An interesting confluence of economic developments has resulted in a surprising trend. The job market has tightened considerably, and the cost of individual health care plans are becoming more expensive (or in some states, no longer available). Suddenly, many small businesses are finding that providing group insurance is not only a better value proposition—it also helps attract quality employees.
As noted in the article Some Small Businesses Restore Group Health Coverage, while most small businesses continue to make the shift to individual coverage (due to government subsidies), the trend is changing. Michael Stahl, senior vice president at Healthmarkets Inc., an agency that works with small businesses, speaks to this shift. “The trajectory is slowing…for the first time we are seeing a reverse migration back from individual to group.”
In 2014, an owner of a 38-employee automotive firm in Minnesota eliminated group health coverage as a cost-cutting move. He came to regret this move. “This made a dramatic impact on our culture, as employees felt they were missing out on a benefit that was standard in other organizations.” He now pays 50% of the premiums for his workers.
American workers—especially in New England, where employer participation in health care costs are prevalent—think employers who offer a robust employee benefits plans view the company as a place where business owners truly care about their workers. Given the rising costs of health care, it’s easy to see why.
I think this trend speaks directly to the relationship businesses have when they partner with a qualified Professional Employer Organization (PEO). This concept is not a cottage industry brought about by the implementation of the Affordable Care Act—it is a rapidly growing and well developed industry in the business services sector that began more than 35 years ago.
In 2014, President Obama signed the Small Business Efficiency Act, which will allow the IRS to certify PEOs who pass business practice and financial muster.
The Minnesota business owner made a good point regarding the “dramatic impact on our culture.” He is indeed correct about the value of offering a competitive health insurance plan.
What is also true is the plethora of other benefits and services offered by a PEO can really help cinch the deal when trying to attract good employees. Many small businesses may see a benefit for providing health insurance, but adding in disability, life, AD&D, 401(k), and other benefits to the mix means small business owners can actually compete with larger employers. In today’s tightening labor market, partnering with a PEO is an option every small business should explore.