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You Can Offer Employee Health Benefits Without Blowing Your Budget

Affordable health insurance can be as elusive as the Holy Grail, causing many small business owners to give up the search. According to Discover Small Business Watch, only 15 percent of small business owners offer health insurance to their employees. Of those, 40 percent have considered discontinuing it because the cost is too high - a number that increased from 33 percent last year.

However, with a little due diligence, there are ways to offer health benefits without breaking the bank. Here are four steps to finding affordable coverage:

Work with an independent broker, not an agent. "The difference is simple: The agent represents a carrier; the broker represents you," Jim Edholm, president of BBI Benefits Inc., says. "In almost all states and for almost all sizes of companies, a broker's advice is free. Brokers often specialize in these kinds of policies and, in most cases, they are totally independent of any carrier's influence. She may have favorite carriers, but that's usually for a good reason, and she'll show you quotes from all the competitive carriers in your market and tell you why she prefers A versus B."

Where can you find a reliable insurance broker? Try your state's department of insurance. Not only can you find brokers in your city, but you also can see if the broker has had claims filed against her. Other good resources for finding brokers are the Better Business Bureau and your fellow small business owners.

"Ask for referrals from other business owners who are happy with their health insurance carriers and find out how they arrived at that decision," says Dianne Kelley, a benefits consultant with Sandbrook Benefits Group LLC.

Don't be afraid of higher deductibles. "Most employees don't hit their deductible in a calendar year; they're more concerned with office visit copays, emergency and urgent care copays, and prescription drug copays," Kelley says. "A higher deductible can be offset with a voluntary hospital income plan, like AFLAC, which is employee paid and less expensive than carrying a lower deductible."

Kelley also recommends health savings account (HSA) compatible plans, flexible spending allowances (FSA), or setting up a health reimbursement arrangement (HRA) to offset deductibles and other out-of-pocket costs.

Consider self-funding on dental insurance. "The employer's worst-case scenario is typically a maximum cost of $1,000 per covered person per year," says Edholm. "Many first-line carriers will offer a self-funded dental plan and will charge you about $8 to $10 per employee per month to adjudicate the plan."

Look for carriers offering a wide range of benefits and price points. Says Douglas King, a vice president with Health Net of California, "This way, if premiums increase, employers have other benefits with lower price points to move to without changing administrators and networks. And if you already have a lower cost option, you can move to a lower priced plan by adding more cost sharing with employees or moving to a narrower physicians network."

A word of warning: Small business owners, who often keep affordability at the top of their minds when hunting for health coverage, are particularly vulnerable to scam artists. According to James Quiggle, spokesperson for the Coalition Against Insurance Fraud, small business owners should look out for these warning signs:

• The plan offers surprisingly low prices, very generous benefits and super-easy enrollment.
• You must join a trade association or union to qualify for the benefits and there doesn't seem to be much substance to the organization (i.e., there are no annual meetings, workshops, newsletters, or other member benefits typical of a professional group).
• The agent selling the plan is unusually pushy.
• The agent says the Employee Retirement Income Security Act (ERISA) exempts the plan from state licensing.

Lastly, Edholm says it's important to remember what insurance is for: to cover risks that no one can afford on their own.

"If you purchase a policy that reimburses employees for minor visits to the doctor's office, you are paying an insurance company $150 to pay for a $100 claim," he explains. "Those are rough figures, but it costs a carrier about $50 to adjudicate a claim - irrespective of how large the claim is. So paying for routine care via a carrier is needlessly increasing your cost of health care