According to this year’s Counselor State of the Industry report, just 35% of distributors provide their full-time employees with health insurance benefits. This comes at a time when the compensation and benefits landscape is changing. Younger employees are willing to pass on potentially more lucrative commissions in exchange for greater security in the form of a consistent salary plus stable benefits.

“Today, with low unemployment and millennials in the marketplace, benefits are very important to people,” says Sam Cole, the VP of individual and family plans and small group insurance at Keenan, a California insurance brokerage. “Insurance gives employees peace-of-mind to know that if something should happen, they have coverage. It also opens their door to go in for wellness checks to make sure everything is good.”

Distributors, of course, know these realities, but figuring out a solution is another story.

“The biggest challenge is maintaining the quality of the health insurance coverage while keeping insurance costs affordable,” says Wendy Ferber, co-CEO of Pride Products (asi/299307). “We’ve had to pay more and more for the same benefits over the years.”

Steve Brungart, general manager at Show Your Logo (asi/326179), also notes that participation rates in plans can make offering health insurance really difficult. His company has tried multiple times to offer insurance to employees, but it’s never worked out.

“Most group plans want at least 75% participation,” Brungart says. “We’re a company of 18 people. That would mean that if five people were out then we’d fall below 75%. There are a number of us that are covered under our spouses’ insurance, so we wouldn’t participate.”

Even if Brungart’s firm could guarantee the participation it needed, other hurdles linger. “The pricing has always seemed high to us. Our owner has been paying for his own insurance out of pocket for years. He found the rates we were quoted for having a group plan were always a lot more expensive than the plans he was able to get on the open market,” Brungart says.

With such a complex health insurance dynamic at play, what’s a distributor to do? Here are some steps to help navigate an uneven path.

1. Assess the Situation
The very first thing any employer looking to offer insurance to their workers needs to do is actually sit down and look at the financial situation in their company. Is it possible to offer health insurance? If so, what options are available?

“Small businesses really need to sit back and take a look at the marketplace,” Cole says. “See what fits their business the best from a coverage standpoint, a cost standpoint, and where their employees live. Many employers look at HMO plans, but if they have sales reps living in outlying areas, that doesn’t always work. Really make sure you tailor your benefits program to your business needs.”

“Offering a healthcare plan and a focus on employee wellness is a valuable advantage as part of an overall compensation package.”Andy Shuman, Rockland Embroidery

Andy Shuman, general manager at Rockland Embroidery (asi/83089), suggests using a broker to help you maneuver through the complicated world of healthcare. Why? Brokers are trained to know what options and requirements are out there for each company size, and can bring that information back to employers in an organized and understandable way.

2. Select Your Parameters
The next step is to become a savvy shopper. Even with small businesses, every employee will have different circumstances, and those need to be accounted for with any healthcare options provided. You’ll need to figure out the exact parameters of the plans to make sure you’re getting the best deal – and that includes determining how much of a contribution the business itself will make to the insurance costs, whether it’s a 50/50 split, or the business pays 75% of the premiums, or even 100%.

“Truly take a look at your own business situation and what makes sense for you,” Cole says. “The worst thing you could do is bring on a benefit and then have to drop it in a few months.”

At this point, it might be helpful to bring in some extra stakeholders: the employees themselves. Either create a committee of employees to look at the benefits plans that work for the company and let them make a suggestion, or give everyone a few options and let them all decide on what will work best. It’s not always that common in the small group insurance market, Cole says, but it helps the employees of a business know they’re getting the best option for their money as well as the company’s money.

3. Don’t Bother Negotiating
Although it may be tempting to try, negotiating for a better price really isn’t the best idea. Both Cole and Ferber note that, in general, law regulates insurance premiums and the amounts are non-negotiable.

“The prices are basically established,” Cole says. “The variances in pricing will be plan choices, HMO or PPO. It’s going to vary in terms of the product. A bronze plan with a high deductible or a platinum plan with a low deductible and low copays could be a 25% to 40% difference in rates.”

It’s important to bring in someone who understands what’s out there in order to get the best price – again those third-party brokers who know the available options and can work to find something a business owner may previously not have seen in the group benefits market.

4. Consider the Future
It’s a hard truth in the insurance world: Premiums won’t be going down any time soon. In fact, they’re more likely to go up than anything else. That’s something business owners need to consider when determining if offering health insurance is feasible for the long haul.

“As health insurance costs increase each year, we need to reevaluate our policy and premiums every year,” Ferber says. “Never renew without making sure your premium increase is not absurd. In our experience, there have always been other plans available that helped us reduce the premium increase.”

“The biggest challenge is maintaining the quality of the health insurance coverage while keeping insurance costs affordable.”Wendy Ferber, Pride Products

That’s exactly what David Tate, president of Signet (asi/326636), did when he saw premiums rising astronomically year after year. Instead of sticking with the plan Signet was used to, he challenged the company’s insurance consultant to find something better. The switch ended up being to a plan that larger companies use – and Tate has never looked back. Now, employees enjoy a partially funded high-deductible low-premium plan, FSA cards, and an HRA program that supplements the deductible, all of which have substantially lowered individual costs.

5. Explore Other Options
If you’ve tried and tried again and finally discovered traditional insurance options truly won’t work for your small business, it’s time to start looking at other options in the insurance world.

Ferber says the insurance that Pride Products offers is through a consortium, the New Jersey Business and Industry Association. The association worked with a nonprofit to find a self-funded group benefit program. Pride is on the plan with 17 employer units from different associations.

“This organization was able to maximize claim stability, administrative efficiency, cost savings and a full menu of comprehensive benefits,” Ferber says. “We also get life insurance with the plan.”

The consortiums, though, don’t work for everyone. Nancy Gudekunst, president and CEO of distributor MARCO Ideas Unlimited, notes that although she’s researched healthcare through several different membership groups, her small company of eight people doesn’t qualify to participate. Instead, the company pays extra in order to offer insurance through Kaiser Health Care. Plus, sometimes these types of consortium health plans can be pretty volatile.

“One of the problems with them is that if they’ve a bad year, their rates will go up 25% to 40%, and that sends people right back to the private exchange,” Cole says. “In a private consortium or association health plan, you’re leveraging the loss experience of the people in that group, but if I went and bought a plan from a carrier, my experience is leveraged into the broad world of all of their clients.”

Even companies that can’t afford to offer insurance of any type have some options for how to make the cost per individual more manageable. Brungart says Show Your Logo has tried a number of ways to offset the cost employees have to pay to get their own insurance. At first, the company offered reimbursement for insurance premiums. Then the company decided to pay into flexible spending accounts for each employee, but once the Affordable Care Act became law, the company could no longer do that without offering an actual insurance plan.

“Also, with the ACA, we couldn’t reimburse employees for their personal insurance premiums,” Brungart says. “We’ve resorted to giving all employees what we call ‘Base Pay.’ They can do whatever they want with their base pay, and we can’t make it tied to health insurance.”

As a last resort, Cole suggests the person in charge of benefits at a company meets with each employee individually and helps them to find their own affordable plans. It shows employees that even though you can’t provide everything you’d like, their health is still important to you.

The Cost of Not Providing Insurance

Nancy Gudekunst, MARCO Ideas Unlimited, at left; David Tate, Signet, at right

Why don’t more distributors offer health insurance benefits to their employees? Some companies insist they’re just too small or don’t have enough capital to support a full healthcare offering. That said, not providing health insurance can end up costing your company more than you think, in terms of attracting and retaining talent.

Without healthcare, Andy Shuman, general manager at Rockland Embroidery (asi/83089), says “retention and recruiting can both become compromised. Offering a healthcare plan and an overall focus on employee wellness is a valuable advantage as part of an overall compensation package.”

Wendy Ferber, co-CEO of Pride Products (asi/299307), agrees, noting that because most of her employees don’t have access to other health insurance, offering it is almost a requirement in order to keep the talent the company has. It’s also difficult to attract new employees, especially if they were coming from a job with a full benefits package. So what needs to change?

David Tate, president of Signet (asi/326636), believes the industry’s mindset does. “We have to compete with large companies for great employees,” he says. “All the large companies have great healthcare plans. The real problem in our industry is the vast majority of companies are really small and have a mindset that providing healthcare is a hardship. To an extent, that’s true, because they’re too small for group rates. It’s also exacerbated by the fact that many of these same small companies still have an archaic commission structure so they can’t afford to provide it. But if they don’t factor in healthcare to their cost model, they may not be able to attract or hold good people.”

Beyond the retention factor, offering health insurance gives employees peace of mind that can only help their performance. “I believe employees can do a better job if they aren’t worried about health insurance,” says Nancy Gudekunst, president and CEO of distributor MARCO Ideas Unlimited. “Providing health insurance to employees seems basic to me.”