No Health Insurance for Employees

by a searcher from State University of New York Maritime College

11 months ago

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?

1 like
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15 comments

searcher from IE Business School

I recently acquired a business with 30 employees and no employer sponsored health insurance. I knew this very early in DD and wasn't concerned because VT has a really strong subsidy program to bring down the cost of insurance on our state exchange (family of 4 with household income of over $200k still qualifies for some assistance). That being said, it's very much on my mind as I look into the future and imagine (knock on wood!) passing 50 W-2 employees and needing to offer it.

11 months ago | like reply | 0 likes

intermediary from The University of Chicago - Booth School of Business

Your statement is "my acquisition target does not offer health insurance to its employees". You may have VERY BIG problem if the target is paying for owner's health insurance but is not offering the same to employees. If target offers but employees are not taking health insurance, then you want to make sure they have denied the offer. You also want to make sure that the target is not discriminating against hiring employees who may take on the health insurance.
Above is not a legal advice. You should consult your attorney.
Hard to comment on the cost of health insurance w/o knowing if such cost will decrease profit by 100%, 50%, 10% or 2 %.

11 months ago | like reply | 0 likes

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