Can Small MSPs Keep Up With Rising Health Care Costs?

In addition to serving SMBs, many MSPs are small businesses themselves. As a result, small MSPs and small business customers sometimes face similar challenges. Chief among them: Keeping up with health care costs.

The Los Angeles Times cites a recent McKinsey Quarterly report, which predicts close to a third of US employers will definitely or probably drop their employee health insurance policies once new federal health care regulations go into effect in 2014. This is a far higher figure than the 7% of employers the Congressional Budget Office expects to drop health care in three years.

For SMBs with fewer than 50 employees, there is no financial penalty for dropping health care coverage, although not offering health care could make attracting top quality talent more difficult. But SMBs with more than 50 employees will be penalized by the government. And while the McKinsey report finds 85% of employees say they wouldn’t quit their job if their employer dropped health care, 60% would expect cash compensation, which sort of defeats the point of dropping it in the first place.

It is somewhat ironic that many MSPs, who specialize in helping smaller companies adjust to the needs of competing in a big marketplace, themselves now face competitive difficulties in terms of the benefits they offer employees. There are no easy answers to the health care cost question, but MSPs by nature are resourceful enterprises that thrive on meeting challenges and finding solutions when nobody else can.

Pooling with other SMBs in the MSP field to get better rates may be one solution. At least smaller MSPs have a three-year window to figure out an answer, which is a lot longer than the deadlines they normally get from their clients.

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