Think small Featured

8:00pm EDT May 26, 2008

According to the U.S. Small Business Administration’s Office of Advocacy, there were 26.8 million businesses in the United States in 2006. Of this number, 99.9 percent were firms with fewer than 500 employees.

While small businesses have demonstrated tremendous growth over the last 10 years, small-business owners are still challenged by one issue — health insurance.

A recent National Federation of Independent Business membership survey shows that the cost and availability of health insurance are the top issues for small businesses. Research also shows that insurers of small health plans have higher administrative expenses than those that insure larger group plans. Additionally, employees at small firms are less likely to have coverage than the employees of larger entities.

“Every business, regardless of size, is concerned about the rising cost of health care,” says Bill Berenson, senior vice president of Aetna’s Small and Middle Market Business for the North Central Region. “Large businesses are better positioned to handle these increases; most small businesses are not. As insurers, we need to understand the demands of running a successful small business and work with owners to establish innovative, realistic and practical ways to provide quality coverage at affordable prices.”

Smart Business spoke with Berenson to learn more about the unique health benefits needs of small businesses and what insurers are doing to meet these needs.

What are some of the challenges that small businesses face in terms of health insurance?

Small-business owners are first and foremost concerned about affordability. As a result, they often seek out insurers who can provide them with the best price. Their need to control costs is countered by their desire to provide employees with simple and easy-to-understand options. Since most small businesses do not have human resource departments to explain the benefits, employees also need access to resources and tools to help engage them in the health care process.

What are insurers doing to meet these needs?

The rising cost of premiums has prompted some small businesses to reduce benefits or even drop coverage entirely. To help these owners afford health insurance and continue to offer benefits to employees, insurers have created innovative solutions that increase flexibility, control and choice for the employer and the employee.

Consumer-directed health plans (CDHPs) are high-deductible plans, usually accompanied by either an HSA or HRA. The HSA or HRA allows employees to set aside tax-deferred money for medical expenses. CDHPs encourage employees to become more involved in their own health care decisions and to exercise greater control over how and when their health care dollars are used.

CDHPs allow employers to have more control over their dollars too. Our research shows that employers who offered a CDHP lowered their health care trend and saved money throughout the life of the plan.

What role does value play in the price discussion?

Small businesses are lean organizations, so the health and wellness of their work force can have a significant impact on their bottom line. In response, a number of insurers have started offering value-added programs and services to small businesses to help improve employee health and productivity.

One example of a value-added offering is wellness. Previously only available to large-account customers, many insurers have started offering wellness programs and incentives to small businesses to raise the level of engagement for healthier, more productive work forces. Some insurers have taken this concept one step further by offering employee assistance programs, which help employees balance work, home and personal life through a wide range of support services.

What are some other ways insurers are working to address the needs of small businesses?

Small businesses are more susceptible to turnover, which can make enrollment changes and benefits administration difficult and time-consuming. As a result, a select number of insurers have developed self-service, Web-based tools to improve the ease of doing business for brokers, customers and members. These tools provide online access to member eligibility information for medical, dental, pharmacy and life and disability coverage. The tools give customers the ability to expedite online member additions, terminations, life event changes and selection of benefits.

In addition, these solutions improve the accuracy of benefits selection, increase the speed with which benefits changes are made, eliminate the number of pending member enrollments [because of incomplete information] and increase the delivery speed of member ID cards.

BILL BERENSON is senior vice president of Aetna’s Small and Middle Market Business for the North Central Region. Reach him at (312) 928-3323 or