Business health insurance

Employee benefit plans use salary-deducted insurance that may be subsidized by the employer

Small business employers give these reasons to explain why they offer employee health plans:

• to use the health plan as an attraction and retention tool (86%)
• Concern that employees would have to pay more in the exchanges to replace employer coverage (30%)
• Desire to avoid paying a penalty to the exchanges (26%)

Employers also identified the top potential benefits of PPACA, such as the increase in wellness incentives (37%), access to the exchanges for part-time employees (31%) and retirees under age 65 (23%), as well as the option to terminate coverage knowing employees will have another option in the exchanges (16%).

We suspect that a majority of employers will switch from a defined contribution to a defined benefit type of health plan using a cafeteria-style structure. Consumer-driven components like flexible spending accounts (FSA) and Health Savings Accounts (HSA) will continue to grow in popularity as more small businesses adapt this flexible approach to their employee benefit plans.