Until the Affordable Care Act (ACA) came along, I thought health insurance was an important issue for our company. After the law passed in 2010, it seemed less important because anybody could get health insurance, one way or another.
That said, we continued to offer a group health plan, as we have for more than 20 years. Our employees wanted it and preferred it to going out on their own.
The recent drama in which Congress came close to eliminating ACA has me thinking the uncertainty in the insurance market isn’t going away. It’s also a reminder that health insurance is easily the most important benefit we provide. It comes up immediately in job interviews.
“Do you offer insurance?”
We say, “Yes, we do, we always have, and we always will.”
Time for a Checkup
There are reasons we offer it, apart from its recruiting value. For instance, we’re always concerned about our labor force. The workforce is largely an immigrant workforce. Some employees wouldn’t even know where to begin to find health insurance if our company didn’t provide it.
Because they have it, they’re healthier. They have access to a doctor. They can get checkups. Something that’s problematic can be diagnosed and treated right away. They’re out less on sick leave.
Statistics show those without insurance only see a doctor when they have to, rather than for preventive care. They get sick more often. Typically, they end up using the ER for their general practitioner.
Put to the Test
This seems pretty straightforward, but there comes a time when it’s not. Health insurance is a business expense and an overhead cost. It’s also not a small expense. In the last recession, some owners canceled theirs to save money.
What I would argue is health insurance is not the first thing you cut, but something you never cut. I understand if your sales are in the red by $25,000, that $36,000 or $72,000 you’re paying in annual insurance costs might look like an obvious cut.
But cutting it is a solution that creates other problems. Say your sales fell, and you made a decision to eliminate health insurance. What will happen is some employees who might not have thought about leaving start to consider it. Word gets around to your competitor, who still offers health insurance. Soon they’re his employees, not yours.
Looking at the Numbers
I don’t look on dropping health insurance as a moral or an ethical decision, but as a bad business decision. When companies fail to offer customers or employees the essentials associated with running a professional business, then it’s usually the case that the owner doesn’t understand how to price his product to manage overhead and make a profit. If you know what the value of something is, you structure your price to accommodate it. Think of financing: Some owners feel they can’t afford it until they realize how much they’re losing by not offering it, at which point they can quickly figure out how to adjust their pricing accordingly.
With health insurance, build your price in a way that includes its cost as a business expense. So if health insurance costs are 2 percent of your sales and your average job is $10,000, instead of dropping health insurance to strengthen or improve your bottom line, why not raise your price $200? The customer who’ll pay $10,000 is certainly going to pay $10,200 if you ask, and the reason you’re asking is so that your people are protected.
Back in the Black
In 2009 and in 2011, Maggio Roofing’s sales dropped, and I had to figure out a way to cut overhead—either that or lose money. Because we share our numbers with employees, we could ask for their suggestions.
No one ever suggested we drop health coverage. We ended up discontinuing, on a temporary basis, the company’s matching contribution to employee 401(k) accounts, which was about 4 percent. We got buy-in on that at a meeting, and no one was upset or left the company. When our sales situation improved in 2012, we put it back into place.
It didn’t seem to me that the solution to the recession and falling sales was to cut prices to get the volume up. Instead we looked at it and said: We need to raise our price to make more money on the work we’re selling. So we raised our prices slightly and moved back into the black. When the recession was over, we still had the same employees, while other companies were finding it more difficult to recruit good people.
Good people are drawn to—and tend to remain at—good companies. And the quality of your employees is what differentiates you from competitors. |QR