White-in-article-square.pngby Reed Richardson.


Ask almost any small business owner about health insurance costs and they’re likely to tell you the same thing. Were Ben Franklin around today, he would have to amend his famous quote “Nothing is certain but death and taxes” to include one more inevitable fact of life: health insurance premium increases.


Pull-Quote-Tall.pngIndeed, the recent figures can be eye-watering. Between 2001 and 2011, health premiums increased 113 percent across all business sizes in the United States, according to a recent Employer Health Benefits study by the Kaiser Family Foundation. And on average, health care premiums now run to $15,073 per year, nearly $11,000 of which is covered by the employer. So, it’s perhaps no surprise that health benefit participation rates dropped dramatically among the smallest businesses over that same 10-year period, from 58 percent to 48 percent.


All of which begs the question: Facing such rising costs, why would any small business still offer health care to its employees?  

There’s more than just one affirmative answer to this question, however, so, below, we’ve broken out three good business reasons an entrepreneur would want to provide health benefits to his or her employees.


1. Health benefits help in recruiting good talent

One of the biggest challenges facing any small business is attracting quality employees. But for many job candidates, a company that doesn’t offer health benefits becomes an untenable option.

A recent HealthPass survey of small business owners in New York state discovered that most small business owners acknowledge this fact. It found that three out of four of those surveyed—including 65 percent of those who don’t provide insurance—agreed that offering health care benefits helps attract quality employees.

“Small business owners are in a Catch-22,” explained Sure Payroll President Michael Alter in a recent survey. “Even though it is increasingly difficult to offer healthcare benefits, a company that offers little or no healthcare benefits is likely to put up an instant red flag for potential talent.”

And the results from that SurePayroll survey bear this out. In it, 20 percent of the small business owners surveyed said they could recall at least one instance when a prospective hire refused a job offer because of a lack of healthcare benefits.


2. Health benefits build stronger loyalty in current employees

Mark Hodesh, owner of Downtown Home and Garden in Ann Arbor, Michigan knows all about the rising cost of health care premiums. Since 1999, he says the premium payments for his company’s 12 employees have risen more than 300 percent. Yet, he remains committed to keeping health benefits as well as paying a majority—75 percent—of the premiums for his employees.

“We’re a 100-year-old downtown business,” he says. “We’re able to compete with the big box stores thanks to having a knowledgeable and stable workforce. But you don’t keep better people if they’re afraid they might lose the equity in their house during a bad weekend at the emergency room.”

In fact, a March 2011 Met Life Employee Benefits survey found that many employers underestimate the correlation between employee loyalty and health benefits. It noted that, for 60% of employees, company benefits were “an important reason why I remain with my employer.” (Forty percent of the survey’s respondents worked at companies with fewer than 50 employees.) What’s more, 74 percent of all employees said health benefits, in particular, were an extremely important factor in maintaining their company loyalty; that figure was a mere five percentage points behind the top reason, salary/wages.


3. Health benefits make employees and, in turn, employers more productive

In a way, it makes intuitive sense. If workers have better access to a health plan, like one offered where they work, they’re more likely to get the care they need and avoid prolonged job absences that can arise from neglected health issues.

“[R]research shows that companies with successful [health and productivity] programs are linked to improved business outcomes, including reductions in lost time, improved employee effectiveness, lower medical trends and, ultimately, superior financial returns.” That’s according to a 2009/2010 TowersWatson report that studied health benefits programs at larger companies. In the study’s findings, companies with the most effective health and productivity programs achieved 11 percent more revenue per employee, delivered 28 percent higher shareholder returns and had lower medical trends and fewer absences per employee.

Although Fortune 500 behemoths like Dow Chemical aren’t at risk of being put out of business because of a few years of rising health premiums, they nonetheless watch their costs just as closely as a small company does. So, the possibility of improving employee health while boosting the business’s bottom line makes a robust commitment to health benefits a wise long-term investment, according to Gary Billotti, Dow’s leader for health and human performance.

“We truly focus on efforts that will improve health outcomes, realizing fully that these will then lead to the economic benefits of both reduced health care costs and improved employee engagement and performance,” Billotti explained in the TowersWatson report. “Our efforts are felt at the individual level as well as at the operational and corporate level.”

And in the end, that potential combination of taking care of both employee and business—doing good while also doing well, as it were—may be the most compelling reason of all for offering health benefits.