Health Insurance for Small Businesses. Finding affordable health insurance for your small business can seem daunting, but it doesn’t have to be! As a small business owner myself, I understand the struggle of balancing costs while still providing quality coverage for employees
In this blog post, I’ll walk through the most frequently asked questions I get about small business health insurance and provide tips for navigating this complex landscape.
Stick with me, and you’ll have the knowledge you need to make smart choices when shopping for plans and providers.
Let’s get started!
The Best Health Insurance Options for Small Businesses
When it comes to health insurance for small businesses, you typically have a few options:
- SHOP Marketplace plans – The SHOP Marketplace was created by the Affordable Care Act to provide an online marketplace specifically for small businesses to shop for health plans. These plans meet certain coverage requirements and cannot deny businesses coverage based on the health status of employees.
- Group health plans – Work directly with health insurance companies to purchase a group plan that covers all your employees. This gives you more flexibility in plan design.
- Self-insured plans – Rather than paying premiums to an insurance company, you pay for employee healthcare costs directly as they arise. This option involves more financial risk.
- Association health plans – Join an association like the Chamber of Commerce that leverages its membership to get better rates on group plans.
I recommend starting your search on the SHOP Marketplace. It simplifies the process and ensures you get comprehensive, fairly-priced coverage.
How do I determine the right level of coverage for my small business?
Choosing the right level of coverage involves balancing cost, comprehensive care, and value for your employees.
Here are some factors to consider:
- Employee expectations – Survey employees on what they expect a workplace plan to cover. This gives you insight into priorities.
- Cost control – More comprehensive plans have higher premiums. Decide what costs your business can realistically take on.
- Deductibles – Plans with high deductibles have lower premiums but shift more upfront costs to employees. Find the right balance.
- Coinsurance rates – The rate at which insurance covers care (e.g. 80/20) impacts out-of-pocket costs. Evaluate these rates.
- Covered services – Ensure basics like primary care, hospitalization, and prescription drugs are covered. Also consider value-adds like dental, vision, and mental health.
Shop plans with employee expectations and business budget in mind. Start with baseline major medical coverage then consider expanding from there.
What is the small business health insurance tax credit and how can I qualify?
The small business health insurance tax credit aims to help offset the cost of insurance for small businesses.
Here are the basic requirements to qualify:
- Have less than 25 full-time employees
- Pay an average annual salary of less than $50,000
- Cover at least 50% of employee premium costs
Additional parameters:
- The maximum credit is 50% of premiums paid
- This only applies to plans purchased through the SHOP Marketplace
This can provide thousands in annual savings. When applying for SHOP plans, be sure to take the eligibility assessment so you can claim this credit.
Taking advantage of this can make health insurance much more affordable.
What employee wellness program best practices help reduce insurance costs?
Implementing an employee wellness program can promote healthier behaviors and outcomes among your staff, which then reduces insurance claims and costs over time.
Here are some best practices:
- Offer annual health risk assessments to help identify issues early
- Implement a nutrition/weight loss program to encourage better eating
- Hold fitness challenges with prizes and incentives for participation
- Provide health education seminars on topics like stress management
- Offer smoking cessation assistance to help employees quit
- Consider subsidizing gym memberships or fitness trackers
Start small and get employee input. Wellness programs require an upfront investment but pay off exponentially in better health and reduced insurance spending.
Should I use brokers to find the best health insurance plans?
Partnering with an independent insurance broker or adviser can simplify the process of selecting and managing health plans for your small business.
Key advantages include:
- Market expertise – They understand the competitive landscape and different plan options.
- Plan matching – They help identify plans aligned to your budget and needs.
- Renewal management – They handle negotiations and paperwork for annual renewals.
- Compliance – They ensure your coverage meets all regulations.
- Admin support – They act as an advocate and help resolve claim issues.
While fees vary, the time savings and expertise often make brokers worth the cost for small businesses new to health insurance.
Do your diligence to find one experienced with small group plans.
How do I pick the right insurance provider for my small business?
Choosing the right insurance provider involves balancing factors like plan options, provider networks, customer service, and costs.
Here are some tips for vetting providers:
- Compare plan designs and rates across 2-3 leading insurers.
- Evaluate each insurer’s provider networks and quality.
- Read reviews and rankings related to their small business service.
- Ask peers about their experiences with claims and support.
- Assess tools and resources offered to help manage plans.
- Consider benefit administration and payroll deduction capabilities.
It’s advantageous to have insurers compete for your business.
Weigh the factors above to choose a dependable partner that aligns with your small business needs and expectations.
Should I work with an insurance agent, broker, or consultancy?
These are common types of insurance professionals small businesses can work with:
- Agents – Represent a specific insurance company. Limited to plans from that insurer.
- Brokers – Independent. Can quote plans from different insurers to find you the best fit.
- Consultants – Experts who advise on plan design, cost containment, and compliance needs.
My recommendation is to first work with an independent broker who can shop rates and plans from leading insurers.
If you need additional help designing plans or containing costs, layer in a benefits consultant to advise specific strategies for your business.
The combination of broker and consultant support provides an optimal experience.
How much does small business health insurance cost on average?
Here are some benchmarks on average monthly costs for small business health insurance:
- Individual coverage – $500-$600 per employee
- Family coverage – $1,200-$1,500 per employee
- HMO plans – tend to have lower premiums around 5-15% less than PPO plans
- High-deductible plans – Average around 15% lower premiums than traditional plans
A company with 5 employees can expect to pay $3k-$7k monthly for group coverage. Use these averages as a baseline but get quotes specific to your business.
Location, demographics, and the type of work impact costs as well. Benchmark against similar businesses to guide expectations.
Pros and Cons of HMOs vs PPOs
| Plan Type | Pros | Cons |
|---|---|---|
| HMO | Lower premiums, only pay within the network | Limited provider choice, need referrals |
| PPO | Freedom of any provider, no referrals | Higher premiums, out-of-network costs more |
HMOs cost less but limit flexibility. PPOs have more flexibility and choice but at a higher price. Weigh what factors are most important for your business when selecting between the two.
If you have remote employees or frequent travelers, a PPO likely makes more sense.
Health Reimbursement Arrangement
A Health Reimbursement Arrangement (HRA) is a type of employer-funded health benefit plan that reimburses employees for out-of-pocket medical expenses and individual health insurance policy premiums.
Key features include:
- The company sets aside a pre-tax fund to reimburse employees tax-free
- Money can pay for copays, deductibles, medications, dental costs
- Provides flexibility alongside high-deductible plans
- Helps attract/retain talent with tax-advantaged benefits
HRAs provide companies with increased control over costs while helping employees pay healthcare bills. This approach is gaining popularity as a supplement to group health insurance.
Key Takeaways
- Shop the SHOP Marketplace plans to find guaranteed, fairly priced small business health insurance.
- Survey employees and evaluate your budget to determine the right coverage level.
- Take advantage of the small business health insurance tax credit to save significantly.
- Implement targeted wellness programs to improve employee health and reduce insurance costs over time.
- Work with a broker and/or consultant for expertise in selecting the right plans and providers.
- Compare plans from leading insurers and read reviews to choose the best partner.
- Understand different pricing models like HMOs vs. PPOs to find affordable options.
- Consider newer options like HRAs alongside traditional group plans.
Conclusion
- Finding affordable coverage for your small business is achievable with knowledge of the options and strategic planning.
- Use resources like the SHOP Marketplace and tax credits available to small employers.
- Get support from brokers and consultants to match plans to your workforce’s needs and budget.
- Implement ancillary programs that promote employee health and well-being leading to cost savings.
- Stay informed on the range of plans and alternative models to make the best choices.
FAQ For Affordable Health Insurance for Small Business
Q: What is COBRA health insurance?
A: COBRA is a federal law that lets employees extend employer health insurance after leaving a job. They pay the full premium but keep coverage active for 18-36 months.
Q: Can I buy insurance across state lines?
A: No, the ACA does not allow the purchase of small-group health insurance across state lines. Policies must be filed and approved within each state.
Q: Should I consider international medical insurance?
A: For small companies with remote staff worldwide, international medical plans can ensure coverage. But for domestic-only employees, they likely aren’t necessary.
Q: Can I reimburse employees for individual plan premiums?
A: Yes, through Individual Coverage HRAs. This gives employees tax benefits while providing more plan choices.
Q: What other costs factor into small business health insurance?
A: Beyond premiums, you’ll pay group policy fees, enrollment costs per worker, commissions/broker fees, and taxes/surcharges that vary by state.