The Future of Healthcare for Small Businesses

Small business owners know that healthcare is an expensive and complicated beast. You have to decide what healthcare plan to offer, evaluate costs, and then administer the program. Even if your business doesn’t meet the 50+ FTE rule, you may still use healthcare benefits as an employee recruiting and retention tool.

So what are the healthcare trends that could impact small business owners in the future?

Healthcare Costs Will Increase

No surprise here—providing healthcare to employees will continue to be expensive.

You aren’t the only one feeling the pain. Small Business for America’s Future (SBAF) survey showed that small business owners’ biggest challenge at (59%) is “the cost of providing health insurance to employees.”

Source: “SBAF Healthcare Survey March 2021,” SBAF.

 

Companies that do not provide health insurance cite cost as the primary reason. That’s understandable since a Kaiser Family Foundation (KFF) study showed: “In 2020, the average annual premiums for employer-sponsored health insurance are $7,470 for single coverage and $21,342 for family coverage.”

 

Source: “2020 Employer Health Benefits Survey,” KFF.

 

And it’s likely only going to get worse. Pre-pandemic, Centers for Medicare & Medicaid Services (CMS) projected national health spending to jump from $3.8 trillion in 2019 to $6.2 trillion by 2028. 

The pandemic may add to that. McKinsey estimates that every 1 million people who seek treatment for COVID-19 add $5.3 billion in direct healthcare costs. 

Source: “Understanding the hidden costs of COVID-19’s potential impact on US healthcare,” McKinsey.

 

And that’s only for direct treatment of COVID-19. McKinsey predicts there will be additional pandemic-related healthcare costs, including treatment of mental health conditions as well as ”between $30 billion and $65 billion” in the US for people who deferred care.

Insurance companies have already signaled their intent to raise premiums. Harvard Business Review (HBR) reports that 2 major insurers filed for 2021 rate increases with the District of Columbia’s Department of Insurance, Securities and Banking—ranging from a mere 7.4% up to a 38% increase. If those rate changes are approved, everyone’s wallet will feel it.

The Government May Help

Pandemic relief options—deferring payments and using PPP loans to pay for premiums—have provided a temporary stopgap for some small business owners. 

Many small business owners believe the government needs to provide more money to ensure the Affordable Care Act (ACA) remains viable. The Small Business Organization advocates that Congress should: “Strengthen the current system of subsidies that has helped make healthcare more affordable for many entrepreneurs.”

But those aren’t the only changes small business owners want from the government. According to SBAF’s survey, many respondents thought “lowering healthcare costs” and “lowering prescription drug prices” should be high priorities for the current administration.

Source: “SBAF Healthcare Survey March 2021,” SBAF.

New Healthcare Models

Healthcare models historically have been based on the pay-for-what-you-get model. Did you visit a doctor? Here’s your bill for the physician’s time. Did you have a lab test performed? Here’s another bill.

That model always had challenges, including putting health insurance companies in control. Practitioners were at the mercy of meeting insurance company metrics (e.g., completing 30 patient visits a day). Patients sometimes felt more like a source of revenue than a patient for medical offices. 

During the coronavirus pandemic, many patients deferred appointments or skipped elective services. This hit medical practitioners’ bottom line—that loss of revenue has some reconsidering their model. Health Affairs reports that “40% of health system CFOs believe that moving toward value-based care is a core strategy for future financial viability.”

What could that look like? It might look similar to the concierge doctor service (portrayed in the TV series Royal Pains) but at a price mere mortals can afford.

With a direct primary care model, patients would pay a monthly fee to a doctor. The doctor is then free to provide the care needed (including preventative care) rather than the care dedicated by an insurance company. In theory, it reigns in healthcare costs (although emergency and hospital visits fall outside the membership fee).

Another possible change is a public option (or Medicare for All, as it’s sometimes called) might become available. If it is successfully implemented, people would have options for coverage outside of private health insurance. While the idea has its pros and cons, 69% of small business owners surveyed by SBAF support the concept.

Prevention Takes Center Stage

Prevention of health issues by leveraging technology will be essential. The sooner a problem is diagnosed, the less costly it is to treat. The medical community can serve more patients, including underserved populations, using telehealth (and a bonus for small business owners is less downtime for employees needing a medical appointment!). Chronic conditions could be better managed using remote monitoring devices (e.g., real-time diabetes monitoring that alerts the doctor of insulin needs) and thus lower healthcare costs.

Well-being programs will be part of prevention efforts since self-care can reduce both physical and mental illnesses. It’s why so many health insurance companies offer incentives for their members to exercise and why large corporations support smoking cessation programs. 

In the future, businesses may demand money-back guarantees for wellness programs. No more buying into a program based on the marketing glitz promise of “reduced employee absenteeism.” Vendors providing wellness programs will have to prove key metrics were met (e.g., 20% decrease in employee back issues).

Businesses Will Stalk Their Healthcare Costs

As health care costs rise, businesses—both large and small—will be forced to manage health care costs. HBR suggests “businesses should examine these costs closely and understand where they are deviating from benchmarks and why.” 

In other words, are your costs in line with industry standards? If not, you’d better spend some time figuring out why not. Regularly reigning in healthcare costs will be another line item on the business owner’s to-do list.

Small Business Will Act Big

It’s no secret that large corporations can use their economies of scale to get lower health insurance premiums than small businesses. As Dr. Erika Gonzalez, co-chair of SBAF, told The Hill, “It’s as if the US has instituted a surcharge just for being small.”

Businesses may turn to professional employer organizations (PEOs) to achieve “big company” health insurance rates. Essentially, your employees become co-employees of the PEO. The PEO adds your employee count into their total number of employees—and then the PEO negotiates lower insurance premiums based on a higher headcount.

Freelancers Have Value

Small businesses may use freelancers and contractors instead of employees. While it’s not viable for every role in an organization, it does shift health care costs off the shoulders of small business owners. (Sorry, freelancers—you’ll have to secure your own healthcare insurance coverage via a spouse’s family coverage or purchasing a plan through the Affordable Care Act).

Healthcare overall needs tweaked to reduce the administrative burden and expense for small business owners and their employees. It won’t happen overnight. But knowing what might be on the horizon can help you plan for healthcare changes for your small business.