Small Business Health Insurance: 5 Tips for Saving at Renewal Time

As premium costs increase, many small business owners are looking for ways to save money on their health insurance. Large companies often benefit from scale, but small businesses do not have the same bargaining power with so few employees.

Experiencing sticker shock from your renewal notice? Here are five ways you can save money this year.

1. Consider a Wellness Plan

It may seem counter-intuitive to spend money on a wellness plan when you are trying to save money on your small business health insurance. However, many businesses find that investing in their employees’ overall health allows them to reduce insurance expenses in the long run.

When serious health issues like diabetes or heart disease are neglected, they become expensive problems for insurance companies, employers, and patients alike. Wellness plans can provide enrollees access to proactive pain and disease management, which will save you (and them) money in the long run.

In addition, many wellness plans come with a savings caveat if a certain percentage of people fulfill participation requirements. For example, if all participants complete a yearly physical, everyone saves 3.5 percent on premiums the following renewal year.

2. Shop Around

No one enjoys shopping around for insurance — regardless of the type — and small business health insurance is certainly no exception. But the fact remains that insurance rates change annually and vary across companies. You are likely to benefit from taking the time to research rates.

3. Check with Your Broker

If you work with a broker, be sure to ask him or her if there are any other options for your small business health insurance in the upcoming year. This will handle the “shopping around” without you actually having to do it yourself. Your broker may also have insider knowledge or case studies from other clients that you can use to your benefit.

4. Revisit Your Ratios

As rates increase, many businesses are shifting a larger share of the cost to their employees. Ten years ago, you may have been able to afford to pay 85 percent of the premium, but perhaps now that number is closer to 70 percent. This can be an effective way to split the burden with your employees — as long as you communicate the changes with them.

5. Consumerize Your Benefits

The most cost effective way to save money on small business health insurance is to consumerize your benefits. Adopting a health insurance reimbursement plan like a health reimbursement arrangement (HRA) is a way to offer a meaningful benefit to your employees without actually carrying health insurance.

Health insurance reimbursement plans allow employers to designate an amount of money per employee per month. This amount gets added tax-free to their paycheck and can be used to help pay for their individual or family health insurance premiums. The best part is that the amount only changes if you want it to.

Communication is Key

The most important thing to remember when making changes to your small business health insurance is to be communicative with your employees — early on and often. Working behind the scenes for two months and announcing changes is rarely appreciated, especially when the changes come with a higher price tag. Be sure to keep your employees in the loop and explain to them the reasons behind your changes.