by Mike Bechtol, Redirect Health
Most business owners view healthcare as a giant hassle, enormous expense and necessary evil. For companies that provide health benefits, it’s one of the costliest items on the P&L. With the ongoing rise in insurance premiums, healthcare takes a bigger bite out of profits every year.
But companies actually can grow their businesses by providing free healthcare.
This sounds outlandish and backward. The majority of employers pass a portion of costs on to their employees, but healthcare expenses still eat into the bottom line. If anything, it seems like offering free healthcare would kill profitability altogether.
Yet companies nationwide are using free healthcare to attract top talent, retain key employees, and expand their businesses. It’s not hurting the bottom line—it’s boosting business—and nowhere is this more evident than construction trades.
Building a Pipeline of Talent
Competition for talent is very high. Employers often feel like they can’t be choosy with their hiring—that they need someone (anyone) on the job immediately. It’s a bad position to be in, and the inevitable result is high turnover. This costs a business dearly, even if turnover is among low-wage employees. For example, the cost to replace a $10-an-hour employee is estimated at more than $3,000 when factoring in lost production, training costs and hiring.
Every business owner would much rather hire the right person who will stick around and help grow the business over the long haul.
Offering free healthcare gives businesses a significant edge in recruiting and retaining top talent. Consider this real-life scenario: an employer in Arizona was seeking to hire two employees for his business. He placed an ad on Craigslist that included an offer of free healthcare. In two hours, he received nearly 300 calls. The two men he hired were vastly more qualified than the 20 people he already employed. He learned he could afford to be choosy.
But how could he afford to offer free healthcare?
A Smart Healthcare Strategy
Traditional medical insurance is expensive and unpredictable. In most cases, companies pay a percentage of the premium—say 75 percent—and employees pay the balance. Since health insurance is so expensive, companies often choose plans with a lower monthly premium and a higher deductible, meaning employees pay their portion of the premium along with a deductible in the order of $3,000, $6,000 or even $9,000.
According to the Social Security Administration, 51 percent of working Americans earn less than $15 an hour. This is true of a majority of workers in the building and construction trades. Many workers decline to participate in employer-sponsored health benefits because they simply can’t afford their share of the costs. The one-size health plan clearly does not fit all.
Self-insurance is a better way. It might sound risky or expensive, but businesses that self-fund take back control of their spending and customize their health plans to meet the needs of employees across the pay scale. In fact, a smart self-insurance plan is considerably more affordable for businesses than traditional medical insurance—even for companies that provide free healthcare.
What Is Self-Insurance?
Companies that self-insure assume the claims risks of their employees in a limited and predictable way. Instead of paying premiums to an insurance company, they fund a claims pot and pay providers directly. In most cases, businesses that self-insure hire a third-party administrator to handle all claims processing, administration and other paperwork. They also purchase stop-loss insurance to cover health expenses beyond a certain threshold.
A strategic plan like this—one that limits financial risk and meets the needs of low- and high-wage employees—pays considerable dividends when it comes to building a quality workforce. The offer of free healthcare—especially for workers who don’t traditionally receive benefits at work—is too good to pass up. Employers have plenty of candidates to choose from. Meanwhile, turnover decreases because workers have a reason to stay and healthcare they can actually use—not a high deductible they can’t afford.
Building a Strategic Self-Insurance Plan
A smart plan includes the following components:
- Free Routine Care: Most traditional plans include deductibles and co-payments, creating a barrier to care. Low-wage earners, especially, may choose not to seek treatment because they’re concerned about the money. This may result in extra sick days or reduced productivity. In some cases, health issues left untreated may become worse—and much more costly. A smart self-funded plan offers routine health services at no cost to employees. Treatment of common conditions like sinusitis, flu, colds, and minor injuries is inexpensive for the business, but highly valuable for employees.
- Stop-Loss Insurance: Companies that self-fund often purchase stop-loss insurance to cover claims that exceed a certain dollar amount. For example, claims costs may skyrocket for an employee who receives a cancer diagnosis or is injured in a workplace accident. Stop-loss ensures the employee receives the necessary healthcare while protecting the business from unexpected financial loss.
- Lower Workers’ Comp: A worker without health coverage might use workers’ compensation to cover treatment of a minor injury—even if the injury was sustained outside the workplace—and the cost to the business could be significant. A smart self-funded plan will reduce workers’ comp claims by giving employees an appropriate and affordable route to receive care. This will also improve eMod scores over time.
- Care Coordination. Most companies that self-fund hire a TPA to administer the plan. To realize the full benefit of self-insurance, many businesses partner with a third-party organization like Redirect Health to help workers navigate the healthcare system and get the care they need, at the right price and at the most appropriate site of service.
Mike Bechtol is director of membership of Redirect Health, a Scottsdale-based company that makes healthcare easy and affordable for individuals, employers and brokers. For more information, visit redirecthealth.com or call (888) 995-4945 or send email to email@example.com.