Health benefits add value in retention, productivity

by Clarissa A. French

SBJ Staff

Small businesses that provide health care benefits to their employees say the cost of benefits is offset by lower turnover and happier, more productive employ-ees.

That and other insights were offered by panel members at the July 20 Health Care Options for Small Business forum, presented by the Springfield Area Chamber of Commerce.

Having just gone through the health insurance process, "I can tell you there are a lot of options out there," said panel member Jim Quesenberry, president and owner of Corporate Business Systems.

Retention was the No. 1 reason Quesenberry said he elected to offer health insurance benefits. While the company did offer some reimbursement of health care costs, there was no actual company health plan. Corporate Business Systems was "a small enough company with a handful of employees that we didn't think we could afford that kind of plan," he said.

However, Quesenberry added, the cost of having a plan has to be weighed against the cost of not having one, which for him was measured in high turnover and lost productivity caused by the need to continually train new people to do the work.

Service World Computer Center, which recently celebrated its eighth year in business, began to introduce health insurance benefits for employees about four years ago, according to panel member Rob Neal, ServiceWorld vice president.

"The company grew, not too fast, but so fast that we didn't give health insurance much thought," Neal said.

In the computer industry, and especially on the service side, turnover is a huge problem, Neal said.

The first people Neal approached about the idea of health insurance were actually applicants. The company now pays 100 percent of its employees' health insurance premiums.

And turnover is at zero.

"It was one of the best things we've ever done for our company," Neal said.

Quesenberry said his company's benefits package has played heavily in peoples' decisions to join the firm.

Employees who have insurance don't have to worry about what-ifs and can concentrate on their jobs, he said. The result is a better quality of employee who stays and is productive. Besides health insurance, Corporate Business Systems has added dental, life and disability coverages.

"Whether at their expense or yours, (the benefit) makes a statement to employees about how you feel about them," Quesenberry said.

David Myers, with the accounting firm of Whitlock, Selim & Keehn, provided a tip sheet on health insurance for small business that made the following points:

?The first economic obligation of a business is to have a profit. In most businesses, quality of personnel is a key component of profit.

?Turnover of quality employees is more costly than providing health insurance.

?Some employees care very little about health insurance, and per IRS rules, you can pick and choose who receives health insurance. As a result, you don't necessarily need a group health insurance plan, you can pay selected employees' individual premiums.

?If you insure more than 25 employees, consider partial self-insurance for the first $5,000 or $10,000 of costs, for instance, Myers said.

?Give your employees a compensation plan summary that includes health insurance costs, retirement plan contributions, life insurance, etc. This, Myers said, makes them aware of the value of their benefits.

ServiceWorld does this by putting benefit statements in with paychecks to show what the company is providing, Neal said.

Myers said a simple solution to offering health care benefits is a cafeteria plan, which allows the employee to pay his or her portion of the premium (or all of it) with before-tax dollars and results in a savings in FICA taxes for the employer.

When it comes to choosing a health insurance, "We all want the best price, until we have a claim. Then we want the best coverage," said Ken Stephens, of Employee Benefit Design.

For the small business, a group plan is typically the best way to go, Stephens said.

Group coverage candidates are companies with two or more employees, otherwise, individual coverage is the only option. Generally, group plans are a better deal because they are more stable with fewer restrictions, such as those dealing with pre-existing conditions, he said.

Very small groups often have bad-claims experience, resulting in loaded premiums, so plans for groups of three or more are a better deal, Stephens said.

In order to benefit from small-group status in offering health insurance benefits, the employer must pay a minimum of 50 percent of the premium for employees, he said, because health insurance companies want high participation in the plan all 30 employees at the company, not just the five people with health problems.

"Very small groups cannot combine for bargaining power unless there is shared ownership," said Tom Montileone, of Alliance Blue Cross Blue Shield. However, he added, some small companies may be able to join industry pools that may offer better rates.

Montileone added that larger companies do not necessarily enjoy better deals on rates.

Larger companies, especially if they've factored retiree benefits into the plan, face the same problems as small companies, he said. Many large employers are experience rated: if they have a good year with few claims, great. If they have a bad year with lots of claims, the rates shoot up.

"You don't necessarily get a deal (on rates) with a larger employer, though the employer may pay a larger share" of the premiums for its employees, Montileone said.

Meanwhile, in terms of rising costs to small businesses, Montileone estimated that small groups of three to 25 lives may expect an increase of between 3 percent and 8.5 percent, "if I had to guess," adding that it could be more.

Drug costs are up significantly, lives are longer and legislative mandates drive costs up, he said. "I don't see anything out there to stop or slow the increase in costs."

Quesenberry said his company saw a significant cost hike with renewal. "We renewed July 1, and our cost was up 12 percent."

The forum panel comprised Jim Quesenberry, of Corporate Business Systems