Business creation is about building blocks, though some of those foundation stones are heavier lifts than others, and that includes providing health insurance for the employees who are part of a startup. This is something that Dallas Riffle knows all too well as the founder of Dallas Riffle Media, an advertising and digital marketing agency
Although payroll is by far the biggest expense at Riffle’s Fairview Park company, group health insurance accounts for about 5%-7% of his total expenses. Lacking a full human resources department means wading through a tangle of insurance rules and options that can shift from year to year, Riffle said.
Several years ago, Riffle entered his six-person shop into a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). The plan provides compensation for certain healthcare expenses – including insurance premiums and coinsurance – to workers maintaining minimum essential coverage.
A far from perfect program that nonetheless works in the current hiring environment, Riffle said.
“Every year we look at the landscape and what we can afford to do, and we’re definitely wanting to work more toward getting full-on coverage,” said Riffle. “For now, this (program) is working well for the small group that we do have.”
Riffle is far from alone when it comes to considering the difficulties of small business health insurance. According to a 2023 survey by the National Federation of Independent Businesses – a Nashville-based small business association – about 39% of firms with less than 10 employees offer healthcare benefits. That figure rises to 89% for companies with 30 or more workers on the payroll.
Riffle studied numerous options before landing on a QSEHRA program, which he learned about from a professional employer organization, or PEO, tasked with helping small companies manage HR responsibilities. He received additional advice from a friend in the insurance industry, he said.
“I felt very intimidated by just the terminology involved,” Riffle said. “We had to consider our investment level and what would be affordable to us. At the same time, we had to ensure we offered something that allowed us to attract the right talent, so that was definitely a challenge.”
U.S. lagging behind
U.S. healthcare still pales compared to peer countries, noted Firouz Daneshgari, a former Cleveland Clinic surgeon looking for alternatives to the country’s patient care model that pays doctors for each service performed.
Nor is the nation able to outspend its problems delivering care, added Daneshgari, whose current BowTie Medical clinic is focused on preventative healthcare for employers and individuals alike. Proactive health management eliminates unnecessary procedures and gives companies control of plan selection and payment, he said.
Much of the healthcare delivered stateside is a waste, due to lack of transparency and uniformity around pricing, Daneshgari said. The doctor also points to a system specialized for “sick care,” where management of heart disease and other chronic conditions is emphasized over prevention.
According to 2021 figures from the intergovernmental group, the Organization for Economic Co-operation and Development, the U.S. spent almost 18% of gross domestic product on healthcare, nearly twice as much as the average OECD country. Among these nations, the U.S. still has the lowest life expectancy at birth as well as the highest death rate for avoidable or treatable conditions.
Such disparities trickle down to businesses large and small, said Daneshgari. Smaller enterprises of less than 50 employees are particularly harmed by having to pay for group health insurance as premiums rise faster than wages.
“The problem is, there is no free money for the employers,” Daneshgari said. “In a tight labor market, they have no choice but to provide that (insurance). Otherwise, they won’t be able to attract talent.”
In 2023, healthcare costs exceeded $31,000 for an average family of four, according to global actuarial firm Milliman. Employers unable to offer group benefits share half those costs, to the tune of $15,000 per worker. Employees paying the remaining share usually do so through payroll deductions, said Daneshgari.
However, a group of entrepreneurs can form a “captive” insurance arrangement – essentially a licensed insurance company owned and operated by those it insures. Benefits of this program include reduced operating costs and increased coverage and capacity.
Ultimately, education is vital for any owner considering benefits for their business, said Daneshgari.
“The most important thing is to become informed – the value of an informed consumer in this market is unparalleled,” Daneshgari said. “The employers do have choices, because they are the ones not only making the decisions for their own families’ health insurance, now they’re in the position to make that decision for employees and their families.”
Choice of a new generation
The Council of Smaller Enterprises (COSE) – an affiliate of the economic development group, Greater Cleveland Partnership, works with about 8,700 Northeast Ohio small employers in providing healthcare to 63,000 workers. A partnership with Medical Mutual brings members group health insurance along with critical wellness programs that, ideally, will keep individuals out of the doctor’s office, said COSE executive director Megan Kim.
“At COSE, we ask our small businesses to work with a local agent; the agent will shop for the best rate, but there are still a lot of things a business needs to think about,” said Kim. “You have to consider cost-sharing scenarios as well as out-of-pocket expenses.”
Preventative care is a potential boon for cost-conscious entrepreneurs as well as younger workers who value employer-provided exercise programs and additional perks, said Kim.
“Young people want a company to care for them as a person, so wellness is folded into an insurance program,” Kim said. “People being more active brings a sense of camaraderie to a business. Businesses are competing with larger companies for employees, and can have an advantage when offering flexibility and a different work environment.”
Riffle, the Cleveland marketing entrepreneur, will re-consider his insurance options once the marketplace opens at year’s end. He simply wishes that the process was a bit easier to navigate, as opposed to the confusing mess of choices he often encounters.
“It’s one thing to have two or three different plans, or sometimes four, from one provider,” said Riffle. “But then taking that from two different providers, and you’ve got eight binders in front of you, and you’re going ‘How do I even start here?’ So, understanding the pros and cons and getting that apples to apples viewpoint is the biggest thing for me.”
Editor's note: Ideastream Public Media is among Northeast Ohio employers who get health insurance through COSE and Medical Mutual.
