Small businesses can find ways to get big benefits

Lance Henderson

When Troy Olney, owner of Unity HR, first opened his business in 2002, there was no one to worry about but himself.

As his business grew, he needed help. So in 2004, he hired his first employees and immediately he began thinking about health benefits for his small but growing office.

An employer must provide a compensation package that attracts and retains employees for the success of a company, he said.

“They are investing their time in me; I need to invest in them,” Olney said.

Too often, medical benefits are out of reach of the small employer. The costs are high and it is too easy to get lost in the maze of red tape and legalese.

Sue Sharpe, a consultant for the Whatcom Alliance for Healthcare Access (WAHA), a nonprofit organization that works to ensure access to medical care and coverage, said that young adults who work for small businesses are the fastest growing section of those without medical insurance in Whatcom County.

When Olney hired his first employees, he began hunting for benefits options right away. To him it was less about whether or not he could afford them and more that it was just the right thing to do.

“We made it work,” Olney said. “This is just the cost of doing business.”

A local alliance to ensure health care access

Sue Sharpe has worked in the health care field in one way or another for the past 30 years and was involved with the creation of the WAHA. In 2002, local nonprofit St. Luke’s Foundation convened a summit to increase awareness about the lack of health care access on local, state and national levels and to identify potential response strategies.

Sharpe said the steering committee from that summit drove the creation of WAHA, an organization that works locally to enhance opportunities in Whatcom County and also works with elected officials to create sound health care policies.

Sharpe and the rest of WAHA felt that the best way to act locally was to focus on what they found was the largest and fastest growing section of the uninsured: small-business employees and low-income workers.

So WAHA started the Small Business Health Insurance Connection program, which is a single stop for information regarding health-insurance issues for small businesses.

WAHA can help businesses evaluate public and private health care options depending on the eligibility of their employees

In an effort to better understand the issues facing small employers, WAHA surveyed the Whatcom business community in late 2007 and early 2008.

“We found that cost, administrative complexity and participation with small numbers of employees can be barriers for smaller businesses,” Sharpe said.

While there is little to be done about the high cost of insurance, Sharpe said WAHA works with insurance brokers, who are the link between small businesses and large insurance carriers

“The broker community is really critical to the small-business community,” Sharpe said.

Rod Bring, one of the three principal owners of Employee Benefits Planning, is a broker as well as an insurance agent and he said it can be frustrating for employers to navigate the maze of insurance options.

“You need to rely heavily on a professional that is in that industry,” Bring said. “It would be very difficult for someone to just start out and understand all the ins and outs.”

Adding value to employment

Bring said when employers begin looking at benefits packages they are seeking ways to add value to employment.

“To add value, you offer more than just wages,” he said.

First, Bring suggested that employers do a little homework. First determine if the business can afford benefits.

“You have to be in a positive cash flow because benefits aren’t cheap,” Bring said.

Next, Bring said the employer should have clearly defined objectives for what the company is trying to provide. For example, does the employer want to provide a plan that emphasizes prevention and wellness and is that within reach of the employees; or is less-expensive insurance that covers only dire emergencies more feasible?

“We usually will consult with employers to find out if, given the range of the employees’ salaries, they are trying to provide something the employees cannot afford,” Bring said.

Olney from Unity HR said the first benefits package he offered was a more traditional plan with a $20 co-pay and an 80/20 split, where the employer covers 80 percent of the cost of the benefits. However, significant annual premium increases and a lack of control over how the insurance carrier spent his premium led Olney to switch to providing a health savings account (HSA) for his employees. HSAs allow employees to contribute pre-tax income to an account that can be used for medical expenses. “My personal opinion on insurance is that you have insurance to cover a catastrophic, life-changing event,” Olney said. “An HSA plan allows for that while it gives me control over what the premium is doing.”

Bring said employers are generally surprised at the complexity of benefits packages and even more surprised by requirements placed on the employer such as how much the employer must pay to secure benefits and how many people the employer must have using the benefits.

Bring said employers must first be able to afford minimum contribution requirements, which usually amount to 75 percent of the employee premium cost.

Employers need to be aware of requirements that mandate businesses with four or fewer eligible employees to have 100 percent participation in the plan; and businesses with five or more employees to have 75 percent participation, he said.

“People have to participate and employers have to be willing to meet those participation and contribution levels,” Bring said.

Along with his work at Employee Benefits Planning, Bring also works to develop and maintain benefits packages for the Bellingham/Whatcom Chamber of Commerce, which is just one of several organizations that use group buying power to secure affordable health care packages, using its numbers to drive down costs for employers and allow them to provide more comprehensive and affordable packages for their employees.

Strength in numbers

When it comes to medical benefits for small businesses, there is strength and savings in numbers.

Bring said, in some cases, Bellingham’s chamber uses its group power to lower the minimum amount employers must pay for benefits and is able to insure some businesses that only have one employee, whereas state regulations demand that there be at least two.

Tom Kwieciak is the insurance programs administrator for the Building Industry Association of Washington (BIAW), which is the largest multiple employer health care purchasing alliance in the Northwest and has more than 2,600 participating businesses and more than 85,000 individuals covered under BIAW plans. Businesses from large construction companies to self-employed contractors belong to the BIAW. Most of the employees work in physically demanding jobs and medical insurance is a key issue.

Another key issue in such an industry is workers’ compensation insurance, also known as industrial insurance. Kwieciak said the BIAW’s most popular benefit is one that uses group power to achieve group savings.

The BIAW’s Return on Industrial Insurance (ROII) program pools member’s workers’ compensation premiums for one calendar year and then refunds the remainder if there are more premiums than claims.

If a company stood alone with its industrial insurance, that premium would disappear even if no one ever got hurt on the job. In past years, BIAW members have received back an average of 25 percent of those premiums.

“This is how we attract and retain members,” Kwieciak said. “Members spend roughly $500 a year on dues and they want to know they are getting more than that back in benefits.”

Kwieciak said the ROII program is the BIAW’s most popular program; however, both the ROII and the association’s health plan had a more than 90 percent retention rate last year.

Kwieciak said he often finds that businesses join the BIAW strictly for the health insurance.

“Most of our plans are similar to what you would find elsewhere,” Kwieciak said. “The difference is that instead of just yourself, you are joining hundreds of other businesses.”

Kwieciak said with so many businesses on its side, the BIAW has a lot more pricing flexibility to get discounted premium rates to businesses that qualify.

“It’s like Boeing buying pencils,” Kwieciak said. “They are going to get a better deal than a small company but if hundreds of small companies band together they will get a better deal on pencils.”

What to do before pursuing employee benefits:

• Define objectives: What services are you trying to cover?
• Perform a business assessment: Can the business afford minimum contribution levels? What associations could the business partner itself with to get a better rate on benefits?
• Perform an employee assessment: Considering average employee salaries, what can the employees afford? Will employees participate to meet mandatory participation level?
• Get some expert advice: Make contact with a broker and the Whatcom Alliance for Healthcare Access to determine what options are available for your business.