What Small Businesses Want

Employer-based health insurance membership has eroded by more than 5% since 2000 and a growing number of new small businesses do not even provide health benefits from the start.

This combination has left millions of Americans uninsured or turning to public programs for help. And it's led small business advocates to tell health plan providers that they need to offer a better product.

If health plans expect to grow in the future, they will need to do a better job of reversing (or at least slowing) this trend. This means creating programs and offering plans that small employers want, and limiting as much cost to the little guys as possible.

"Given that the majority of American workers are employed by small business and that the erosion of insurance coverage is among small employers, insurers are keenly interested in understanding what all employers want and how they can adapt plan designs and service offerings to better meet their needs," said Michael J. Thompson, principal at PricewaterhouseCoopers' human resources services group, in a statement.

What do small employers want? PricewaterhouseCoopers released a report last week that answered that question. Here are some interesting findings:

• About half of small employers (250 or fewer employees) surveyed don't see the importance of wellness programs though health insurers and disease management companies are promoting the programs as a way to save money in the long run.
• Employers would live without customized health benefits if they can receive "significant, direct cost savings." Health plan customization adds administrative costs, and small employers said they would only accept less customization if it results in 10% or greater savings. (Interestingly, larger employers are willing to take a smaller savings to do away with customization.)
• Employers want to work with fewer vendors to manage all of their health-related benefits. This shows the need for health plans to create a one-stop shop.

Vince Ashton, executive director of HealthPass, a New York City-based company that helps businesses with two to 50 employees get a wider variety of health benefit options, tells Health Plan Insider small employers don't want programs that add costs and don't have an immediate impact. Take wellness for instance. Small businesses don't see a quick return on the investment so they're not interested.

"[Wellness programs] would be nice and it can have an effect on the back end with less absenteeism and healthier workers, but there is no financial incentive at the end of the day to want those," says Ashton about small businesses' view of wellness programs. Another example is the personal health record (PHR). Health insurers promote PHRs as a product that will improve care and Ashton acknowledges that PHRs can help long-term, but for small employers it's just another added cost to their healthcare bills.

On the topic of customization, Ashton says small employers are not impressed with smaller administrative fees because healthcare costs have doubled in the past nine years. A 10% savings doesn't mean much to them when overall costs have increased by 100%. Amanda Austin, manager of legislative affairs for Washington, DC-based National Federation of Independent Business, tells Health Plan Insider administrative costs are highest in the small group market. Small businesses want choices, but don't need so many that it adds costs, she says.

"I think generally they want high quality and they want the choices, but they don't need 50 of them," says Austin.

One way health insurers can help small businesses is lending a hand in the benefits/human resources arena. Most small employers don't have that department. Instead, the owner provides those services so providing guidance and limiting the amount of employer administrative work helps small businesses.

What's a health plan to do? PricewaterhouseCoopers researchers provided a number of recommendations:

• Collaborate with employers to reduce unnecessary customization and tell employers about the "true cost of customization," which can include referral and authorization requirements, deductible structures, and data integration from other sources
• Streamline processes to reduce redundancy and resources that are not deemed valuable
• Improve the "right" technology, such as real-time claims adjudication, which results in faster payments, and review whether other kinds of technology, such as personal health records, are worthwhile for customers
• Collaborate with employers to educate employees about making healthy and cost-effective decisions
• Improve transparency and reporting to improve quality of care and assisting members to make educated healthcare cost decisions

Health insurers should remember this about small businesses: If a program adds value and doesn't increase costs, small businesses like it. A problem for small businesses (and all employers for that matter) is the unpredictably of healthcare costs.

"It's the most unidentifiable foreseeable cost every year at renewal. They really don't have any idea what it's going to be so it's hard for them to prepare," says Austin.

Blue Cross Blue Shield of Minnesota recently announced its SureBlue plans that will allow employers with 51 to 249 employees to lock in rates for the second and third year of a three-year contract with the agreement that the businesses would ultimately move their employees into consumer-directed health plans. Austin says those types of programs provide small businesses some stability.

Health insurers can also help by implementing physician pay for performance programs that reward doctors for providing optimal care and not pay them for errors. The current system makes "the poor outcome something that is advantageous to the person who is going to be reaping the benefits from that on the doctor side or hospital side," Ashton says. Health plans could implement programs and provide more transparency that would shed a light on quality of care and allow consumers to make educated healthcare decisions.

Any area in which health insurers can find savings interests small businesses, says Ashton.

"We're talking about groups that are struggling to find ways to make insurance work. Every penny counts," says Ashton.