No Health Insurance for Employees

May 02, 2023

by a searcher in Chicago, IL, USA

I recently uncovered that my acquisition target does not offer health insurance to its employees. This a distribution business, where margins are already tight.

While the owner has explored offering a plan in the past, I'm told most existing employees are on spouse plans and did not feel they needed an employer-provided plan. Employees are well-tenured and seem happy, but I worry about attracting future talent with no health plan in place.

Currently receiving quotes for a pretty basic 50-60% employer contribution plan running around $###-###-#### /mo per employee. This would add around $30-40k of annual cost to the business.

Would this be a deal-breaker for you, and if not, would you renegotiate if you uncovered this? Has anyone bought an SMB where there was no health plan, and how did you navigate post-close?

Reply by a searcher
from Cornell University in Salt Lake City, UT, USA

Depending on how much your employees make, it probably makes sense to let them find health care on the Health Exchange. Many may be mostly or fully subsidized. If you pay for one employee, you have to pay for them all and they can't take advantage of the subsidies.

You may also have something like an urgent care membership in your state. In Utah, we have a few groups that provide urgent care for $45 a month and cover most things people deal with. See https://www.medallusurgentcare.com/membership)

Unfortunately, the horrible US health care system is a huge burden on entrepreneurs and small businesses. It's too bad that we have to spend brain power, time, and money figuring out this issue.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

If looking to provide benefits to your employees I would highly recommend looking at partnering with a Professional Employer Organization ("PEO"). With a PEO you end up pooling your employees with other companies. The PEO provides all payroll, benefits, and other services. I have found it to be substantially cheaper and the benefits much better than purchasing insurance directly. You can also set up rating scales changing what you pay for employee based on the level of the employee, and I believe you do not have to pay any portion of the health insurance premiums if you do not want to and can just let the employee pay the full premiums. I hope this is of help. Many of the major payroll companies off them, but I know one smaller one as well I highly recommend, Idilus.

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