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Health Insurance When You Downsize Your Business

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Offering employee health insurance benefits is not just “set it and forget it.” Dynamics and times change what your business needs. If it’s time to downsize, individual health insurance can evolve with you.

All businesses, and particularly small businesses, naturally progress from start-up growth to winding down. And everyone who contributes throughout those changes needs health insurance.

Providing attractive benefits to help employees maintain good health while also containing costs can be conflicting priorities when you are downsizing your business. Here’s how individual health insurance can help.

The Ups and Downs of Downsizing

In business, downsizing means reducing operating costs and making your company leaner. This involves reducing the size of your workforce and restructuring to be economically competitive.

Companies typically downsize in order to

  • Improve business efficiency, sometimes through automation
  • Reduce overhead costs to increase profit
  • Match resources relative to a decline in market demand
  • Use cost synergies after there is a business merger.

Whether you have experienced the hammer of a sudden change in your business’s market position or you are choosing a gentle approach towards retirement, as a business owner, you need to take necessary steps to ensure that highly valued people are kept on.

Offering group insurance benefits may not be the best fit

When considering your balance sheet, the cost of offering a full suite of employee benefits can be prohibitive, costing about 15% of payroll for your small company. Even if you run a family business, there may come a day when it is necessary to break with the “old ways.”

If it is time for you to save money on your group benefits, offering and funding part or all of the cost for individual or supplemental health insurance is a solid strategy to consider. Just because you offered group insurance yesterday does not mean it will be the best method for your business tomorrow.

Make Individual Health Insurance Part of Your Game Plan

There can be a lot of emotional and physical toil when a business change is underway — making dependable health insurance critical in reducing any further out-of-pocket impacts if healthcare is needed to keep everyone on task.

Putting Individual health insurance in place gives so much for so little. It is a sensible strategy that offers

  • Coverage for every type of employee
    You can offer coverage for employees aged 18 and over, no matter what their occupation is.  They may be new to the business or approaching retirement, work full- or part-time, and you can even offer coverage for consultants and retirees. Individual health insurance is renewable for life as long as premiums are paid.
  • Supplemental protection
    If your company wants to retain a scaled-back group insurance plan, individual health insurance can supplement the group plan, providing extra protection from out-of-pocket healthcare costs to those who need it as an option.
  • Cost predictability
    Individual health insurance can be more affordable than group health insurance because of the size of the risk pool. Individual health insurance spreads the risk over all the individuals all across Canada covered by the plan. With your group health insurance plan, even a few employees or their family members who have become seriously ill or experienced an accident can raise group insurance premium rates at annual renewal. When offering individual health insurance, you can define how many dollars you will contribute for an employee to use on their individual health insurance purchase. You can pay for the employee individual health benefits with pre-tax dollars, just like you would for a group plan. And your downsized organization will have benefit cost predictability without the threat of benefit plan premium increases in the future.

Communicating your Plan

When insurance benefits change, it is important to explain and educate employees as thoroughly as possible. Here are just some of the features of individual health insurance they will want to know are in place:

  • Drug benefits
    Your employees likely used their drug plan at least once in the past year. Individual health insurance plans cover the cost of prescription drugs; they can be used to “top up” group plans, or as the primary drug coverage benefit, keeping your employees happy and healthy.
  • Dental and Paramedical benefits
    Having basic dental coverage is typically only second in importance to prescription drug coverage. There are individual health plans that offer only dental and extended health benefits, and these are an attractive option for young and healthy employees who don’t see a need for prescription drug coverage. These individual health plans include paramedical coverage, hospital coverage, vision care and more — just like those that also offer prescription drug coverage.
  • Flexibility of choice
    Employees can have the option to choose specific benefits that are best suited for their current personal situation. Individual health insurance plans range from basic to comprehensive — offering coverage for employees only, or for their family.

You can assure every employee that there are individual drug and dental individual health insurance plans available to them regardless of their current health conditions.

Don’t Go it Alone

It is important to seek guidance from insurance experts on what your options are. Your group insurance broker is a specialist in group insurance. You will need to contact them to let them know you need to lower healthcare costs by changing your plan or terminating it. The easiest time to make a switch is when your current plan expires at the renewal date. You should consider giving notice to your employees about 60 days before making these changes.

At SBIS, we specialize in individual health insurance. If you are like most people, you will need a coach — especially when navigating a business adjustment like this for the first time. We can help you make the best possible decisions on what individual health insurance plan will work for you and your employees. Call us at 1-800-667-0429 Monday to Friday, 8:45 a.m. to 4:45 p.m. ET. We’re here to help.

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