Designing a benefits package as part of one’s recruiting or retention efforts can be stressful for small employers. Potential employees look at more than just the wage being offered; in many cases, available employee benefits can be the deciding factor in applying for or accepting a new position, to the point that some employees will even trade lower pay for better benefits. But is a small employer always at a disadvantage compared to the benefits portfolio offered by mega corporations?
No, but Yes, but No.
Medical insurance is clearly the most important benefit to most employees. Before the passage of the Affordable Care Act (ACA), small employers were at a definite disadvantage, because insurance carriers would underwrite each small group before making an offer of insurance rates. The smaller your pool of employees was, the more impact a single health condition – pregnancy, for example, or diabetes – would have on the rates offered.
Since the ACA became the law of the land, though, insurance carriers are mandated to offer small-group fully insured coverage on a “community-rated” basis: All people of the same age in the same geographic region pay the same amount for the same benefit, regardless of health status.
However, sometimes it’s better for your employees if you don’t offer group medical insurance, especially for employers who don’t want (or can’t afford) to contribute a large share of employee premiums. The federal government’s individual Marketplace (healthcare.gov) offers individual plans which can be largely subsidized if the individual doesn’t have access to an employer-sponsored health plan and if the household income falls into certain brackets.
(But on the other hand, employer expenses for employee health insurance can provided valuable tax breaks. There are always other hands in these matters, and whether to offer a group medical plan has a different “correct” answer for almost every employer.)
For other benefits – dental, vision, life, disability, etc. – the small employer is still at a substantive disadvantage. Insurance carriers take group size into consideration when quoting rates for benefits like this, and the same volatility figures into their calculations as in pre-ACA medical underwriting: a single expensive claim can skew rates for the entire group. Many carriers simply won’t offer richer benefits to groups under a certain threshold; for example, dental insurance carriers frequently don’t offer plans with orthodontic benefits to employers with fewer than 10 employees, and life insurance carriers may offer a lower guaranteed issue amount to smaller employers. That’s not to say there are no options; we work with over 40 insurance carriers who serve all employer industries and sizes. If there’s a solution out there for you, we can help you find it.
If you want to explore the specifics of what benefits are available for YOUR employees and how that would impact you financially, let us help you.
