Health Insurance: Businesses take varying approaches to weighty decision

roote-terryLike many insurance agents, Terry Roote has seen the challenges small businesses face in providing health insurance, weighing the benefits of what can be a competitive and attractive employee offering, against the costs.

“I’ve seen this happen more than once, where the employer will say ‘listen, I’m struggling to keep good quality employees and provide them with benefits,’” said Roote, founder and principal of Great Northern Benefits & Consulting.

It’s an issue he and others in Traverse City and beyond have seen businesses tackling in a number of ways, from higher costs borne by employees and reduced or dropped coverage, to offerings that give workers more benefit options but still help employers on the expense side.

The health insurance arena, though, has been thrown into uncertainty with the November presidential election of Donald Trump. During the campaign, Trump said he would repeal and replace the federal Patient Protection and Affordable Care Act of 2010, also known as Obamacare and a shared target of Republicans who continue to control Congress. But the president-elect has also said there are some provisions of the health law he might keep.

As of story deadline mid-November, it remained to be seen how it will all play out.

Economic climate, labor market, rising health care costs and the impact of the Affordable Care Act, or ACA, have all been factors that can play into an employer’s decision if – or how – to offer health insurance. And among small businesses, it’s a mixed landscape.

Nationally, recent research by the nonpartisan Employee Benefit Research Institute in Washington, D.C., points to fewer small employers offering health insurance over the last several years, for possibly any number of reasons. The analysis, released in July, shows rates among employers with fewer than 10 employees declined from 35.6 percent in 2008 to 22.7 percent in 2015. Health insurance offers among employers with 10-24 employees dropped from 66.1 percent in 2008 to 48.9 percent in 2015.

Scott Lyon, senior vice president at the Lansing-based Small Business Association of Michigan, or SBAM, said the organization has also seen declines, particularly among very small employers, in offering health benefits. But while those declines accelerated in the early days of the ACA, the numbers are “now inching back upwards,” he said.

Lyon said the advent of the ACA and the individual coverages available on the ACA’s public insurance exchanges led some employers around the state to drop group coverage, but that’s been changing.

“We’ve seen employers in the very early days of the Affordable Care Act, that have dropped benefits, coming back into the benefit world,” he said.

At the same time, some Traverse City agents report they’ve had few small-group clients drop coverage in the wake of the ACA, even given the law’s new requirements and the fact that companies with fewer than 50 full-time or equivalent employees are exempt from the ACA’s provision that employers offer health benefits or pay a penalty.

Lyon said it’s important for employers to understand all their options, in the group and individual markets. And offering health insurance, he said, is “a decision that changes over time.”

Indeed, Great Northern Benefits’ Roote has seen employers eliminate health plans entirely and give employees an increase in pay to purchase insurance on their own. But he’s also seen that course reverse, in response to potential employee migration to a competitor offering benefits.

“The employer comes back and says I need to put a package together…in order to keep the quality of employees that I need to do the job,” Roote said.

Raquel Paulus, employee benefits consultant at commercial insurance agency Peterson McGregor and Associates, said she’s seen a “shift to higher deductibles and higher co-pays, and asking employees to contribute more, as well.” And, Paulus added, “I know that the employers I work with really struggle, because they don’t want to pass it on.”

There’s also interest in options like a high-deductible health plan with health savings accounts. And, approaches like: giving employees a set contribution with which to “shop” for insurance off an employer-provided array of choices; self-funded health plans; and offering add-on benefits at little or no employer cost.

witkop-laverna“It’s all over the board,” said Laverna Witkop, agent at the Ford Insurance Agency Inc. “It’s…how much the employer can afford.”

She said she has small business clients who see it as important to offer a benefit package to attract and retain employees, particularly “with the competitive job market right now.” But how employers craft offerings and contain costs, varies.
One trend she sees is employers may fully or partially cover the cost of their employees’ health care premium, but if an employee’s spouse or children are on the policy that comes at the employee’s expense. “With the cost of health care going up so much, that’s where I’m seeing employers cut back,” Witkop said.

She also sees that health savings accounts – tax-advantaged medical savings accounts available to individuals enrolled in high-deductible health plans – have picked up in use, as have wellness programs like diabetes education or smoking cessation. Such programs, sponsored through insurance plans or by outside vendors with the employer, aim to boost employee health and productivity.

Ryan Liabenow, health and benefits practice leader at The Larkin Group, said one trend he sees is a surge in companies offering what are called voluntary benefits – additional plans that supplement health insurance coverage and can fill needs unmet by medical plans.

Common offerings are dental, vision, critical illness and accident plans, and “most voluntary benefits are 100 percent employee paid,” Liabenow said.

Such employer-offered benefits – even helping employees repay student loans – enable small businesses to be creative and respond to worker desire for value, he said.

Liabenow said he is also seeing more local small employers interested in self-funding health plans, providing benefits with their own funds. It’s an approach that can mean more plan control, improved cash flow, federal preemption and lower taxes, among advantages, and ultimately savings, he said. And flexible medical stop-loss insurance options can make it possible for small businesses to self-fund “without the risk of significant exposure,” Liabenow said.

Also catching some favor are defined contribution plans in which the employer gives employees a set amount of money that they can use to choose health coverage from among a variety of plans made available by the employer.

The employer creates a budget and contribution strategy, gaining more certainty over health benefit costs while providing employees greater flexibility to select insurance that best fits their needs. It’s a long-term approach that can be more manageable for the employer than traditional defined benefit plans, said Roote. “It’s the old concept of cafeteria plans…that has become more feasible for smaller groups.”

Lyon, at the Small Business Association of Michigan, said he expects more employers will go the defined-contribution route.

“It’s one of the only tools the employer has to make their costs predictable year over year,” he said.

SBAM sponsors Blue Cross Blue Shield of Michigan and Blue Care Network health plans for its eligible members, handling billing, enrollment and administration, and also offers a defined contribution option that incorporates a Blue Cross Blue Shield private exchange containing multiple Blue Cross Blue Shield and Blue Care Network group health plans.

Amy Lane is a freelance journalist and former reporter for Crain’s Detroit Business, where she covered business, state government, energy and utilities for nearly 25 years.