When Kiersty Lombar was shopping for health insurance for the seven employees of her year-old online coffee and gourmet-foods company, she faced two challenges. "We had limited funding, yet we needed a competitive benefit package to recruit people," she recalls. Lombar, 27, worked with an online insurance broker to find the right plan. She finally settled on a Preferred Provider Organization (PPO), a form of managed care that offers more freedom and a wider range of choices than the traditional health maintenance organizations (HMOs).
Today, Lombar's company, The Perk.Com, offers generous health-care benefits. The Austin, Texas-based company pays 100 percent of its employees' costs and 60 percent for spouses. "It's important for us to take care of our employees," reasons Lombar. "We see this as a recruiting and retention tool. Even though we felt like we were at the mercy of the insurance companies, we decided it was something we couldn't cut back on."
To offset the cost of health insurance, The Perk.Com keeps tight control on salaries and other overhead. No fancy offices for this Internet start-up. "We don't have a whole lot of beautiful furniture in our offices," says Lombar. "Health coverage is more important to us."
Ellen Paris is Entrepreneur's "Management Smarts" columnist.