3 challenges small businesses face when selecting benefits
Many small businesses may not know where to start when designing their benefits. See which funding types, health plans and engagement strategies may work best.
There are 33.2M small businesses in America — those who employ anywhere from 1 to 399 employees.1 These companies fuel 44% of the U.S. economy, but it takes a lot to keep those businesses running.1
Not only are small business owners responsible for the day-to-day business operations, marketing, financial accounting, hiring and more, but they also want to make sure their workforces have access to the health benefits they want and need. Yet small business owners tend to have limited funds, time and mindshare to devote to their benefits strategy.
Still, with health and well-being benefits among the most important benefits to employees2 — and with 41% of small business owners indicating that they’ve had trouble filling job vacancies1 — health insurance remains an important piece of the puzzle.
Along with ensuring the benefits they offer are both cost-conscious and quality, here are 3 common challenges small business owners face when seeking to offer health benefits:
Choosing the right funding type
Rising health care costs, due in part to the economy, are posing a challenge. In fact, 98% of small businesses, those which employ an average of 10 employees, reported feeling concerned that health care costs will become unsustainable within the next 5 to 10 years.3 In fact, nearly half of smaller-sized employers have taken lower profits or suffered losses to cover health insurance premium increases over the past 5 years.3 This financial strain may necessitate exploring different funding options that balance cost with quality coverage.
The main types of health plan funding include:
- Fully insured plans: Fixed monthly premiums, in which the insurer assumes the financial risk
- Self-funded plans: Employer assumes the financial risk, with potential savings opportunities
- Level funded plans: Combines elements of fully insured and self-funded plans
Of these, level funded plans are gaining traction as they balance potential cost savings with fixed monthly payments. Level funded plans offer the predictability of fully insured plans and the opportunity for a surplus refund* if claims come in lower than expected.
“Our Level Funded plans give small businesses the financial predictability they need, without sacrificing the flexibility to tailor benefits to their employees’ needs,” says John Terry, national vice president of small business for UnitedHealthcare Employer & Individual.
Level funded plans can serve as a powerful tool for small businesses looking to control costs without sacrificing the quality of benefits offered to employees. Plus, the ability to maintain consistent year-over-year employee health care contributions may be particularly valuable in retaining and attracting talent in a competitive job market.
Case study: Rubber & Accessories
Rubber & Accessories, a Florida-based company, demonstrates the tangible benefits of level-funded plans. Facing a 14% premium increase in 2020, the company switched to the UnitedHealthcare Level Funded plan. This decision resulted in an average 16% surplus refund over 2 years, allowing them to continue funding 70% of their employees’ health care contributions. Buzz Hooper, co-founder and president, emphasized the stability and affordability of this switch, noting that the financial predictability it brought was key to their continued business success.
Assessing which health plan may be best
Understanding health plan options is crucial for small business owners who often juggle multiple responsibilities. Factors to consider when choosing a plan include business size, employee demographics, risk tolerance and financial stability. Based on those factors, small business owners can make different decisions around which health plan may be best for their unique workforce.
High-deductible health plans (HDHPs), for instance, are often less costly to the employer and, many times, employee health care contributions are lower, too. If a small business has a relatively healthy workforce, HDHPs can be a smart choice to reduce costs — and employees may also benefit from the incentive to make more informed decisions around providers, site of care and utilization.
HDHPs can also be paired with health savings accounts (HSAs), which allows members to make tax-free contributions to help pay for eligible medical expenses, or health reimbursement accounts (HRAs), in which employers contribute funds that employees can use toward out-of-pocket expenses. In fact, 29% of employees were enrolled in a HDHP with an HSA, according to a 2023 report.4
Keeping employees engaged in their health
Health benefits are vital not only for maintaining employee health but also for recruitment and retention. Helping employees engage and utilize their benefits can have a positive effect on employee retention, experience and costs, especially for employers offering level funded plans.
It’s also critical to work with a carrier that offers its members digital tools to more easily access and manage their health. Virtual visits are part of that equation too. When employees can access care anytime and anyplace, they may be able to get the care, treatment or prescriptions they need more quickly, which can have ripple effects on workplace productivity and presenteeism. Wellness programs that promote healthier lifestyles may also lead to better health outcomes and lower costs over the long-term.
To keep employees engaged with their health, small business owners may want to work with their broker or carrier. With UnitedHealthcare, for instance, small businesses can get support from their Field Account Manager (FAM) to help provide open enrollment and benefits education. The UnitedHealthcare Employee Engagement Planner® (EEP) may also be a useful tool. The EEP auto-populates a calendar with timely and relevant materials — from reminders about flu shots to information about accessing health and wellness resources — all readymade to send to employees. This can help reduce the administrative burden for small employers, allowing them to focus on managing and growing their business.
Working with a carrier that offers tools like these can help improve employees’ awareness and understanding of their benefits and lead them to make more informed health care decisions, which may affect a level funded employer’s potential surplus refund.
While providing health benefits remains challenging for small businesses, level funded plans and technology-driven engagement tools are working to make it easier. UnitedHealthcare continues to develop solutions for that address small businesses’ unique needs and help them and their employees navigate what can be a complex and oftentimes costly health care system.
