Employer-sponsored healthcare insurance is becoming more complex and expensive every year. Whether or not you have employees or offer healthcare insurance, this is a trend that WILL impact your recruiting business.
In the past decade, health insurance premiums for employer-sponsored plans have gone up 80-100%. Nearly half of the employers surveyed for the Aflac Workforce Report listed cost containment, including healthcare insurance costs, as their top business concern, compared to 28% in 2011.
“The research shows how the need to control costs is driving workforce decisions,” said Teresa White, executive vice president and chief operating officer for Aflac Columbus. “For four consecutive years, we have witnessed this growing trend and can foresee the possible ramifications for the U.S. workforce.”
Why Health Insurance Premiums Are Increasing
Those workforce decisions are impacting everyone in the employment arena, including independent recruiters. But before we discuss that, let’s look at what is feeding this upward trend in premiums. The first place people tend to look is Obamacare, or more formally, the Affordable Care Act (ACA). Forbes magazine recently listed four factors related to the ACA that impact premiums:
- Commercial underwriting restrictions—Insurers can no longer apply a number of techniques they have used to lower their costs. They must now offer coverage to participants’ children up to age 26, and they can no longer apply pre-exisitng condition exclusions or lifetime limits on coverage, for example.
- Insurers can no longer base premiums on age.
- The ACA applied new taxes and fees to insurance companies that are typically passed to employers.
- Plans must now include “Essential Health Benefits,” including ambulatory patient services, emergency services, substance abuse disorder services, etc.
However, the ACA is NOT the only thing to blame. Here are some other catalysts:
- High insurance claims
- Aging population
- Unhealthy lifestyles
- Costly technological advances
- Inaccessibility of healthcare pricing to allow consumers to make cost-effective choices
Small employers are taking an even harder hit because their participant pool is not large enough to absorb high medical bills. One participant with high claims can easily result in a massive premium increase at a smaller organization.
Cost-Containment Methods
Employers have to find a way to cover these high, and often unexpected, costs. They are being forced to make difficult decisions that impact the entire business, including the following:
- Shifting costs to employees—To minimize the premium increases, many employers have been forced to choose plan designs with higher deductibles, co-pays, coinsurance, etc. The number of workers covered under high deductible plans has quadrupled in the past 7 years, according to The Kaiser Family Foundation. Some employers are contributing a lower percentage toward employees’ benefits premiums, as well. The end result of these techniques is shifting more costs to the workers.
- Shifting costs to customers—Ultimately, some of the cost also shifts to a business’s customers in the form of higher prices on goods and services. However, there is a limit to how high a company can raise prices while remaining competitive.
- Staffing decisions—You are probably already aware that some companies are freezing hiring and/or reducing employee hours to part-time to avoid the upcoming employer mandate of Obamacare. While the effective date of the mandate keeps getting extended, employers with 50 or more full-time employees will be required to provide healthcare insurance to those employees. But employers under the mandate aren’t the only ones to employ these techniques as premium increases affect companies of all sizes. Any company grappling with high insurance costs will be looking at these and other methods (e.g., freezing raises) to reduce the impact of healthcare costs.
- Eliminating healthcare—Some employers will just drop healthcare coverage altogether, even if that means facing fines under the Obamacare employer mandate. For some, it will be cheaper to pay the fines than offer coverage.
Impact on Recruiting Firms
Recruiters should also brace themselves for the impact of healthcare costs. You may notice, for example, that more candidates will weigh the TOTAL compensation package in their decision to take a position, not just salary. This is especially important now that the ACA is requiring most Americans to have health insurance under the individual mandate. Therefore, negotiations may be more difficult if quality benefits are not available.
Direct-hire job orders could also decrease as employers try to contain costs. Contract job orders, though, could increase because companies will still need to get work done. This is likely one reason why contract staffing continues to grow. If your firm does not already offer contracting, the time to start is now.
Recruiters who employ in-house staff and/or contractors will be more directly impacted by healthcare costs. If you are a larger firm, you may be required to offer coverage under the employer mandate of the ACA. But even if you do not meet the 50-employee threshold, you may need benefits to attract quality contractors. You will have to weigh the cost and administrative burden of offering the benefits versus the candidates you may lose by not. Another option is to outsource the employment of your contractors to a contract staffing back-office, such as Top Echelon Contracting, that provides contractor benefits. That can be a great way to brand yourself as a recruiting firm of choice without taking on the complexities of offering healthcare insurance.
The cost of healthcare is a problem that is not going away. You will want to remain educated on the issue and put yourself in the best position to succeed in this increasingly challenging environment. The best way to do that is to become a sole-source provider who can provide all of your clients’ staffing needs by offering a variety of options, including contract staffing.
(Editor’s note: This article is intended for informational purposes only and should NOT in any way be construed as legal advice.)
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