Small employers now offering competitive health insurance at lower cost than larger enterprises
Small employers are offering competitive health insurance benefits relative to larger employers and, in fact, some are doing a surprisingly better job of containing costs. That’s the underlining message of a report based on the most recent national health plan survey from United Benefit Advisors. The research also suggests it’s a winning formula in the war on talent, which brokers and advisers serving this market segment can help develop on behalf of their clients.
“You don’t have to be a Fortune 100 company to be a great place to work,” says UBA President Peter Weber. “Telling current and prospective employees that, for example, your PPO plan offers the same coverage, deductibles and copays as very large companies, or that your monthly premiums are lower than what other employers your size are offering, is a great way to challenge misconceptions, win talent and build loyalty.”
When analyzing the average annual cost per employee, UBA found that part of the small-business market is cutting a better deal than comparably sized and even larger firms. That sweet spot appears to be groups with 25 to 49 employees, whose average cost is only $9,165 compared to $9,727 for all employers. There also was just a 5.3% difference between employees in small groups who paid $3,557 toward annual health insurance benefits relative to $3,378 on average for those across all plan types.
To be fair, Weber notes that many small groups, unlike their larger counterparts, were able to maintain pre-Affordable Care Act plans at better rates says because of various rules designed to level the playing field. They included so-called grandmothering and the Protecting Affordable Coverage for Employees Act.
It’s also worth noting, however, that this particular segment is succeeding across all types of health plans and making more generous contributions to health savings accounts. Companies with 25 to 49 employees paid the least amount relative to categories involving one to 24 employees, 50 to 99 employees and 500 to 1,000 employees, regardless of plan type. PPO coverage was the most costly at $10,134 per employee per year for all employers on average followed by consumer-driven health plans at $9,391 and HMOs at $8,886.
In addition, those with 25 to 49 employees also led other small and midsize firms on employer contributions to an HSA. For example, they contributed $543 on average to a single HSA vs. $474 for all employers and $908 to a family HSA vs. $801 for all employers. Those contributions edged out all other company size categories.
The report, “Small Businesses Keeping Pace with Nationwide Health Trends,” highlights data from a UBA survey of 19,557 health plans sponsored by 11,524 employers. Together, they employ more than 2.5 million workers and cover more than five million total lives.
The healthcare benefits of small employers, while highly competitive with average employers nationwide, differ in two important ways, according to the report. The first is cost-sharing. They’re passing onto employees nearly 6.6% more of the costs for single coverage and 10% more for family coverage, which increases to 17.8% and more than 50% higher, respectively, for small firms relative to their largest counterparts. Secondly, they have higher out-of-pocket maximums, particularly for families.
Small businesses ultimately can use these findings to establish “strong employment brands” that will help recruit and retain top talent, Weber says. “To identify and articulate the specific advantages of a benefits package, smart benchmarking is key,” he explains. “You want to get as granular as possible, comparing your plan design and costs against others in your industry, region and size bracket. An added benefit of this kind of detailed benchmarking is that the next time you go to the bargaining table you can drive an even better deal with carriers, too.”