Remind Me: Why Are Businesses Involved in Employee Health Care?

Isn’t running a business hard enough, Gene Marks asks, without having to assess health plans every year? He suggests an alternative.

Good morning! 

Here are today’s highlights:

• Ami Kassar, once again, cautions against dealing with the big banks.

• With some changes, gyms are making a comeback, even becoming a shopping-center draw.

• Remember all of that excitement about Amazon’s HQ2? Funny thing happened.

• As remote work takes hold, companies are looking for alternative ways to get acquainted.

HEALTH INSURANCE

Gene Marks says he’s found a way to reduce his administrative burden and save money: “As a business owner, I must negotiate health insurance with big insurance companies every year for my employees with little control over the inevitable, annual cost increases. I’m often forced to analyze the demographics and health histories of my workforce, which is knowledge I don’t want, nor should I know. I have to pay someone to administer their claims, answer questions about coverages, and go through a regular review of benefits. I’m just a humble CPA. I’m not a health care expert. Why am I involved in all of this? The short answer is: I don’t have to be.”

• “Last year I dropped my company’s health insurance plan altogether and replaced it with an Individual Coverage Health Reimbursement Arrangement or ICHRA. Why? Because an ICHRA changes the way business owners like you and me provide health care benefits for our employees. And it’s lowering my health care insurance costs.”

• “Simply put: with an ICHRA you still pay for your employees’ health insurance. But instead of forcing them into a plan that you choose for them, you reimburse your employees for the health insurance they choose to buy.”

• “And because you’re giving them the ability to buy their own health insurance you avoid all the time and costs involved to choose and administer a group plan.”

• “The benefits for an employer are significant. No longer do you go through the pain of choosing health insurance plans every year. You have complete control over your costs. You spend less time reviewing and administering your plans. No longer do you need to know about your employees’ health histories.” READ MORE

FINANCE

Ami Kassar cautions about an entrepreneur who spent months trying to get a line of credit from a big bank only to be turned down: “Exceedingly frustrated, he is now considering factoring with a company backed by private high-net-worth individuals who he thinks might be able to help him with connections in addition to the factoring.” Ami’s thoughts:

• “Stay away from big banks.”

• “Refrain from assuming all banks are created equal. His experience could be completely different down the street.”

• “Be wary of factoring. It isn't straightforward with liens, lock boxes, and customer notifications. If you need it – it's one thing. But we don't know if that's true here or not.” READ MORE

RETAIL

Gyms are hot again: “As people return to in-person activities with the loosening of coronavirus pandemic restrictions and a fall in reported Covid cases from last year, they are making a beeline for the gym, eager to shed extra pounds they gained during lockdowns. And the $32 billion U.S. fitness industry is greeting them with some new tricks.”

• “Monthly visits to gyms from March through August rose more than 18 percent from the same period in 2019, according to data from Placer.ai, which tracks retail foot traffic. New memberships also increased, with sales per square foot at gyms up 34 percent in August from a year earlier and almost on a par with 2019, said Mark Sigal, chief executive of Datex Property Solutions, a software company that tracks retail properties.”

• “Well-capitalized chains are expanding, taking advantage of pandemic-depressed rents, and operators are reconfiguring their spaces, adding accommodations not only for children but also for aging baby boomers.”

• “Fitness clubs are opening in shopping centers, where they can generate foot traffic that benefits other tenants. A retailer in a shopping center with a gym receives, on average, 2.5 percent more visits a month than the same retailer’s locations in centers without fitness businesses, according to Creditntell, which analyzes location and financial data.” READ MORE

ECOMMERCE

Carvana thrived during the pandemic: “Supply chain snarls kicked off a shortage of new cars that sent buyers to the used market in droves. The price of second-hand vehicles began to surge as a result. And during the scariest depths of the pandemic, Carvana offered a way for people to buy cars online and have them delivered to their homes. But now the used-car market is slowing down, dealing a blow to Carvana and other dealership chains. On Thursday, Carvana reported disappointing sales and a hefty third-quarter loss of $508 million, sending its already faltering stock into a tailspin. This year, Carvana has lost $1.45 billion so far.”

• “Carvana, known for its vehicle vending machines, chalked up the poor results to a challenging economy and slowing demand for used cars.”

• “The Federal Reserve's effort to curb inflation by raising interest rates has jacked up consumers' monthly payments and made vehicles even less affordable in recent months, the company said.”

• “According to Edmunds, the average monthly payment for a used car purchase hit $564 in October, up from $412 in January 2020. The average annual percentage rate on loans for used-car purchases hit 9.6 percent.” READ MORE

OFFICE SPACE

Remember all of the excitement about Amazon’s HQ2 contest? It hasn’t gone precisely to plan: “Today the rumble of construction trucks and the din of jackhammers are the soundtrack of life in Crystal City, the neighborhood where, theoretically, thousands of Amazon workers will report to new offices a year from now. The project is envisioned as a white-collar 21st-century paradise, complete with interlacing parks, child care centers, and even a facial spa. It sounds so utopian, so ideal, so … 2019.”

• “Amazon’s HQ2, with the first phase scheduled to finish in 2023 and a second phase green-lit in April, has become a test case for what happens when your timing just couldn’t be worse: planning for millions of square feet of office space before one incredible, unimaginable event made new offices the least convenient thing you could build.”

• “The vacancy rate for National Landing (the official name for Amazon's Arlington business neighborhood) in the second quarter of 2022 was 24 percent, the second highest of every office market in Northern Virginia. That will probably worsen when HQ2 construction finishes and Amazon likely returns to the market the 1 million square feet of office space it’s currently using.”

• “‘There’s just a very logical next question: Office users aren’t going to use that space, what other users could use that space?’ asked Uwe Brandes, Georgetown University’s faculty director of the Urban and Regional Planning Program and the Georgetown Global Cities Initiative. ‘The most important obvious next part of that is a question around retrofitting office buildings into residences.’” READ MORE

HUMAN RESOURCES

Remote work is creating something of a corporate-retreat arms race: “Even with a recession looking increasingly likely in the next 12 months, founders are willing to spend to get their teams together to recreate the sense of culture and camaraderie that came naturally when employees shared a workspace five days a week. Some of these trips -- often splashed across hiring portals to entice applicants—could be mistaken for a spring break itinerary or an episode of The Amazing Race.”

• “‘We just wrapped up our busiest fall season in 10 years,’ says Sean Hoff, managing partner at Moniker Partners. Before the pandemic, the Toronto-based agency, which plans retreats for companies including Shopify, PayPal, and Uber, averaged about four to five inquiries each month. Now, Moniker is fielding outreach from more than 30 organizations every month—more business than Hoff and his 15 employees can handle.”

• “Once an office evangelist, Covid-19 prompted Rockerbox founder and CEO Ron Jacobson to give up his company's New York City lease. The marketing attribution platform for direct-to-consumer brands, which was named one of Inc.'s 2022 Best Workplaces, went fully remote during the pandemic. Since then, the team has tripled in size.”

• “In August 2021, Jacobson got the team together for Rockerbox's first company-wide retreat. Over two days in New York, the team competed in a scavenger hunt on Governor's Island, explored the Museum of Modern Art, and attended a Yankees game.”

• “In April, he flew 40 employees to Miami for kayaking, a Wynwood Walls tour, and a catamaran cruise. Each time the company posts a retreat recap online, Jacobson says he receives 20 to 30 emails from other founders asking about the trips. His advice is always the same.”

• “‘It's worth the time, money, and energy for us to bring the team together. The benefits far outweigh the costs,’ he says. ‘I have no doubt that it ends up paying for itself.’” READ MORE

THE 21 HATS PODCAST

There’s Big Money All Over the Place: This week, Shawn Busse tells Jay Goltz and Sarah Segal that he sees all kinds of opportunities for small businesses, including his own, in the coming wave of climate-related government spending and tax credits. Count Jay among the convinced. He’s got four buildings, five vans, a truck, some Sprinters and a parking lot where he could put a charging station. If there’s government money available for upgrades, he asks, “Why wouldn’t I do that?” Plus, Jay explains how he’s rethinking his search for an HR person. And Sarah tells us she’s ready to meet in the metaverse.

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren