Small- and Medium-Business Employee Healthcare Insurance: Yes Or No

Shock waves are hitting a majority of smaller businesses receiving notices about the premiums due for employee healthcare insurance policies in 2016.
The new rates exceed 20% for many enterprises based on surveys done by Information Strategies, Inc. and other organizations.
An average 23% increases were reported in ISI’s survey of 233 randomly selected businesses under 50 employees. Other soundings surfaced similar increases ranging from 19% to 24%. One respondent reported a 49% increase.
Many companies are pondering alternatives such as providing stipends in lieu of benefits, increasing deductibles, reducing coverage to the minimums required by the Accountable Care Act (ACA), or doing away with any coverage.
For companies with under 50 employees, this last alternative does not involve government sanctions.
Organizations with 100 or more employees have weighty penalties for abandoning employee healthcare insurance.
Perhaps hardest hit are enterprises with 51-99 employees who are seeing massive increases in healthcare insurance premiums.
During the past two years, companies have held down premium costs by shifting the burden to employees either through higher deductibles, increasing the percentage paid by employees, or trimming benefits.
Most of these savings have been wrung out and there are few other alternatives.
While last year, only 6% of respondents said they were considering eliminating healthcare insurance benefits (believed important for employee recruiting and retention), in 2015 the number more than doubled to 13% in ISI’s survey and two other surveys reviewed.
Here are two ways small businesses can attack the cost hurdle.
The first involves a government program offering subsidies to smaller enterprises. This program is complicated and less than 100,000 companies have attempted to use it. The program is called the Small Business Healthcare Options.
The second involves setting up a private exchange enabling employees to purchase individual policies and obtain government subsidies under the ACA.
It has been reported that such programs can save companies significant dollars while providing individually tailored healthcare insurance. To learn more about this approach small business leaders can go to HealthMarkets.com.
If you know of other alternatives, please share them.
No matter what course of action is taken for 2016, small- and medium-businesses can expect 2017 premium rates will be higher.

SMBs Need To Get Their Financial Houses In Order

If as many economists believe the economy will expand in coming quarters, in order to take advantage of new opportunities or even remain competitive will require many small- and medium-size businesses (SMBs) to seek additional funding.

While never easy, finding funds to maintain current sales and/or fuel growth is expected to be harder in the last quarter of this year and more so in 2016.

It is reported many larger banks are opening the lending spigots, other financing sources are tightening their programs.

Institutional lenders blame the advent of the full implementation of the Sarbanes-Oxley Act as a key reason for the changes. However, there are other factors at work.

None of them make funding searches easier.

Low, low interest rates have helped many SMBs to survive the five year economic malaise.

This life jacket may be sinking as the Federal Reserve Governors just signaled that the low to non-existent interest rates will soon be a thing of the past.

In recent years, new funding sources including crowd funding; websites offering individualized paths to multiple lenders; and other non-bank lenders appeared. These channels have experienced explosive growth as start-ups and SMBs sought funds to stay alive or for growth.

However, federal bureaucrats are beginning to eye these non-traditional financing outlets as avenues through which the opportunities for mischief are becoming more frequent, obvious.

For most of the recent depression, community banks and specialized lending groups were the main sources of funding for SMBs.  Over the past twelve months, these sources have been steadily withdrawing from the marketplace. While larger banks have taken up some of the slack, they have not fully replaced the monies no longer available.

Another factor is these larger banks take longer to make a decision and often require onerous terms.

Recent surveys by Information Strategies, Inc. and others indicate a majority of SMB leaders think good times are ahead.

They also anticipate they will need additional funding to meet the costs of satisfying higher demand levels.

Thanks to the revolution by Internet cloud offerings and other technology advances in simplifying the ability to start a new company, SMB leaders also are recognizing that the number of competitors in all fields will be greater than before the recession.

Given this evolving scenario small business leaders should be acting now.

Mitigating against their efforts are two factors:

The first is that many SMBs have depleted their reserves during the past five years maintaining themselves during the economic downturn. They therefore appear more vulnerable to lenders.

The second is that SMBs have found the funding sources are reluctant to accept much risk in their lending practices.

To improve their chances of finding funding, experts suggest SMBs start lining up credit lines or taking out fixed rate loans or accept those with limited interest rate escalation clauses before then end of the current quarter.

As one expert said: “The time to borrow is when you don’t need the monies immediately. This gives the owner/manager time to shop around for the best possible loan source.”

While difficult, it is important that SMBs have, build, or rebuild a cash reserve.

If indeed the economy is strengthening, now is the time to generate financing to take advantage of those new opportunities.