Each fall over the last several years, I worried this might be the year I would tell the employees at my Indianapolis-based small marketing firm that I could no longer afford to offer health insurance.
My business was doing well. But group health insurance rates kept rising and rising, much faster than our revenues and profits.
In fact, over the last year, our group health insurance rates jumped almost 6 percent, while inflation has gone up less than 1 percent. According to the Kaiser Family Foundation, group health insurance for families cost $16,625 per employee last year.
Worse, contracting with group health insurers and managing benefits for employees added expense, distraction and time commitment I couldn't afford. My firm, Collective Alternative, is in the business of marketing, not administering health benefits.
In talking with several other business owners about group health insurance, I found that we all seemed to be in the same sinking boat.
Last year I finally concluded my firm simply could not afford group health insurance any more. What was a gut-wrenching decision then, however, turned out to be one of the best business decisions I have ever made for my company and employees.
Financially, dropping group was a huge money saver. Although firms with 50 or more employees face federal penalties from the Affordable Care Act for forgoing group health insurance, firms like mine, with fewer than 50 employees, are in the clear. But even a penalty wouldn't have changed my mind; some larger companies are dropping group even though they will face $2,000 per employee in ACA penalties.
"Could my company afford not to offer group health insurance? Would I lose employees who depend on that benefit? Would my employees and their families be covered if they got sick?"
As a consequence, the Congressional Budget Office expects 8 million fewer Americans to have employer-provided health coverage by 2018.
Because many employees view group health insurance as a right owed to them by their employer, the real underlying question for me was this: Could my company afford not to offer group health insurance? Would I lose employees who depend on that benefit? Would I be able to attract new employees? Most important of all, would my employees and their families be covered if they got sick?
Before the ACA, those were legitimate concerns. At that time, buying an individual health insurance plan was difficult and often unaffordable. If you had a pre-existing condition, an insurance company could deny you coverage.
The ACA's elimination of this pre-existing condition exclusion and recent breakthroughs in information technology created a robust marketplace for individual health insurance, making it a viable alternative to group health insurance.
I didn't want to just drop my group plan and wish my employees "good luck." So, I paid my employees a higher salary and partnered with a company called Gravie that guides my employees through the seas of individual health insurance by helping them choose the right plan and manage that plan throughout the year.
It was a win-win.
My employees win because they can buy the health coverage they need at a price they can afford, and get some free help, too. Rather than choosing from one to three ill-fitting plan options picked by their employer, they find individual coverage customized to their needs and their budgets.
Consider two of my employees: Kristen was looking for a plan that covered her family's regular care visits, while Ross was looking for an inexpensive, high-deductible plan that fit his healthy, low-maintenance lifestyle. Both found what they were looking for in the individual health-insurance market. In addition, they got help in determining which doctors are in a particular network, what to do about a denied claim, or how much a prescription will cost. Even while paying higher income taxes on higher salaries, they still come out ahead, given the cost of their share of group plan premiums they had been paying.
My company wins because I spend a whopping 49 percent less than what I had been spending on group health insurance. Dropping group enabled my firm to add new employees and support staff as well as wellness benefits, like massages and team workouts. And we are free to concentrate on doing what we do best – marketing for our clients.
A decision that began in panic gives me confidence for the future. I no longer have to worry about unsustainable group health insurance and the time, resources and distraction related to offering those benefits.
Even more important, my employees get the resources necessary to take charge of their health-insurance needs.
Commentary by Amanda Parker, president of Collective Alternative, an Indianapolis-based marketing agency.
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