Despite the trials of huge companies such as General Motors, local benefits consultants want small business owners to understand that offering group insurance coverage to staff is not out of their league.
In fact, insurance companies have come to recognize small business owners as a growing market for their services.
"The insurance industry has been getting more attuned to the needs of small businesspeople in the last five to 10 years. Prior to 10 years ago or so it was very hard for a company under 10 people to have any coverage whatsoever. Now they are developing programs for them," says David Whitehead of Coughlin & Associates Ltd.
The new programs include more flexible options that allow plans to be quite basic or complex depending on what a small business owner can afford. Add to that, the practice of pooling small businesses together to increase economies of scale and obtain better rates.
"I think the small group products have evolved quite a bit and the insurance companies in general have recognized that this is a growing market that we need to be in," says Guy Vachon, associate at Mercer Human Resources Consulting.
With insurance companies now offering options to small businesses that may have only three employees and even individuals who are self-employed, the advantages of providing group insurance is definitely worth a look, says Mr. Vachon.
"One of the key advantages of benefits plans is the tax advantage. If you're a small company thinking of benefits and ask, 'Should I give my people a salary increase or should I increase benefits?' The benefit premiums you pay on the employees' behalf is, with a couple of exceptions, not taxable in the employees' hands so the benefit plan is a tax advantaged benefit. It is not taxable on their T4 whereas their salary is."
Besides the tax advantages, group insurance plans are a tool that employers can use to attract employees and show that the small business is an established outfit with stability, Mr. Vachon adds.
Even the administration of benefit plans has become much easier thanks to technology. Most major insurers now have online administration systems so that once an employer has set up a group plan, it takes minimal time to go to the insurer's website and add on a new employee or change a current employee's salary, thus sparing a small business owner hours of administrative work.
Benefits consultants agree that smaller business plans do cost more than what larger companies pay, but the rate has narrowed over the years.
For example, a company with a staff of 100 will likely pay 20 cents on the dollar for insured expenses on healthcare whereas a small company will likely pay 30 cents, Mr. Vachon says.
Insurance companies generally require a small business to have been operating for a year before starting it on a group insurance plan in order to feel confident in the business' long term success.
The perception among benefits consultants is that small business owners still often believe they must reach a certain size before being able to offer their employees a benefits plan.
"I don't think they are looking to find that information generally. I think that it is our job to approach them and make them aware of what's available," says Denis Deschenes, principal consultant at Cowan Wright Beauchamp Ltd. "We find that clients are generally not aware of what's out there and don't necessarily know who to talk to."
Mr. Vachon advises small business clients to start off with very basic plans in order to ensure the sustainability of the new program. For example, offering basic health but not vision care can be a good start. Since benefit plans can be changed at any time, it is easier to add benefits than it is to take them away.
According to Mr. Deschenes, the market is strong for small businesses to look into group benefit options. For now.
"Rates are good today. The market is very strong at this point in favour of a small business looking at (benefits). With time it all depends ... smaller employers tend to hire younger workers, which is to their advantage and keeps rates lower. If they keep their workforce and they get older, aging will affect experience but that will take another five to 10 years before we get to that point."