Small Business Seminar: How Do You Pay For Healthcare?
Health insurance has always posed challenges for small businesses, and for years many opted not to offer insurance in exchange for other benefits. Since the introduction of the Affordable Care Act (ACA), however, businesses with at least 50 full-time or full-time-equivalent (FTE) employees are required to provide health insurance. But even those small businesses with fewer than 50 employees are feeling the pressure to provide some healthcare funding, even if it’s not insurance. It’s just a good business practice and it can help attract and retain the best employees.
If your small business is struggling with the healthcare question, it’s time to take a step back. There are many ways to offer employees support with medical bills without providing traditional insurance.
Here are 5 popular strategies and how they can help your business take care of its employees.
Consider A Health Savings Account
Health Savings Accounts (HSAs) are a type of savings account popular with small business owners, but they can be a good option for employees as well because they allow you to save pre-tax dollars for qualifying medical expenses. Overall, these accounts are most similar to a 401(k) or traditional IRA, although they also allow you to use saved funds tax-free, as you would with a Roth IRA.
The one clause with HSAs is they’re best for those who are planning for the future, and less beneficial to those with near-term healthcare costs. While you can technically withdraw from an HSA as needed to pay off medical bills, HSA funds are invested and you’ll earn more on them if you leave them until retirement. Then you can use them to pay off past medical bills or new expenses, up to $60,000, or $3,000 a year for 20 years.
If employees need to use their HSAs in the near term, however, there are still a number of benefits. In particular, HSAs can be used to pay for services insurance doesn’t cover, including paying for breast pumps, massage therapy and acupuncture, weight loss programs, and eye exams. If you’re providing health insurance but not vision and dental, or know that most of your employees have fairly bare-bones health insurance plans, HSAs can help them access services they need.
Though HSAs are employee-owned and portable, as a small business owner you can also contribute to your employees’ HSAs. This can be a valuable incentive for those who are hesitant to take a position without health insurance and also much more cost-efficient for you as an employer.
If HSAs aren’t a good option or your business, another alternative to traditional insurance is a flexible spending account (FSA). Unlike HSAs, FSAs don’t roll over from year to year and are more closely affiliated with your place of employment than HSAs – they aren’t portable. And though, like an HSA, FSAs will save users money at tax time, if you don’t spend all the money you put into your FSA, you’ll lose it.
FSAs are a good option for small business owners who want to incentivize employees to take care of themselves because, as with HSAs, you can put money into employees’ FSAs, though you aren’t required to. This money can then be used towards copayments or coinsurance, medications, and many common over the counter medications and first aid supplies. Providing money towards an FSA, though, is a good way to say to employees, “Your employer cares about you and we don’t want you to come to work sick.”
Share Healthcare Wisdom
Perhaps the most valuable thing you can do for employees as a small business owner is to look beyond traditional health insurance and savings accounts and provide your team with a better education around health expenses. For example, most people know that different insurance plans result in different billing arrangements, but most don’t realize that medical costs aren’t fixed amounts. Medical bills have room for negotiation, can be placed on payment plans, and can be otherwise reduced.
Consider holding an annual continuing education-style day for employees, where they can learn from healthcare finance experts about how to reduce their medical expenses. Most finance experts recommend asking for itemized medical bills, asking directly for discounts from healthcare providers, and talking to different providers before undergoing a procedure – essentially shopping around for healthcare. There isn’t a universal cost for a colonoscopy or biopsy, and you could be paying more just because you turned up at the wrong office.
Most employers don’t provide healthcare education services to staff because, especially if they provide traditional insurance, they believe they’re already doing everything they can to support their employees. However, negotiating healthcare costs is, at its core, a very simple topic and spending just a few hours discussing healthcare costs on an annual basis can help keep your employees healthy and encourage them to seek care as needed, rather than avoiding it because they think the costs are out of reach. You’ll probably learn a few things as well.
Rethink Reimbursement Models
If your business has fewer than 50 full-time or FTE employees, then you aren’t required to provide insurance and your employees will have ready access to insurance programs through the healthcare marketplace. Employees should be encouraged to take advantage of these plans, as they are required under the ACA to select an appropriate insurance plan. To be sure, a few will opt out, and a few will select bare minimum coverage through a catastrophic plan and pay only a few dollars a month.
For those who want a more complete healthcare arrangement, consider offering financial support through a Healthcare Reimbursement Plan (HRP). HRPs are company-owned funds that can be used to reimburse employees for qualifying expenses, including healthcare premiums and preventative care. Though they are the least well-known alternative payment system, they may actually be the most flexible and affordable for employers because it is fully funded and owned by your company. Employees have an allowance, but if they don’t use it, they lose it – it remains company funds. These funds also don’t have any annual contribution requirements, so you decide how much you invest in funding employee healthcare.
Unlike HSAs and FSAs, HRPs are completely company funded – employees don’t contribute to the program. That’s because the employee’s role is to select an insurance plan. The HRP just covers some of the cost of the insurance plan of their choosing, depending on the individual allowance.
One of the best things about being a small business is that you have the opportunity to build individual relationships with all your employees. That means you can provide health and wellness support exactly where it’s needed, rather than offering broad programs that don’t really benefit anyone. So, what health or wellness changes would benefit your employees the most?
Many experts believe that wellness programs are about to breakout across small businesses, much as they have at larger corporations in the last decade. The difference is that because employees and employers have closer relationships at small businesses, these programs are more likely to have a big impact. When leaders participate in wellness programs at the small business level, employees are more likely to get on board.
Small businesses are also considering the power of technology to improve workplace mental health. Though physical illness can lead to absenteeism, in our work culture, people are more likely to push through a virus or infection and head into work, but may miss days or weeks at a time due to mental health issues. By partnering with remote talk therapy programs or anxiety and phobia-oriented VR software, workplaces can help employees manage mental health issues without the expenses associated with traditional insurance.
Finally, don’t forget that your office is a community and you can work together to improve everyone’s health. For example, if you’re struggling with sedentary work practices and wasted time, consider initiating walking meetings. When teams have discussions while in motion, not only do they get some exercise, they also tend to be more concise, waste less time hashing out details that could be organized over email, and may even be more creative and less stressed. Walking meetings are a “step” in the right direction toward employee wellness.
Feel free to mix and match a range of strategies to support your small business employees, but be sure to do your homework. For example, only those with high deductible health plans can use HSAs, and HSAs and FSAs can’t be combined. But once you know how different programs interact, you can craft the perfect arrangement for your business.
Whether or not your business falls under the ACA’s employer mandate, you have a responsibility to your employees – it’s just the nature of owning a small business. And by educating yourself to help your staff, you also have the opportunity to help yourself. The more you know, the more you’ll be able to reduce your own healthcare costs. Medical care is expensive, but there are plenty of ways to save, especially within the context of a small business once you understand the options available.