Employee health care is a top concern for tire dealers— and for legitimate reasons. According to MetLife’s 2018 “Employee Benefit Trends Study,” 54% of millennials cite their benefits as a determining factor in deciding where to work. Simply put, you could be losing out on young, passionate employees simply because your benefits package — if you offer one at all — is not competitive.
In addition, there are benefits to your bottom line for providing medical coverage to your employees. Small Business Majority reports that offering such coverage reduces absenteeism and decreases risks associated with poor health in the long run: “When employees don’t have health insurance, they wait longer to seek treatment, which can lead to the need to stay home from work or go out on disability. Healthy employees are less likely to injure themselves and more likely to do their jobs well.”
Having group medical coverage also may lower some of your other costs. Looking for, hiring and training new employees takes time and costs money — which can be reduced in part by having insurance as a tool to recruit and retain talented employees. Small Business Majority also reports that employees tend to be happier and more satisfied with their jobs when they are offered group insurance, adding, “Some small employers indicate that their employees will accept slightly lower wages if those wages come with health insurance.”
In a Blue Cross and Blue Shield Association “Small Employer Health Benefits Survey,” a majority of small business owners reported several positive effects of offering health insurance for their employees: 78% said it increased loyalty and decreased turnover; 75% said it helped employee recruitment; 64% said it increased productivity by keeping employees healthy; 62% said that employees demanded or expected health insurance; and 58% said it reduced absenteeism by keeping employees healthy.
Of course, providing employees with health care benefits sounds like a no-brainer — until you start crunching the numbers. For many small business owners, employee benefits are the largest expense second only to payroll, according to Michael Gladnick, group benefits department manager for The Arizona Group, a Mesa, Arizona-based independent insurance agency.
While there are obvious competitive advantages for dealers who offer some form of health care for their employees, in reality it is not always possible. Our goal is to help you balance the pros and cons while looking at ways to cut costs and explore alternative options.
Health Insurance Requirements & Trends
Under the Affordable Care Act, if an employer has 50 or more full-time employees or full-time equivalent employees, they are considered an “applicable large employer” and are required to provide health insurance or else pay a tax penalty. Those with fewer than 50 full-time employees are not required to provide health insurance.
However, the ACA does provide a tax credit to help offset the cost of coverage to select small business owners who choose to offer health insurance to their employees. According to the Internal Revenue Service (IRS), the small business health care tax credit benefits employers that:
- Have fewer than 25 full-time equivalent employees;
- Pay average wages of less than $50,000 a year per full-time equivalent (indexed annually for inflation beginning in 2014);
- Offer a qualified health plan to their employees through a Small Business Health Options Program (SHOP) Marketplace;
- Pay at least 50% of the cost of employee-only (not family or dependent) health care coverage for each employee.
(Visit healthcare.gov/small-businesses for more information about SHOP.)
According to the Kaiser Family Foundation’s 2018 “Employer Health Benefits Survey,” the average group health insurance policy totaled $6,896 a year for single coverage in 2018. On average, employers paid 82% of the premium, or $5,711 a year. Employees paid the remaining 18%, or $1,186 a year.
If that seems pricey, that’s because it is — the survey found that from 1999 to 2018, premiums increased 214% for single coverage; additionally, deductibles are rising much faster than premiums, wages and inflation.
Fifty-six percent of small employers and 98% of large employers offer health beneﬁts to at least some of their workers, with an overall offer rate of 57%, according to the KFF survey.
Tire Industry Alternative
For tire dealers with fewer than 50 full-time employees, there are some alternatives to offering traditional group health plans.
In October, the Tire Industry Association announced it had formed an alliance with National General Benefits Solutions to offer all of its members flexible group health insurance plans that are tailored for small- to mid-size businesses. Program options include:
- Core Value Plan: A reference-based pricing plan, meaning it pays providers based on a multiple of the Medicare reimbursement rate, regardless of the billed amount. There are no networks associated with this plan and members have the freedom to use any provider they choose. Core Value’s rates are often lower than traditional self-funded plans, helping dealers save on monthly costs.
- Core Value Flex: A new level-funded reference-based pricing option that allows dealers to choose a reference-based pricing plan with the option of switching to a PPO network mid-year, without a change in monthly payment.
Timothy A. Chandler III, TIA’s benefits manager, explains that the fully insured plans offered through the ACA are guaranteed issue policies, meaning the insurance company has to offer coverage no matter what pre-existing conditions employees have.
“They’re designed so that the rates are based off of the geographic location of the individual,” he says. “In other words, there is no underwriting process; there’s no medical screening. When you have a guaranteed issue policy, the prices are automatically going to be very high because it doesn’t matter how sick or healthy you are, it doesn’t make a difference.”
The level-funded program that Chandler has tailored for TIA members adds one additional step to ACA plans: a medical underwriting screening.
“The reason for that is because it’s the only acceptable way that you can prove to the insurance company that it’s worth their risk of insuring your business,” Chandler explains. “By saying, ‘We’re willing to submit medical background information and if we’re in somewhat decent health, we deserve a discounted rate program,’ that’s how it differs from a standard ACA program. By doing that, you’re going to see a significant savings when your group qualifies.”
He estimates a savings of about 30% for TIA members who use the program, compared to standard ACA group health insurance.
Further cost savings come through the establishment of an aggregate claims limit, or the maximum amount the insurance company is willing to cover your staff.
“This program is designed to give these members – smaller to mid-size business owners – an opportunity to save money,” he says.
Other Savings Options
There are several other ways for small businesses to cut costs and still be able to offer health coverage to employees.
According to PeopleKeep, Inc., employers can control their health insurance costs by reimbursing premiums instead of paying for them.
“In other words, employers may reimburse employees tax-free for their individual health insurance premiums by establishing a formal, compliant health care reimbursement plan,” states a PeopleKeep article from Nov. 7, 2018. “By doing so, employers are able to fix their costs on a monthly basis, and employees can choose an individual health insurance policy that best meets their health and financial needs.”
If insurance premiums are too costly for your budget, or deductibles too high for your employees’ wallets, consider offering a flexible spending account (FSA) instead of a group plan. Employers can make contributions to their employees’ FSAs, which can then be used to pay for co-payments, deductibles, certain drugs and some other health care costs.
Small Business Majority advises employers to take advantage of available tax benefits since, generally speaking, any expenses an employer incurs related to health insurance (for employees or for dependents) are 100% tax-deductible as ordinary business expenses, on both state and federal income taxes.
Additional cost-saving strategies outlined by Small Business Majority include changing plan benefits (from rich benefits to a more basic catastrophic-type plan, for example); and pairing a health savings account (HSA) with a high-deductible plan, which are often significantly cheaper than standard plans.
Another option is increasing the employees’ share of the monthly premium. Most insurers require a business to cover at least 50% of the employee-only premium, according to Small Business Majority, but if you originally planned to pay a larger share, you may have some leeway to reduce your costs.
If you plan to do your own research and enroll yourself into a coverage plan as a way to save costs, think again. According to Arizona Group’s Gladnick, most insurance carriers pay commissions to brokers through what is referred to as “socialized commissions,” meaning they bake a commission percentage into all employers’ premiums regardless of whether the client is utilizing a broker or not.
“Essentially, employers are paying for the services of a broker, so they may as well find and use the right broker for them,” he says. “Also, many agents provide complimentary value-added services, including dedicated account management, online enrollment and other employer services, such as HR support.”
Alternative & Fringe Benefits
If offering any type of employee health coverage simply isn’t an option for your dealership of fewer than 50 full-time employees, consider offering other perks to retain existing staff members and attract new employees.
FitSmallBusiness suggests options such as higher pay, increased 401(k) contributions, life insurance, a wellness program, more paid time off and flex time.
It can even be as simple as providing free snacks and drinks, a weekly catered lunch or rewards, like gift cards and cash bonuses.
The main point to remember is that keeping your current employees happy and healthy, while at the same time attracting new talent, will keep your own bottom line in better health.
Check out the rest of the April digital edition of Tire Review here.