Small Businesses Trending Toward 401K-style Healthcare

For most employees, healthcare costs have become a major consideration in their overall compensation package. In the past, employees have counted on their employers to provide health insurance – many employees felt that they were entitled to healthcare benefits. Over the last decade, the cost of insurance, especially to small businesses, has become unaffordable and the value to employees has become less than desirable.

Small businesses must stay competitive particularly in this declining market. Many small businesses can only afford to provide their employees with high-deductible plans, in which employees have to shell out the first $3,000 to $7,000 of their own healthcare costs. reported that employees who “have skin in the game” (who pay these higher deductibles) are more likely to take better care of their health (get physicals, join wellness programs, and take medication) than those people you have “all-included, paternalistic” employer paid benefits. To read the article from, click here.

Last week, the Star Tribune announced that two Blue-Cross nonprofits purchased a majority stake in a new “insurance exchange” start-up, Bloom Health. An insurance exchange is a place where employers can direct employees to shop for health care plans that fit the employees’ specific needs and budgets – very similar to the way 401k accounts operate. The employer contributes a defined amount to health care costs and employees can shop from a “menu” of competing providers and plans; the employee’s premium is determined by how rich of a plan they want or need and how much more the employee is willing to pay every month. To read the article from the Star Tribune, click here.

The insurance exchanges will debut to the public in 2014, but will be limited (at first) to small businesses – companies with 50 or fewer employees. Although, big business may want in on the action because the Affordable Health Care of Act of 2010 mandates that a company with more than 50 employees provide health insurance to all of its employees – an enormous cost. An insurance exchange shifts the risk of health care from businesses back to their employees and will likely appeal to small and big businesses alike.

For small companies, healthcare can create huge overhead costs, limiting their ability to be competitive. Forbes provides an informative “action plan” for small employers to combat these rising costs:

  • First, employers should treat healthcare as compensation and not some entitled benefit. The cost of healthcare has become astronomical to small businesses and employees need to understand that employer-provided healthcare is a benefit to the employee.
  • Second, employers need to put the employees in charge of how the money is spent. Many companies are turning to Healthcare Savings Accounts (HSA) in lieu of providing the all-included approach to health insurance. Employers contribute money into an account that can be used to pay the deductible or can also be used to outright pay for healthcare, such as vision or dental expenses without having to go through an insurance company.
  • Finally, employers should provide the tools and education to help employees get the best medical care for their buck. Employers, especially small employers, can tailor compensation packages to fit the needs of each employee and the needs of the company. If healthcare is extremely important to employee X, but not so important to employee Y because employee Y is covered by their spouse’s plan, the company can tailor each benefit package to that employee.

At the end of the day, remaining competitive in the marketplace, especially in construction, may require businesses to put employees in charge of their own healthcare decisions.

Scroll to Top