Health Insurance Options for Small Business
The ever-increasing costs of health care are not just a problem for individuals. They have also impacted companies of all scales that make health benefits a priority for their workers. Small businesses have been especially vulnerable to the rising costs of medical care. Over the last 15 years, the fees to cover each employee under a group health insurance plan rose to 200 percent, particularly from $2,000 to $6,000.
These unsustainable fees paired with the ‘one size fits all’ rules of conventional group or company health insurance benefits have caused many small business owners to stop providing their employees with health benefits entirely. However, with the increasing number of small businesses taking over, there are currently more Small Business health insurance options than ever before.
This post outlines your options to determine which is the best health insurance for your business and employees.
Why is Small Business Insurance Health Plans Important
Before laying out your options and choosing which one you should get for your small business and employees, you must first understand what these health insurance plans can do for you.
If you are planning on growing your business, having a competitive Small Business health insurance plan or package is key to recruiting and maintaining the top talent in the vast job market. Your firm is only as good as the team you assemble, so it is vital to ensure that these team-members remain loyal. Compensation is a massive driving factor for employees, but other things like healthcare benefits are also essential to today’s workforce.
These benefits are not just critical to ensure that your employees are happy and covered, if you fail to provide competitive health insurance plans for your workers, you can face severe financial repercussions and even lose employees to competitors. A study by the SHRM (Society for Human Resource Management) showed that the average cost to find a direct replacement could take up to 50 to 60 percent of a worker’s yearly wages.
Turnover can be quite costly. To avoid spending additional funds on frequently replacing unsatisfied employees, you have to make sure you get the best health insurance plans to help secure the top talented individuals. It enables you to progress the growth of your business.
Your Options for Health Insurance for Small Businesses
Traditionally, small group health insurance has been the leading choice for most small employers from any state seeking health insurance benefits for their employees. However, because of the increasing costs of health care, group health insurance can do more harm than good for employees, damaging their pockets and profits.
But you do not have to worry as there are now numerous Small Business health insurance plans that you can get for your company and employees. What works best for you will depend on your company’s setup and how much a group health insurance or an individual plan is in your state’s geographic area.
The following are some of the best options for health insurance for small businesses in any state:
Small group health insurance
Conventionally, small group health insurance or the fully-funded insurance plan has been the leading choice for most small employers seeking health benefits. It is aimed toward small businesses with fewer than 50 full-time equivalent employees everywhere except four states where it applies to firms with fewer than ten employees.
A group health insurance plan provides coverage to a small group of participants that typically consist of employees or members of an organization. Members covered under the group health plan usually receive insurance at a reduced cost because the employer’s risk is shared across various groups of policyholders.
How does it work?
Business owners will purchase small group health insurance plans and offer them to their employees. Groups are the only ones qualified to buy these plans and not individuals, and they typically require at least 70 percent participation in the health plan to be valid. In each state, an employer must have at least one employee if they want to be eligible for the group health insurance plan and contribute to employee insurance premium costs. You can sign up any time within the year for this plan instead of the open enrollment season.
Employees and employers share the costs of a group health plan, and it usually costs less because the risk pool is more significant. Small business owners can place most or even the entire cost of the group health insurance over to their employees, but it is ideal to pay a portion of the premium fees to attract and retain top talent. Once a business owner chooses a health plan, group members can accept or decline the coverage.
You can get any of the group insurance plans for your small business in any state below:
- Preferred Provider Organization Plans
The PPO plan features higher premium costs but usually offers more extensive networks and gives employees and employers more flexibility. Members under the PPO plan do not have to choose a PCP (Primary Care Physician) and do not require a referral to see specialists. Employees and business owners can select any physician from any healthcare facility regardless of whether the medical provider is not in the plan’s network or they are. Out-of-pocket fees include copayments, coinsurance for covered services, and yearly deductibles.
If you want to have flexible access to choosing the medical providers for your health plan, you should get a PPO plan. Although it only provides moderate-cost savings, it can provide members with the best help from their preferred providers.
- Health Maintenance Organization Plans
This plan is more affordable than the PPO program. It offers affordable and comprehensive health coverage with low out-of-pocket costs. However, employees and employers can only choose from in-network PCPs and require a referral from them if members want to see a specialist. Out-of-pocket fees are limited to copayments for physician checkups, low yearly deductibles, and other covered services. The options of providers in the HMO network varies in each state.
If you want to save the most money when it comes to healthcare expenses for your employees and small business, you should get an HMO plan as members can only choose from in-network providers. Employees and employers have limited choice when it comes to an HMO plan, so the help they get may also be limited.
- Point-of-Service Plans
It is a hybrid that contains distinct features of HMO and PPO plans. The POS plan premium costs are mid-range when compared to PPO and HMO plans. However, the POS network size varies in each state. Employees and employers are required to select an in-network PCP but do not need a referral if they need a specialist. Members under the POS plan can choose to use the plan’s provider network for specific services and go outside to get other medical services.
If you want your employees and your business to have HMO-level savings but have a bit of freedom in choosing out-of-network services for specific medical needs, you should get a POS plan. It allows members to select the provider of their choice for particular conditions, allowing members to get the help they prefer in specific scenarios.
- Exclusive Provider Organization Plans
It resembles a traditional HMO plan; however, it only usually pays covered services delivered by providers in the state plan’s network. Employees and employers do not have to choose a PCP to handle their care, and it also does not require referrals to consult with specialists. However, EPO plans only have a small fraction of networks with active participating healthcare providers.
If you own a small business value cost-savings of a small network of providers without HMO plans’ restrictions, you should get an EPO plan to get the best help needed.
Small businesses can purchase group health plans at any state and time of the year instead of waiting for open enrollment, allowing employers to adjust their plans according to their and their employees’ specific needs.
Self-funded health insurance
A self-funded health insurance plan allows businesses to pay for their employees’ out-of-pocket claims instead of paying a fixed premium to an insurance company. However, this health plan is riskier as it requires small businesses to establish a full trust fund that both the owner and the employees contribute to pay the health insurance claims. Employers can add a ‘stop-loss policy’ if they want to limit the risk of facing financial consequences.
How does it work?
When small businesses opt for self-funding for health benefits for themselves and their employees, they need to set up a private trust fund that earmarks money to pay incurred claims later. However, if employees do not want to keep claim processing in house, a TPA (Third Party Administrator) is engaged in processing these claims. However, this can prove to be a massive risk for employers.
Self-funded health insurance can help small businesses save funds on insurance claims because of decreased administrative costs. You can save up to 25 percent in non-claims expenses.
Self-funded health insurance plans require small businesses to wait for open enrollment season, varying from each state. If you want to avail of this service, ensure you keep a lookout for the next enrollment date in your state to help you get the most cost-effective health plan.
An HRA is a tax-advantaged alternative to conventional health insurance plans where business owners reimburse their employees for individual insurance premiums on a pre-tax basis. It is more affordable care that strictly operates on reimbursements, unlike HSAs (Health Savings Accounts) or FSAs (Flexible Spending Accounts) that require accounts. Employees will have to pay the insurance company or physician directly and submit a claim to their employers to get reimbursed for the expenses they incurred, tax-free.
With an HRA, business owners can reimburse their employees without paying additional payroll taxes, and employees do not have to recognize income taxes.
How does it work?
The model of the HRA is straightforward. An employer will decide how much funds to contribute each month to the premium costs. Doing this will provide employees with standard information about how the HRA plan works and outsources administrative functions such as identifying coverage. Employees can choose a plan that works best to help them with their respective conditions, submit receipts for premium payments and healthcare expenses if they have visited a physician, and get reimbursed.
Here are the top three types of health reimbursement arrangement options for small businesses:
- Qualified Small Employer HRA
QSHERA is available to small businesses with less than 50 employees and does not offer health insurance, from dental to vision. All full-time workers that work for the company are automatically qualified for the QSHERA plan, but employers have the option to include part-time employees in the arrangement. For business owners to use their respective QSHERA amount, they must have a policy that meets the ACA’s (Affordable Care Act) requirements.
- Individual Coverage HRA
ICHRA is available to every business, regardless of the size, as long as they have one employee not directly related to the firm’s owner. A small business can provide various monthly amounts to employees based on employee classes, including seasonal, part-time, full-time, employer work locations, and workers that have not completed their waiting period. The ICHRA plan does not have a yearly cap on the amount business owners can offer to their workers. To use the funds from the ICHRA plan and get the nearly unlimited help needed, employees must have individual health insurance coverage.
- Group Coverage HRA
This branch of HRA is also known as integrated HRA, and it is available to all businesses that provide a group health insurance policy to their workers. The group HRA is only open to workers covered by the firm’s group health insurance policy. It has no yearly cap, allowing employers to offer almost unlimited help to their workers.
What Small Business health insurance policy you get will depend on your company’s current need and how much help you are willing to give to your workers. The requirements for these plans vary from each state, so ensure to see your state’s requirements for each policy to choose the best options for your business.
Is it Required to Provide Small Business Health Insurance for Company?
According to the Employer Mandate, the ACA requires all firm owners from any state with over 50 full-time equivalent employees to offer affordable health insurance, providing adequate help for each worker. To determine if this policy applies to your company, you need to see how many FTE you have on your firm. FTEs are workers who work full-time for your company or work up to 30 hours per week.
If you have 49 FTEs, you are not required by the law to provide insurance to your workers. However, if you have 50 eligible FTEs, you must provide them with the appropriate health insurance plans. However, it is better to offer health benefits to your workforce regardless of how many FTEs you have to keep your workers engaged, loyal to your business, and boost recruitment or employee retention.
How Much Does Small Business Health Insurance for Companies Cost?
Whatever insurance options you choose to help your business and workers, measuring the cost of health insurance includes time and money. For instance, if you choose a group plan, you will have to consider the percentage of insurance premium costs you are willing to cover. These considerations include whether you want to cover the employees and their families or use third-party services to find the best insurance since they charge you with additional fees.
Aside from considering the costs, it also takes time to research and compare health plans from different providers to see which meets your company’s specific needs, educate your team on their plan options, and set up and maintain the policy.
Although costs for each business will vary from the plans they choose and their state, the average premium cost per employee for the standard small group health insurance policy is $409 per month. It is a bit cheaper than the individual plan that can rack up to $440 monthly.
How to Choose the Right Small Business Health Insurance Plan
To select the appropriate plans for your company, consider the following factors:
- The Specific Needs of your Business
If you have decided to offer healthcare benefits to your business and workers, you must determine what your firm needs to find the best plan. These needs include the needs of your workers and their dependents, helping you tailor the policy to meet your team’s medical and financial needs.
- Compare your Options
We have established that there are numerous options that small businesses can use for their firm. To help you compare the options, and find the plans that best match your company’s needs, determine how much premium costs you and your workers can pay monthly. You also have to ensure deductibles, coinsurance, and copayments will be manageable for your team when receiving medical care.
Keep these factors in mind when shopping for a health insurance policy for your business, and always remember that what is best for one firm is not necessarily the ideal plan for the other. Consider your business’s unique makeup, company size, location, and market conditions to grab the best health insurance policies for your company’s growth.
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