When a 'Benefit' Ceases Being a Benefit

    By Diana Ransom | Small Business

    As small employers report expanding health-care costs, the question of whether to offer coverage at all must be addressed.

    It's not surprising that small-business owners rank cost as the biggest factor in whether they offer health insurance. But what is surprising is that small employers offer health insurance at all.

    Let me explain: Obviously health insurance is a benefit that employees prize and one that any company that wants to retain top talent ought to offer. But health-insurance costs are often higher for small businesses than larger ones--and those costs have skyrocketed in recent years.

    Health Costs

    The average monthly cost of health-insurance premiums for a small firm is $1,121 per individual employee or $2,084 for families, according to a new report on health care costs from the National Small Business Association, a business advocacy group in Washington, D.C. In 2009, survey respondents reported monthly health-benefits costs were $590 per employee.

    What's more, notes the NSBA, employers report additional monthly health-care related expenses (wellness plans, health-savings account contributions, etc.) to the tune of $458 per employee. That's not including premiums.

    Of course, other health-insurance premium estimates are much less stark. The Menlo Park, California-based Kaiser Family Foundation's annual health benefits report, for instance, showed that the monthly average premium for individuals at small firms was $476 and $1,298 for families in 2013. By contrast, individual employee premiums at large firms clocked in at $497 a month and $1,393 for families.

    The cost discrepancy may be a result of the differing audiences surveyed. The Kaiser report polled small employers with three to 199 employees about their health costs and the NSBA polled companies with five employees or fewer, says Molly Brogan Day, a NSBA spokeswoman.

    Regardless, the point is: Insurance costs are still substantial. And many small businesses aren't confident they'll subside anytime soon. In the NSBA survey, 91 percent of owners said their health insurance costs ticked up at renewal time, while 82 percent said they anticipate costs rising in the coming year.

    So, what can you do?

    While the Small Employer Health Options Program (SHOP) exchanges are expected to come on line next year, and could help moderate these costs, many of small-business owners say they don't anticipate using them, according to the NSBA report.

    Instead, they're opting to shave other expenses. More than a third of small businesses polled by the NSBA report holding off on hiring new employees, while 12 percent said they had to lay off an employee. Many other employers are choosing to extend increasingly greater shares of their expenses to employees.

    Such a predicament, naturally begs the question: When does a "benefit" cease being a benefit at all? If health-insurance costs continue to erode companies' financial footing, employers must ask whether they're doing their employees a disservice by offering health insurance--particularly when they might access better coverage on their own through the new health-insurance exchanges.

    This question really only affects smaller employers, as those with 50 or more workers would be penalized if they cease offering coverage under the Affordable Care Act. Still, for these smaller companies, it's a worthy--if not inevitable--question.

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