Building a business is all about building blocks, although some of those building blocks are heavier lifts than others, and that includes providing health insurance for employees who join a startup. This is something Dallas Riffle knows all too well as its founder Dallas Riffle Mediaadvertising and digital marketing
Although payroll is by far the largest expense at Riffle's Fairview Park company, group health insurance accounts for about 5%-7% of his total expenses. Lacking a full human resources department means wading through a tangle of insurance rules and options that can change from year to year, Riffle said.
Several years ago, Riffle joined his six-man shop in one Qualified Small Employer Health Compensation Arrangement (QSEHRA). The plan provides reimbursement for certain health care costs – including premiums and coinsurance – to workers who maintain minimum essential coverage.
A program that isn't perfect, but one that works in the current hiring environment, Riffle said.
“Every year we look at the landscape and what we can afford to do, and we definitely want to work harder to have full coverage,” Riffle said. “For now, it (the program) is working well for the small group we have.”
Riffle is far from alone when it comes to examining the difficulties of small business health insurance. According to 2023 overview from the National Federation of Independent Business – a Nashville-based small business association – about 39% of businesses with fewer than 10 employees offer health care benefits. That percentage rises to 89% for companies with 30 or more employees on the payroll.
Riffle looked at several options before landing on a QSEHRA program, which he learned about from a professional employer organization, or PEO, whose mission is to help small companies manage their HR responsibilities. He got additional advice from a friend in the insurance industry, he said.
“I felt very intimidated just by the jargon involved,” Riffle said. “We had to look at the level of our investments and what would be affordable to us. At the same time, we had to make sure we were offering something that allowed us to attract the right talent, so that was definitely a challenge.”
The US is lagging behind
U.S. health care still pales in comparison to peer countries, noted Firouz Daneshgari, a former Cleveland Clinic surgeon who seeks alternatives to the country's patient care model that pays doctors for each service provided.
Nor is the nation able to overcome its problems by providing care, added Daneshgari, whose current BowTie Medical The clinic focuses on preventive health care for both employers and individuals. Proactive health management eliminates unnecessary procedures and gives companies control over plan selection and payment, he said.
Much of the health care provided in the state is wasteful, due to a lack of transparency and uniformity regarding prices, Daneshgari said. The doctor also points to a system specialized for “disease care,” where the management of heart disease and other chronic conditions is emphasized on prevention.
According 2021 figures by the intergovernmental group, the Organization for Economic Co-operation and Development, the US spent almost 18% of its Gross Domestic Product on health care, almost twice the average OECD country. Among these nations, the US still has the lowest life expectancy at birth as well as the highest death rate for preventable or treatable conditions.
Such disparities trickle down to businesses large and small, Daneshgari said. Smaller businesses with fewer than 50 employees are particularly hard hit by having to pay for group health insurance, as premiums rise faster than wages.
“The problem is that there is no free money for employers,” Daneshgari said. “In a tight labor market, they have no choice but to provide this (insurance). Otherwise, they won't be able to attract talent.”
In 2023, the cost of health care exceeded $31,000 for an average family of four, according to global actuarial firm Milliman. Employers who cannot offer group benefits share half of those costs, at $15,000 per employee. Employees who pay the remaining share typically do so through payroll deductions, Daneshgari said.
However, a group of businessmen may form a “captive” insurance arrangement – essentially a licensed insurance company owned and operated by those it insures. The benefits of this program include reduced operating costs and increased coverage and capacity.
Ultimately, education is crucial for any owner considering the benefits for their business, Daneshgari said.
“The most important thing is to be informed – the value of an informed consumer in this market is unparalleled,” said Daneshgari. “Employers do have choices because they are the ones not only making the health insurance decisions for their families, but now they are able to make that decision for their employees and their families.”
New generation choice
The Small Business Council (COSE) – a subsidiary of the economic development group, Greater Cleveland Partnership, works with approximately 8,700 small employers in Northeast Ohio to provide health care to 63,000 workers. A partnership with Medical Mutual brings members group health insurance along with critical wellness programs that, ideally, will keep people out of the doctor's office, said COSE Executive Director Megan Kim.
“At COSE, we ask our small businesses to work with a local agent. the agent will shop around for the best price, but there are still a lot of things a business needs to think about,” Kim said. “You have to consider cost-sharing scenarios as well as out-of-pocket expenses.”
Preventative care is a potential boon for cost-conscious entrepreneurs as well as younger workers who appreciate employer-provided exercise programs and additional benefits, Kim said.
“Young people want a company to take care of them as an individual, so wellness is being folded into an insurance plan,” Kim said. “Having more active people brings a sense of camaraderie to a business. Businesses compete with larger companies for employees and can have an advantage when they offer flexibility and a diverse work environment.”
Riffle, the Cleveland marketer, will review his insurance options once the market opens at the end of the year. He just wishes the process was a little easier to navigate, as opposed to the confusing mess of options he often encounters.
“It's one thing to have two or three different plans, or sometimes four, from one provider,” Riffle said. “But then you get it from two different providers, and you have eight binders in front of you, and you're like, 'How do I start here?' So understanding the pros and cons and taking the apples-to-apples view is the biggest thing for me.”
Editor's Note: Ideastream Public Media is among the Northeast Ohio employers that receive health insurance through COSE and Medical Mutual.
