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Founders of high-growth startups are horrified by what they see when they look at the latest price quotes for individual health coverage, small-group insured coverage and stop-loss insurance this year.
That's the assessment of Josh Buchness, a vice president at Founder Shield, a Baldwin Group affiliate that helps startups with employee benefits plans as well as property and casualty coverage.
When brokers bring out the tables showing what's happening to rates now, "many small business owners are panicking," Buchness said. "Very few small businesses can shoulder such a massive increase."
In states where founders have been getting by without employer-sponsored health benefits, and asking employees to get their own individual coverage through the Affordable Care Act public exchange system, the typical increase for the workers is 50% to 75% per worker per month, Buchness said in an email.
"In some states, such as Nebraska, the premium increase is a startling 300%," Buchness said.
The situation for small employers that want to set up their own conventional self-insured health plan and protect it with stop-loss insurance is not much better, Buchness added.
Stop-loss insurance issuers faced a surge in catastrophic claims in 2024.
"While the demand for stop-loss insurance is strong and the market size is growing, the cost is rapidly increasing," Buchness said. "Furthermore, the supply is being offered under much stricter underwriting conditions."
Solutions: Benefits advisors can help some of the business owners by giving them ideas about how to pass a portion of the increases on to the plan participants, by taking steps such as increasing the plan deductibles, Buchness said.
Other options the advisors are recommending now include use of:
◆ Narrow, custom-built provider networks.
◆ Individual coverage health reimbursement arrangements and qualified small employer HRAs, to provide employer cash that workers can use to buy their own individual coverage.
◆ Professional employer organizations, or firms that act as the official employers and benefits providers for workers at other firms.
Buchness acknowledged that using new or unusual health benefits strategies can be tricky.
In the PEO market, for example, there are about 700 providers available.
"It's essential to understand that not all PEOs are created equal," Buchness said. "We're acutely aware of each PEO's strengths and capabilities."
What it means: The current panic over skyrocketing health coverage prices is creating opportunities for advisors to persuade employer clients to consider options that might have been laughed out of the office two years ago.
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