

If he were forced to provide health insurance, Stutsman admits that it would be nearly impossible to keep the doors open.

“I can’t offer health insurance,” he says. “It’s that simple. I have to make this place profitable. I can’t cut salaries, I can’t cut food costs, I can’t cut utilities, and my rent is the same every month. I have too many fixed costs.”

Considering the job market, some might question Stutsman’s budgeting tactics and how they affect his hiring pool.

“People don’t even ask about health insurance when they’re applying for a service job anymore,” he says. “Nobody offers it—especially not a mom and pop.”

Stutsman can’t compete with corporations—Starbucks, McDonald’s, Whole Foods—that offer benefits packages, so he works to provide a variety of other perks that don’t punish his bottom line.

“We offer our full-time employees one week of paid vacation, flexible scheduling for all our full and part time employees, and one free meal per shift,” he says. “And those benefits don’t go unnoticed.”

Still, small business owners who do offer health benefits to their workers tout the competitive advantage of doing so. More than two-thirds of those recently surveyed by eHealth said that doing so gave them a strategic advantage in hiring.

While paying for  health insurance will continue to be an uphill battle for small businesses, traditional group health insurance isn’t the only option out there. Here are other options for small business owners to consider:

Qualified small employer health reimbursement plan (QSERHA)

Business owners in a similar financial situation to Stutsman may want to consider these types of plans, established in 2016.

This budget-friendly plan allows the employer to set a monthly, per employee allowance that is tax-free for both parties.

The 2019 monthly QSEHRA contribution limits are $429.17 for single employees and $870.83 for employees with a family—with no contribution minimums.

The plan works best when a third party handles reimbursing employees for medical expenses after receiving proof of product or receipt. .

Self-funded health insurance

While a risky option, self insuring allows small businesses to avoid outrageous premiums and the headache of dealing with traditional health insurance hurdles. It’s also increasing in popularity. About four in 10 companies offer at least one self-insured plan to workers.

Businesses that choose to self-funded path assume all responsibility for their employees’ health needs. Meaning, proprietors vow to cover all out-of-pocket expenses submitted by their employees.

To avoid confusion and off-the-wall claims, use a third party to create and carry out formal terms and coverage. You might also consider stop-loss insurance, should someone unexpectedly need serious or long-term medical attention.

That said, if your employees strike you as “healthy,” this may be the most cost-effective solution.

Association health plans

Newly available last year, AHPs allow businesses in similar industries, professions, and even geographic regions to purchase group coverage as if they were a larger entity.  

Banding together with other small businesses and individuals has the potential to significantly cut costs—sometimes by upwards of $4,000 per year, per employee.

So, what’s the catch? These large-group plans often exclude coverage in vital areas, including prescription drugs, maternity, and mental health.

However, Professional Employer Organizations (PEOs) may be able to fill the gap, as they’re more likely to cover the above costs.

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