A Healthy Alternative

Small business owners face challenges finding quality health insurance plans that are affordable

John Harpole's family has owned Harpole Steel Buildings for 34 years.

But one thing that hasn't gotten any easier for the company over the last three decades is finding a way to provide benefits - specifically health insurance - for its employees.

"It's something that we have a hard time doing that we wish we could do," Harpole said.

For many small businesses, Harpole said it is hard to find quality health insurance plans - not to mention retirement plans and other benefits - that don't sink a company's budget.

Harpole, the company's project manager, said he recently has been in the process of talking with large health insurance providers about different insurance plans, but the same problem arises - it is often difficult for small businesses with few employees to get affordable rates.

But not all business owners are experiencing the problem.

Tom Barnes, president of Compliance Specialists Inc. in Bessemer, said the health insurance situation is better for small businesses today than it was when he incorporated his business in 1995.

Barnes said the main problem used to be that many carriers required that a business have at least five employees before they would offer a group plan. Now, Barnes says many insurance companies will offer a plan to companies with two employees.

"It used to be quite a burden for small businesses, but that has been alleviated," Barnes said.

Today, Barnes offers health insurance to his employees and pays a portion of the premium.

Because of a competitive work environment, Barnes says the benefits of employee retention that come with a strong benefits package outweigh the cost of health insurance premiums.

"I hire professionals, and they are not going to come work for me unless I offer health insurance," Barnes said.

Hal Shepherd, senior principal of The Kennion Group, which provides administrative and claims support for insurance and other benefits products, says more employees are looking at health insurance as a right of employment.

With the increasing cost of health care, Shepherd said that creates a problem for small businesses.

One way some businesses are handling the issue and controlling costs, Shepherd said, is by making health insurance a defined benefit - which means the employer will give a defined amount of money to go toward an employee's health insurance as part of their compensation.

Shepherd said that method locks a small business owner into a specified cost with their employee.

He said that helps protects the small business owner against future increases in the cost of health care coverage.

Harpole said one problem is that there doesn't seem to be a viable alternative out there that will work across the board for small business owners, even if many large providers do health insurance plans targeting small businesses.

One idea that has been advanced, but not implemented, is association health plans, which would allow large trade groups and other organizations, such as the National Restaurant Association, to negotiate health plans for their members. Proponents of association health plans say they would make insurance more affordable to small businesses because the organizations would be able to negotiate lower rates than the small business owners could do on their own.

Larry Fidel, president of the Alabama Restaurant Association, says association plans would be a major benefit for the group's members.

"By and large, the most asked-for benefit in our organization is insurance - generally property and casualty, and right behind it is health insurance," he said.

Fidel said under the current system, a lot of restaurant owners and their workers go without health insurance or only offer it to a few employees.

"Anything we have found has just been too costly," Fidel said.

But given the negotiating power of a national organization that represents more than 750,000 establishments, Fidel said he believes better rates could be found under an association health plan.

The group is one of many that have lobbied Congress for the plan, but there are several roadblocks, including a large contingent of lobbying groups, insurance companies and politicians who have opposed association health plans.

According to the Blue Cross and Blue Shield Association, the plans would actually cause increased premiums, loss of protection and the loss of review for denied claims.

Rather than removing state and local restrictions on association health plans, which would be necessary to make them available nationally, Blue Cross and Blue Shield's official stance recommends providing subsidies to small employers for low-income workers to purchase coverage and addressing the drivers of rising health care costs.

As a small business owner, Harpole said association plans could be one alternative, but he said it is clear that something needs to be done.

"Obviously the system isn't functioning and there is room for improvement," he said.