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Better Business for Small Business Leaders
Better Business for Small Business is the go-to podcast for entrepreneurs looking to get 1% better in their business every day. Hosted by Chrissy Myers, CEO of AUI and Clarity HR, each episode dives into real-world stories and expert insights from resilient small business owners who blend passion, purpose, and philanthropy to drive success.
Better Business for Small Business Leaders
Alice Rhodes on Why Most Small Businesses Get Employee Benefits Wrong
The difference between a struggling small business and a thriving one often comes down to how they approach employee benefits. Most business owners think they have benefits figured out—but as Alice Rhodes, Vice President of Employee Benefits at AUI reveals, they absolutely do not.
Benefits shouldn't be treated as just another monthly expense. When employers make drastic changes without considering the human impact, the consequences can be devastating. "I had people in tears," Alice shares about one company that suddenly switched employees from a $250 deductible plan to an $8,000 deductible. This short-sighted approach to cost-cutting often leads to losing key talent and creating unnecessary workplace tension.
Even small businesses with just 3-10 employees can offer competitive benefits packages when they approach the process strategically. From low-deductible plans with copays to HSAs that provide tax advantages and flexible spending options, small employers have more options than they realize. The key is working with a knowledgeable broker who understands the specific needs of your team and can navigate the complex world of insurance offerings.
Perhaps most critically, business owners must recognize the serious compliance requirements surrounding benefits administration. Mistakes with COBRA, inconsistent waiting periods, or discriminatory practices can result in substantial penalties—fines accumulate per day, per employee, per occurrence, potentially reaching hundreds of thousands of dollars. Some violations even carry the risk of jail time. As Alice advises, "Don't confuse 'this works' with 'this works well.'" A benefits strategy that truly works well goes beyond merely checking boxes—it becomes a powerful tool for attracting and retaining the talent your business needs to thrive.
🎙️ Connect with Chrissy Myers and discover how resilience, expertise, and community can transform your world:
🔗 Follow Chrissy on LinkedIn for behind-the-scenes insights, leadership tips, and updates on her journey as the CEO of two thriving businesses.
📘 Grab your copy of 'Reluctantly Resilient' to learn how Chrissy turned challenges into opportunities and how you can do the same in your life and business.
🤝 Explore Clarity HR and discover how Chrissy’s team simplifies HR for small businesses, giving you peace of mind to focus on what matters most.
💼 Visit AUI to see how Chrissy's employee benefits expertise can help you build a healthier, happier workforce.
Sometimes short-term savings can lead to long-term pain. So you could lose a key employee because now the plan that they've been paying $50 a month for for a $250 deductible is now an $8,000. Most business owners think they have figured out but they absolutely do not.
Speaker 2:We're talking about employee benefits and some of the mistakes that small business owners make around their benefits, and I have Alice Rhodes from AUI, the Vice President of Employee Benefits. Alice, thank you for taking some time today.
Speaker 1:Thanks, Chrissy. Always glad to be here, especially for a topic like this.
Speaker 2:I know it's your favorite. I know Benefits small business changes huge. They make a huge difference. So you've worked with hundreds of small businesses since you've been an agent for a broker for a long time, even though it's only been like three years.
Speaker 1:Yeah, I started when I was 10.
Speaker 2:That's exactly right. What's something that still surprises you about what employers think about their health insurance plan, employee benefits plan? Those words are interchangeable. So, what surprises you from employers?
Speaker 1:still, most employers still look at it as a fixed expense, not a strategy you can use to help your employees. They don't realize how many options they have. You know, here in Northeast Ohio we're very fortunate. There are carriers that have 30 different options. We had one at one time that had 120. It can be overwhelming. That's one of those. You get the quote and it's like oh no, I need to spread, I need to excel and I need sort.
Speaker 2:Yes, all right. So today we're going to talk about like five mistakes that small businesses make and, hopefully, how to fix them. Let's start with mistake number one, which you actually talked about in your surprises that treating benefits like a line item costs. So let's start with that big one, looking at benefits as just another bill to pay. It's just, it comes in every month or it goes in ACH, it's just there it is.
Speaker 1:What's the risk there in treating it like it's just an expense? Sometimes short-term savings can lead to long-term pain. Oh, so you could lose a key employee because now the plan that they've been paying $50 a month for for a $250 deductible is now an $8,000 deductible and they use it all the time and it's going to impact their wallet. I just had a group do that. They made some drastic changes and I had people in tears. Oh yeah, I just had a group do that. They made some drastic changes and I had people in tears. Yeah, I had to be that bad guy.
Speaker 2:And part of how to avoid some of that is really just, it's being proactive and looking at it yearly, having a strategy for where the cost needs to be. Is that right? A lot of it, yeah. And education, yeah. So not necessarily about spending more, but maybe spending smart, correct. So how do you help people spend smart?
Speaker 1:Oh boy. First, it's very important to people to have their doctor. So just buying again based on the cheapest cost is you know they could lose their doctor, medications that were covered that aren't covered. We run into that a lot where it was covered under formulary before and not anymore. So you just kind of want to make sure you know what's going on out there.
Speaker 2:Oh, I like that. So even when you've got benefits in place, if your team doesn't understand them, it can be a problem. So let's talk about mistake number two, which is educating employees. So, why does teaching the employees how to use the plan? Why does education matter?
Speaker 1:A lot of times there's perks in the plan that they don't know exist. Sometimes it's Um, sometimes it's you know, my insurance nerd brain. Um, you know I wear a tracker. It I did it anyway so that my treadmill didn't kill me, but, um, it tracks my steps. For every so many steps I get, I get points towards rewards dollars, um, and some even our own employees kind of forget it exists all the time until I'm like, hey, did you know you have this? So making sure they know what's out there, um, or that there's, there's tools they can use to help them find the lowest cost on their medication. That's $500 a month. So, just making sure they know what's going on, educating them Also the cost. They a lot of times forget that, oh, the employer's paying this. Yeah, I make you know $20 an hour, but they're paying $1,000 a month for my plan. Sometimes that's not appreciated. They're like, oh, I can go here and make $25 an hour, but I don't get benefits.
Speaker 2:Yeah, they don't see that total compensation.
Speaker 1:No, so that's important too, to make sure they know what's out there.
Speaker 2:Yeah, I think a good broker can help you understand the value of creating those total compensation statements, whether you work with an HR.
Speaker 2:You have an HR person that does that your payroll company can often help run those for you. It's a feature usually in most of the large payroll softwares. I see that oftentimes employees can't value what they don't understand, true, so if they don't see it, they don't understand why. Not even just what the overall cost is for the premium, but the value in what they get. And often, even if they have a high deductible, they have coinsurance that they don't necessarily see the value of shopping around knowing how much things cost. I think it can be a pain point as opposed to a point of clarity and being able to find the right price and the right provider. So I think that quick education can kind of help with that. Misdirection, misperception of plans oh yeah, definitely. So let's talk about mistake number three, which is only thinking about benefits at renewal, and I think that's something, especially as small business owners.
Speaker 2:When you look at it as a line item in your spreadsheet, you're not thinking about anything. It just runs in the background, there's nothing going on. So we said before, like if your benefit plan is a one-see-your-thought, it's probably broken, Right? So let's talk about this one. So tell me about what that mistake is in only thinking about benefits at renewal.
Speaker 1:So we check in constantly. Sometimes you don't want to hear from me because you feel like you're hearing from me too much. It's like hi, me again, and it's just understanding your business. What's going on? Or you may tell me oh, I've got three employees that are expecting right now and I don't know what to do. Or they have disability insurance and how does that work? And they forget they have it or not.
Speaker 2:Yeah, so looking about benefits being almost like an ongoing conversation, yeah, and it's benefits being almost like an ongoing conversation.
Speaker 1:Yeah, and it's not just health insurance, it's short-term disability, life insurance, different things like that.
Speaker 2:Yeah, so as we're planning I know we do benefit planning with our businesses, with our clients throughout the year. Can you talk about why, like that, 30 days before your renewal, especially depending on the time of year, can be problematic and even coming up with where things need to go? I mean, we can always get people moved, we can do that placement, we're nimble, but from a heartburn perspective with your employee groups why is renewal season too late for some of those big decisions?
Speaker 1:Sometimes, especially in small employers, you need some things out of your employees in order to be able to shop it, and it is it's heartburn for the employees. They don't want to do it. It's like herding cats sometimes to get out of them what you need.
Speaker 2:Filling out the applications for medical information, especially in small groups. Yes, yes.
Speaker 1:So trying to get them to do it, get it back, get the quotes out of the carriers, and then to make a decision, making sure that, oh, this plan is going to have my doctors, it's going to have hospitals that they need, that takes time. You don't want to rush into a decision and then realize, oops, right, and come December holidays, yes, things slow down. I'd say 75% of our employers renew January 1st.
Speaker 1:Well that's also the same for the carriers. So things slow down. Sometimes getting an approval back will take two, three weeks. So we're at the end of January and just getting a January approval letter. So in the meantime employees have had to go to the doctor. They've had to go and, oops, I don't all right, they have medications to fill, and now they've got to change some things. They're stuck paying a higher premium, maybe not the right benefits for a period of time.
Speaker 2:I know the ideal for us when we talk to our clients a lot, especially the ones that renew that January 1st we're talking about wanting to make sure they've done their application in Formfire which is what we use. So they've done their Formfire. We've gotten the quotes back. When are we really wanting them to make a decision? If it's January 1st, Is the goal that? Ideally in the middle of November.
Speaker 2:So that way we have enough time Because the other struggle that I see is that small business owners make the decision the day before Because we think well, january 1st means I can make my decision December 31st, which is fine if you're just one person. What is that impact? You mentioned it before, but I'd like to reiterate what that impact is to the employees themselves. When you make a plan change, what does that look like for them when they don't know what's going on?
Speaker 1:And it never fails. You know, something happens. It's Murphy's law. You know? Oops, I have a doctor's appointment on January 3rd. Where's?
Speaker 2:my.
Speaker 1:ID card. Oh, they can't find me in the system. Or, oh, I have a sinus infection. I've got a prescription to fill, yeah, so, and then the employees are disgruntled because they've either had to pay out of pocket, wait for reimbursement, yeah exactly Exactly, which is never quick.
Speaker 2:Yeah, and I know oftentimes we've had issues with carriers where they're so backlogged. But again, we may do everything right in getting something even in the middle of December but not getting an approval until the middle of January and clients not getting ID cards. So some of that is in the expectation of making sure that you are as proactive as possible so that that drag of people being out for the holidays and the volume of business that's coming through that they can make sure that they're navigating successfully those changes.
Speaker 2:Oh, definitely, okay. So let's go to mistake. Number four, which I think is a huge one, especially for those small groups that have less than 25 employees. I think oftentimes that one to 25 market. They think that they're too small to compete. And this one gets me. It fires me up in a lot of ways because we've got a competitive market in Northeast.
Speaker 1:Ohio.
Speaker 2:So this is not necessarily true, but the idea that only big business can offer great benefits. So what's the real story there?
Speaker 1:We've helped employers that have three, five under 10 employees put together killer benefit packages where they've got low deductibles, co-pays or even high deductibles. With health savings accounts, with dental vision, you can get disability plans. You can put together a nice package for your employees that's cost effective. Yeah, and they just don't know. We have something where you can combine other bunch of smaller employers together to kind of get the bargaining power of a large employer to get the same benefits. So those are our MEWAs, right.
Speaker 2:Yes, exactly, I know we speak insurance and I'm sure that some listeners are like I don't know what they're talking about.
Speaker 1:We talk about.
Speaker 2:ICHRAs. We talk about HSAs and HRAs, yeah.
Speaker 1:My husband yells at me all the time. Quit talking in acronyms. It HSAs, hras. Yeah, my husband yells at me all the time. Quit talking in acronyms. It's like I'm sorry it's my life.
Speaker 2:It's all I do. It's what I do. I don't know the real word. There's too many of them together, yeah, and so much on the insurance side and building those benefit packages that are attractive for small employers. I think it's about knowing your team and what they value most. And you made a comment about HSAs health savings accounts. I mean, I think oftentimes when you're young, you think you're bulletproof.
Speaker 2:And so you need something. That can be catastrophic, but HSAs can also be a funded investment vehicle for organizations, and it's all about knowing the types of employees that you have and what they value. I know that that's one of the things that we have at. Aui, we have health savings accounts, and part of that is it gives us autonomy and that I can spend on, not just the things that are in my deductible and in my co-insurance. Do you want to talk a little bit more about HSAs real quick?
Speaker 1:Yeah. So with a health savings account or an HSA you can set up a side health savings account and it's not like the old FSA where it's lose it or use it or lose it, use it or lose it.
Speaker 1:That money stays in there so you can let it grow for years and it doesn't. In order to contribute to it, you have to. There are certain parameters around the plan that it has to have, but you can use things like I'm a contact lens wearer yeah, they're not covered under my medical plan, under my deductible, but if I need contacts, I can use what's in my health savings account to help pay for them. Even, too, I had some issues earlier this year where I was going to a chiropractor. I used all my visits under my insurance, but I still needed it to go. I was still able to pay for them because it was a qualified medical expense.
Speaker 2:So for those of us at, the time when we had small children, we may not have been able to accrue a lot of money in our health savings account, because we're dealing with, you know, all the different types of treatment, but there are years where you know you're not necessarily using all of the money that you can contribute into your health savings account, and employers have the ability to contribute to it as well, which I think is really it can be an added benefit, because it enables them to kind of build money over time. So if they, wind up having a catastrophic event, they need to deal with paying a higher deductible. That money's there.
Speaker 1:Yes, yeah, and as an employee, since AUI offers an HSA that AUI contributes to, it's nice I also put money in that is tax-free. It's an above-the-line tax deduction. I don't have to itemize to get it. I've been able to build up because, fortunately, I haven't had to use it too terribly much. I've got a significant amount in there now that if something happens later, even with my high deductible plan, I don't have to worry about it.
Speaker 2:And then it gives you additional choice because you can choose. Do I want to go to an out-of-network provider? Do I? Want to do something that isn't necessarily covered the same way that my traditional insurance plan covers it. That's been super helpful in our family because some of the things that we do tend to be nontraditional as well.
Speaker 1:Oh yeah, or I mentioned contacts.
Speaker 2:Contact lenses.
Speaker 1:Yeah, last year I got contacts and glasses which normally aren't covered under vision insurance, to get both the same year.
Speaker 2:Yes, we have a daughter that's got some challenges around her dental and orthodontia work, and our dental plan will only cover so much, so this has kind of enabled us to kind of put some money away so that, as she continues to, we work through this lovely expense that we have with her mouth.
Speaker 2:It's not, it's not as difficult to navigate, so all right. So let's go to mistake number five, which I think I mean it can be terrifying, but for you, as an insurance nerd, it's probably your favorite to work through which is ignoring compliance and administrative details. So let's it's probably your favorite to work through which is ignoring compliance and administrative details.
Speaker 1:So it's the least exciting thing to business owners.
Speaker 2:I know it's probably the most dangerous. Oh, definitely Exciting for you, though, and that mistake is compliance. So, give me a couple of those landmines. Speak insurance acronyms. It's totally fine.
Speaker 1:Okay, big one, cobra, not the snake again Huge one. We just had a new example New administrator takeover group. There's a COBRA person on the group. He's like well, can I just take them off? No, you can't take them off, that's illegal. They're entitled to their benefit.
Speaker 2:Yes, and what people forget with COBRA and we can talk about this is why they were frustrated is that they have to pay the premium. The employer pays the premium Correct, and then they get reimbursed once the former employee pays the premium.
Speaker 1:Correct.
Speaker 2:So it's really not and they can charge an administrative fee. Yes, so it's not necessarily the cost. Yeah, Sometimes it's principal, Like well, I fired that person. It's like it doesn't matter.
Speaker 1:They have the right to elect COBRA. You cannot take them off.
Speaker 2:Right, it is illegal.
Speaker 1:Right. Or it says you know it was gross misconduct. No, there's no definition for that. I don't think you know they were late three days. That's not gross misconduct, no.
Speaker 2:Not in the eyes of the federal government as it relates to health insurance portability.
Speaker 1:No, no, no. And with COBRA there's notice requirements You've got and you've timeline requirements, Like you have. From the time you know somebody left. You've got 14 days to send the notice out. Then they have so many days to elect.
Speaker 2:If you miss a notice, those fines are pretty substantial, having a broker that can answer those questions, and ahead of time, I think, oftentimes. What's the size for COBRA? 20.
Speaker 1:Okay, but there's different roles and how employees count for that.
Speaker 2:So when they hit that magic number, they don't realize they hit that magic number? Yes, so having a broker that checks in kind of help them on the understanding of this is new. This is what you need to do, right, right. Any other compliance pitfalls you'd like to talk about, like maybe the one with that's discrimination. That's my favorite.
Speaker 1:Oh, yes, yes. What do you mean? I can't do this for this employee and not that employee? No, you can't do that. And when we talked about waiting periods earlier, you know you can't have one employee come on date of hire and one employee have to wait 90 days. So there's.
Speaker 2:We have a special plan for all of our key executives that we don't offer to any of our frontline workers.
Speaker 1:Is that okay, alice? No, no, no, it's considered discrimination, yeah.
Speaker 2:And what does discrimination in your benefits mean, Like what can that? What problems can that cause? When people think like oh, it's not a big deal unless I get caught. If they get caught, what happens?
Speaker 1:The Department of Labor comes a knocking and there's several fines that are down to per day Per employee, per occurrence, per day. Exactly, that's expensive, yes, yeah, and there are caps that are several hundreds of thousands of dollars.
Speaker 2:Wow, and I think some of them. If it's a RISA Employee Retirement Investment Securities Act, that comes with jail time, oh yes.
Speaker 1:Depending on what you're doing.
Speaker 2:Yes, so kind of good brokers, kind of take that off of your plate and they'll tell you where the guardrails are and what you shouldn't be doing. I think oftentimes you wind up and this is sad to me like you're the bad guy because you're coming in and saying no, you've got discrimination in your benefits, you've got to fix it. And they're like well, nobody ever told us. And why is that? Is that the broker just doesn't want to deal with?
Speaker 1:it A lot of times. A lot of times they don't. They're afraid they're going to make the employer mad and lose them. Okay, or they don't know because they haven't stayed on top of the compliance issues that my nerd brain loves, yes. So I don't know why I go that way.
Speaker 2:That's okay. I know it's not compliance, isn't glamorous, but I mean, I think it really protects your business and it saves your sleep.
Speaker 1:Oh yeah, definitely, Definitely.
Speaker 2:All, definitely so, all right, so we've opened a lot of boxes, we've covered a lot of problems. Let's talk about really quickly some solutions. So what's a thing a business owner can do today to kind, of course, correct if they've committed any of these infractions or have any of these mistakes?
Speaker 1:So look at what you have. Are you making sure you know what your waiting period is, that somebody has to be on benefits and are you sticking to it? Have you looked at your benefits? Is everybody on it that should be on it Are? You offering it correctly? Yes, have you at least offered it to them and protect yourself. Show that you offered it to them, get a waiver that you offered it to it and they declined it.
Speaker 2:So you're telling me if I don't want to offer somebody benefits because they have a family and I know that's expensive.
Speaker 1:I shouldn't do that.
Speaker 2:No, no, no, no. I shouldn't just say, oh, all the young single people, you can be on the plan. All of you older people with children?
Speaker 1:no, yeah, and even though I'm a family, I'm still going to be on it. But the rest of you families, no, you can't.
Speaker 2:Okay, all the things that you're not supposed to do.
Speaker 1:Right, right Now you can say, nope, we're not going to cover spouses, but you have to not cover any spouses. Be consistent.
Speaker 2:Yes, and a good broker will help you navigate all of that compliance. All right, so we're down to the end of the podcast. We always ask the question you know, what can business owners do to get 1% better in their business every day? So, alice, what's your suggestion?
Speaker 1:Don't confuse this works with. This works well.
Speaker 2:Oh, I like that, especially as it relates to benefits.
Speaker 1:Yes.
Speaker 2:Alice, thank you for your time. We're going to connect everybody on our socials to you and I'm excited and hopefully everyone will talk to you about benefit compliance and not to commit discrimination in their insurance benefits.
Speaker 1:Thanks for having me. Thanks for your time.