Small Business Solutions to Effectively Manage Healthcare Costs

Small Business Health Savings

Small to mid-size business owners are often tasked with juggling many balls at once. Human resources activities have continued to become more complex, costly and time-consuming over the past several years. Making this one role that requires more time and attention than may sometimes be available and is in need of new solutions to keep things on track.

Three Approaches Small Employers Can Take to Save Time and Money

One of the biggest factors HR professionals must contend with is providing cost-effective healthcare. Small businesses often spend an enormous amount of time shopping for the best prices and plans every year. There are other ways to manage healthcare needs that employers may want to consider. Here are three approaches that can save employers money and time:

Give FSAs and HSAs a Look

The constant rise in benefit premiums means organizations need ways to defray costs and still offer benefits. Flexible Spending Accounts and Health Savings Accounts, allow the savings (and essentially the costs) to be removed pretax, giving the employee a way to pay for qualified medical expenses and see an increase in their take-home pay. Employees do need to be enrolled in a high-deductible health plan to open an HSA. Helping employees stay healthy means less absenteeism and greater productivity.

Consider Moving to a Defined Contribution Approach

With this model employers would give employees a set amount of money to spend on the plan of their choice as well as other benefit options, usually offered through a private exchange. Plan options may be the individual type or small-group based. The private exchange handles the enrollment and often has online tools to help guide employees through the decision-making process.

Employers may also choose Small Business Health Option Plans (SHOP), which are federally or state-run exchanges where if an organization meets certain requirements, they can choose a small business health plan that meets their needs.

Professional Employer Organization: Try a PEO

Using this approach, employers can gain economies of scale. A PEO becomes your employees’ official employer of record. This gives employers and employees access to obtain benefits that are favorably priced as if they were a larger company. Most PEOs are regional in focus, which is in alignment with the health insurance market as well, meaning employees will find plans they are familiar with. A PEO also takes on the complex task of compliance and manages all aspects of regulatory rules associated with employee benefits, which under the ACA has grown into a bigger issue for many companies.


Considering all possibilities for reducing healthcare costs is especially important for small and mid-size businesses that want to stay competitive in the job market while containing their overall benefit costs at the same time.

Source:  Inc. The Classic HR Dilemma: You Have The Humans, But Not the Resources. 2015.

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