Establishing a successful business is hard work. However, navigating small business health insurance shouldn’t be. While each small business has its challenges and goals when finding health insurance, the good news is that there are now numerous opportunities to grab affordable health insurance plans.
At the most basic level, small business health insurance pertains to insurance policies that cover medical fees. It is a group health insurance plan that aims to meet the needs of smaller organizations, enterprises, and companies that may not have a fully functioning HR (Human Resources) department to organize health benefits for everyone.
Although some employers are legally required by the ACA (Affordable Care Act) to provide health insurance plans to their employees, depending on the size of their business, small businesses are not required. But even if you are not legally required to offer health insurance benefits to your full-time employees, it is a competitive benefit that can help set your small business apart, increasing your employee loyalty and health.
To make it easier for you, here is a thorough guide about everything you need to know about health insurance for small businesses, helping you choose which plans are the best for your business and employees.
So, to start, how does small business health insurance work? Here’s a gist of how small business health insurance works:
Insurers Can Never Deny your Application for Coverage
If your company is eligible for the insurance plan, your coverage is usually guaranteed to be issued by your selected insurer. It means that your business, including your employees and their dependents, are 100% covered on their pre-existing medical conditions, and the insurers have no right to turn you down. But all qualified employees on your team and their dependents can decide if they want to enroll in the new plan regardless of whether they have existing medical conditions or not.
You Need to Have One Qualified Employee to Be Eligible
If you want to qualify for the health plan, you need to have at least one full-time equivalent employee (1099 employees may also be eligible). But the rules may vary from state to state or from one insurer to another, so make sure you ask your local insurance companies and government to see what your localized requirements are.
Employers Need to Pay Premiums Costs
You need to pay at least 50 percent of the premium insurance costs that your employees pay monthly. The minimum percentage varies from one to state another or the insurers, and if you want to pay for your employees’ dependents, you have the option to do so. Contribution towards premiums for dependents has no minimum requirements.
You Can Apply and Change Coverage Year-Round
As an employer or small business owner, you can apply, shop, and change health insurance coverage anytime you want. You don’t need to wait for an open enrollment period to grab the best affordable health plans for your company and employees. After purchasing your health insurance plans, your premiums are active for a year, and if you change your mind, you can always change your coverage options.
During the year, if you hire new employees, you can add your workers and their dependents to the plan, or drop coverage for those who no longer work for your company. You can renew your coverage or shop for a new policy at the end of the year.
Small Business Health Insurance Basics
The small business health insurance is like any other insurance. It protects individuals if they need healthcare services or immediate medical care due to an illness or an injury. The costs employees or owners might pay for routine visits, emergency visits, or surgery will depend on the specific group health insurance plan the business owner gets.
To make it easier for you, here are the different health insurance terms and what they mean for you, as a business owner:
Deductibles are the amount of money you have to pay before your health insurance plan takes over and pays for you and your employees. Remember that lower premium costs per month may result in higher deductibles.
Also known as ‘copay.’ It is the fixed amount you pay for medical services. For instance, every consultation with the other doctor is $20, or every prescription is $10.
It is the percentage of the fees you will pay for healthcare services after you have reached your deductible amount. For instance, if you have a 30/70 coinsurance, you will have to pay 30% of the services’ fees, and your insurer will cover the rest.
This limit is the maximum fee the business owner is expected to pay for healthcare services in a calendar year. After reaching the limitation, your insurer will be the one to cover 100% of the services.
Health Care Provider Network
This network is a list of medical providers and health care facilities that will accept your insurance plan. In-Network is a particular list of specialists and providers that your insurance covers, while Out-of-network is a list of providers and specialists that your policy doesn’t cover.
Two Main Types of Health Insurance
There are two significant types of health insurance plans available to small businesses, which includes:
Group Health Insurance
It is a policy purchased by a small business owner. They typically offer health benefits to eligible employees of their company, and the eligible dependents of the workers. Employers and workers share the premium coverage costs of a group health insurance plan, but the employer must contribute a minimum percentage rate to the premium fees.
Individual Health Insurance
It is a policy purchased by a person for themselves for their family. All individual health plans provide coverage for employees regardless if they have pre-existing medical conditions or not. Small businesses can set up premium reimbursement arrangements to reimburse their employees without additional tax payments for individual health insurance.
What Are the Health Insurance Options Available for Small Businesses?
Although small business owners are not required to offer health insurance plans to their employees, many choose to provide it to keep the top talent around or attract new employees.
Here are some of the most popular company health insurance options available to smaller organizations:
Traditional Group Health Insurance Plan
The federal government established the SHOP (Small Business Health Options Program) to help small business owners offer group health and dental insurance coverage to their employees. SHOP is only available to businesses with fewer than 50 full-time equivalent employees.
Preferred Provider Organization Plan
PPO is a group health insurance plan that is the most common choice for most small businesses. Members, including the owner and employees covered under PPO plans, have the freedom to choose their preferred medical providers and facilities for their specific needs. However, the premium coverage costs for a PPO plan are more expensive, and out-of-pocket expenses may include co-payments, coinsurance for covered services, and annual deductibles.
Health Maintenance Organization Plan
HMO is a group health insurance plan that offers an array of medical services through an in-network source of providers with a contract exclusively with the HMO, or organizations that agree to provide services to the members under the HMO plan. Employees and owners under an HMO plan need to select a PCP (Primary Care Physician) to provide most of their health care and refer them to an HMO-listed specialist.
The POS is a group health insurance plan that combines the distinct features of PPO and HMO plans, providing employees and owners with semi-limited care options and lower coverage costs. Members under the POS plan generally pay small portions of the fees of covered services when they select healthcare providers in the POS network.
Qualified Small Employer Health Reimbursement Arrangement
The QSEHRA is a health benefit plan funded by business owners that reimburses their workers for healthcare expenses from a tax-free healthcare allowance that employers typically pay monthly. This arrangement allows small businesses to set their budgets but still offer proper coverage for their employees and dependents.
An integrated HRA works when small businesses offer their employees a group health insurance plan with a monthly coverage allowance for healthcare fees. A group plan for integrated HRA typically involves high-deductible policies.
Why You Should Offer Health Insurance for Company
Many small businesses choose to offer health insurance to their employees because it provides excellent benefits to both the workers and the company itself.
The following are some of the top benefits of offering health insurance plans as a small business:
- It Keeps Employees Happy
Providing health benefits to employees can ensure their happiness during their time at the company and help with employee retention. Offering competitive advantages can also help attract new talent to your business.
- It Improves Worker Productivity
Worrying about healthcare coverage and disregarding preventive care measures because of the costs can result in stressed or sick workers, which can significantly lower employee productivity. According to the CDC (Center for Disease Control), a healthier worker tends to be more productive. Providing insurance coverage to employees can reduce stress levels and encourage them to stay productive.
- It Saves You Money During Tax Time
An employer’s health care insurance premiums are tax-exempt, reducing, or even covering your tax obligations. Your contributions to premium costs are also tax-deductible, which means you can include the fees of your contributions during tax time or seasons.
Are Insurance for Small Business Health Plans Required?
Small businesses don’t need to provide health insurance plans to their employees following the Affordable Care Act. No company, firm, or enterprise is required to pay health insurance in the United States. Instead, the large firms that don’t follow the insurance coverage stipulations must pay a no-coverage penalty to the IRS (Internal Revenue Service) when they file their tax for the year.
In 2018, businesses with over 50 employees were the only ones required to offer full-time equivalent employees and their dependents with minimum health coverage. The employer must pay at least 60% of the premium cost coverage of their full-time workers.
How to Qualify for Small Business Health Insurance
On the other hand, smaller organizations, companies, and businesses have no requirements to provide insurance coverage to their workers. However, if a small business wants to provide health insurance coverage to their full-time employees, they should meet the criteria to qualify for the different health insurance policies:
- An employer must have at least less than 25 full-time equivalent employees
- The average annual salary that the employer pays their employees should be less than $51,600
- Employers must spend at least 50% of the premium costs of their full-time employees’
Navigating small business health insurance plans may feel daunting, but it doesn’t have to be! We hope this guide helped you understand everything you need to know about health insurance for small businesses to help you determine the best plan for you, your employees, your family, and your business.