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Retain talent with health insurance options


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Recruiting and retaining top talent are critical to a franchisee’s success. By offering competitive healthcare employee benefits, franchisees can utilize a proven retention strategy to hold on to quality store managers and ultimately help increase profitability.

Yet many multi-unit franchisees that offer healthcare employee benefits are facing a conundrum. They have had to deal with serious sticker shock the past few years when it came time to renew health insurance for full-time employees. Healthcare costs have been soaring for businesses, leaving them with difficult choices of how to go about reducing healthcare business insurance cost.

Plan costs are increasing 10 percent a year while average employee wages are rising by three percent or less annually. This makes it especially challenging for franchisees to determine if they are offering an affordable health plan that costs employees less than the 9.66 percent of wages as defined by the Affordable Care Act.

As a result, some franchisees simply decide to offer a minimum value plan that meets the ACA’s affordability test. However, that can lead to bigger problems long-term, such as the ability to attract and retain top talent among management.

The good news is that franchisees can reduce healthcare costs by being proactive and planning ahead. Rather than reacting to rate increases every year and trying to figure out how they can afford them, franchisees should create a multi-year risk management strategy for their healthcare employee benefits.

A professional insurance adviser can help build a three- to five-year strategic healthcare benefits plan and even help larger franchisees identify creative alternatives to traditional insurance.

One example is captive insurance, which is essentially like forming a private mutual insurance company. A captive insurance company can be wholly owned by the business, the owner or a trust.

By forming a captive insurance company, franchisees may be able to stabilize or even reduce healthcare costs while also gaining more control over claims and loss control. A company can customize the types of coverage employees are offered and charge premiums that better reflect its actual loss exposure.

Another benefit: Businesses that form a captive business insurance plan are able to retain profits that would normally go to an insurer. The business can also retain and invest premiums that would normally be paid to an insurer, providing potential return on investment and cash flow benefits.

There is good news for smaller franchisees as well. Those with at least 25 insured employees can partially self-insure their medical benefits if they have a healthier population. This generates savings similar to that of a captive insurance plan but the franchisee would not have equity in the insurance program.

The expense associated with replacing quality store managers can be costly. Studies, such as one by the Society for Human Resource Management, predict that every time a business replaces a salaried employee, it costs six to nine months’ salary on average. For a manager making $34,000 a year, that equates to $17,000 to $25,500 in recruiting and training expenses.

Fortunately, with today’s creative and affordable healthcare options, good healthcare employee benefits solutions don’t have to take a huge bite out of your company’s budget.

Todd Fredella is a senior vice president with Cadence Insurance, a subsidiary of Cadence Bancorp. Reach him at todd.fredella@cadenceinsurance.com. Dan Holland is an executive vice president and head of the Restaurant Banking Group at Cadence Bank. Reach him at daniel.holland@cadencebank.com.

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