A small-business owner calls and says, “We’re thinking about offering group health insurance.”

My first response is usually not to start talking about carriers, deductibles, or premiums.

It is more likely to be:

Are you sure you want to do that?

Should a small business offer group health insurance simply because it can?

Usually, no.

That may sound strange coming from a health insurance broker. But group health insurance is expensive. It requires ongoing administration. Premiums usually increase over time. Once employees begin relying on the benefit, it can also become difficult to take away.

Before a small employer begins offering coverage, there should be a real reason for doing it.

When Should a Small Business Offer Group Health Insurance?

The first question is not which plan to buy.

The first question is why the company is considering coverage now.

Sometimes the answer is compelling:

The company is growing and needs to hire more qualified employees.
A strong candidate will not accept the position without health benefits.
Existing employees are leaving for companies with stronger compensation packages.
A key employee or owner is losing other coverage.
The business has become financially stable enough to support an ongoing benefit.

Those are meaningful business reasons to consider a group plan.

Other times, the employer simply feels that offering health insurance is something a legitimate company is supposed to do.

That alone may not be enough.

Group Health Insurance Is a Significant Commitment

Employers sometimes think of group health insurance as a purchase. They select a plan, enroll the employees, and move on.

That is not how it works.

A group health plan creates continuing responsibilities:

The employer contributes toward employee premiums.
Employees are enrolled and removed as circumstances change.
New hires must be added within the required timeframes.
Eligibility and participation requirements must be managed.
Required notices and plan information must be provided.
The company must respond to annual renewals and cost increases.

Someone inside the company has to manage those responsibilities, even when the employer works with a broker or administrator.

The expense is also unlikely to remain fixed. Carriers change rates. Employees age. Claims experience may affect some arrangements. Provider networks and plan designs change.

Starting a group plan means accepting an ongoing management process, not making a one-time decision.

Sometimes Employees Already Have Workable Coverage

Consider a very small employer whose workers already have coverage through a spouse, a parent, Medicare, Medicaid, or the individual market.

The owner may be preparing to spend a substantial amount of money on a benefit that only one person truly needs.

If the company is not having trouble hiring, employees are not asking for coverage, and cash flow remains tight, the plan may not solve a significant business problem.

In that situation, I may recommend waiting.

That is not a permanent answer. The company can reconsider the decision when the workforce, finances, or hiring environment changes.

What Is the Cost of Not Offering Benefits?

Group health insurance becomes easier to justify when not having it is already creating a cost.

The company may be losing candidates. It may be struggling to retain experienced employees. An owner may be spending too much time replacing people who leave for stronger benefit packages.

At that point, the employer is no longer comparing the cost of a health plan with zero.

The employer is comparing it with the cost of turnover, missed hires, recruiting delays, lost productivity, and the inability to build the team the company needs.

This often becomes more important as a company grows and the type of employee it needs begins to change.

Some employers with a largely part-time workforce may face less immediate pressure to establish a traditional group plan. A company competing for experienced managers, engineers, salespeople, technicians, or other skilled employees may reach the decision much sooner.

A strong candidate may already have employer-sponsored coverage and see no reason to give it up.

In that situation, health insurance is not simply another expense. It may be part of what allows the company to continue growing.

Starting Later Can Be Better Than Starting Too Early

There is no prize for beginning a group health plan before the company is ready.

A new or very small business may benefit from preserving cash and flexibility for as long as reasonably possible.

Starting later may allow the employer to:

Build more predictable revenue.
Understand what employees actually need.
Reach a more workable participation level.
Develop a sustainable contribution strategy.
Introduce the benefit when it supports a clear employment objective.

The goal should not be to postpone coverage indefinitely. It should be to begin when the benefit solves a real problem and the company can reasonably support it.

When It Does Make Sense, Sustainability Matters

Once an employer has a compelling reason to offer coverage, the next question is how to structure it responsibly.

The richest available plan is not necessarily the right plan.

The company should consider:

How much it can contribute each month.
How many employees are likely to enroll.
Whether employees have other coverage available.
Which provider networks fit the workforce.
How much renewal volatility the company can tolerate.
Whether traditional group coverage or an individual coverage approach is more appropriate.

Ohio employers may have access to ACA small-group plans, MEWAs, level-funded arrangements, and, in some situations, an Individual Coverage Health Reimbursement Arrangement.

The objective is not to find a perfect plan that will never change. It is to establish a benefit the company can manage and review over time.

A Broker Should Be Willing to Say Not Yet

Insurance brokers are generally compensated when coverage is placed. That can make it easy to treat every inquiry as an opportunity to begin quoting plans.

But sometimes the most useful advice is that the employer should wait.

If the company has uncertain cash flow, little hiring pressure, low employee interest, and workable alternatives already in place, starting a group plan may create more burden than value.

When the facts change, the recommendation may change too.

A company that begins growing rapidly, needs to recruit more qualified employees, or starts losing people because it lacks benefits may reach a very different conclusion.

The right question is not whether group health insurance is generally good. It is when a small business should offer group health insurance and whether this company is ready for it.

It is whether offering it makes sense for this employer, with this workforce, at this point in the company’s development.

About the Author

For more than three decades, Ted Stevenot has helped Ohio small businesses evaluate employee benefits as a partner at McCarthy Stevenot Agency, Inc.

He writes the Broker’s Desk series to document the real-world decisions, conversations, and observations that come from helping Ohio employers navigate health insurance renewals and employee benefits.

Talk With McCarthy Stevenot Agency

If your Ohio small business is considering offering health insurance, the first step is understanding what you are trying to accomplish and whether the company is ready for the commitment.

Contact McCarthy Stevenot Agency to discuss the group and determine which review process makes sense, or call 513-891-9888.

Related Resources

Disclaimer

Broker’s Desk is a series of observations from more than three decades of helping Ohio employers navigate health insurance. Some articles explain a process. Others tell the stories behind the work. All are intended to help employers understand how experienced brokers think through real-world situations, not to suggest there is one right answer for every employer.

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