Affordability Crisis on Benefits
There's an affordability crisis happening in small companies and startups all over the U.S.
It's healthcare, and it keeps getting more expensive.
Did you know that MOST small companies have been experiencing increases of up to 20% or more, year over year, since 2022?
The average cost of family-level medical insurance can cost in the range of $2,500 per month for a 'good' coverage plan. That's $30,000 per year for one employee with multiple dependents (spouse/ partner + at least one child). That's not including dental, life insurance, short-term disability, 401(k) match, and that pet insurance they keep saying everyone wants.
Now, let's put this into context: A company employs 25 people and generates about $25M per year in revenues. If all 25 employees utilize family-level coverage, the health insurance cost is $750,000 for medical insurance. Now add in the other benefits and 401(k) match just to be competitive, that costs well over $1M per year to provide a modest benefit offering. A 20% increase is a six-figure increase to their costs, and that is not including the cost of cash compensation.
It's simply not sustainable for many companies, yet the health & wellness benefits are a key factor in your Employer Value Proposition. The need to attract and retain talent frequently comes back to Pay + Benefits. So what can you do if you're a smaller company or startup staring down another crazy increase?
Be Strategic About Your Offerings. Are there offerings in your plans that are not needed? What matters most to your team? If your team is mostly younger professionals, they may not need that orthodontia plan for their kids yet. Make sure your investment is aligned to bring the most benefit to your team, and don't pay for things you don't need.
Shop Around. If you work with a benefits broker, make sure they are shopping around on your behalf. If your benefits plans are provided by your PEO, see what else is available. Smaller companies tend to have less options in terms of insurance providers, but there are more coming on the market, and they may be more competitively priced.
Switch It Up. Consider changing up your offerings and contribution structures. Do your employees have options such as Flexible Spending (FSA), Health Reimbursement Accounts (HRAs), and High Deductible Health Plans that drive smart consumerism? Is an ICHRA the right answer for your team? You can fix your costs while offering employees funds to choose the plan that works best for them.
A final thought - do your employees know how much you are contributing to their health insurance? A year-end compensation statement should include line items that you, as the employer, contribute to employee health and wellness benefits.
The increases are not likely to slow down, so get smart about your spending.
How are you managing your people costs?
