- Providing world class service and value for employee benefit group plans since 1987
For small businesses and large businesses alike, health insurance can be a major headache. There are so many questions surrounding what type of plan you should provide, how much to budget for, and whether or not you are even legally required to offer health insurance. If you are a small businesses owner trying to stay on the right side of the law but also want to keep your team happy, we’re here to help.
The following guide will help shed some light on small business insurance, how it can help you attract and retain quality employees, the different types of group insurance you have to choose from, and how to shop around for the right insurance provider.
By law, some small businesses are required to provide health insurance and some are not. Specifically, small businesses with less than 50 full-time employees (or the equivalent number of part-time employees) are not legally obligated to provide health insurance, according to the Affordable Care Act (ACA). Since the majority of small businesses have fewer than 50 employees, most are exempt.
However, if your small business has 50 or more full-time employees, you are required by law to offer health insurance to said employees. Keep in mind that laws change, particularly when political administrations change, so make sure you have measures in place to always be up-to-date with current regulations. One of the best ways to do this is to work with a licensed, professional insurance broker.
Even if you aren’t legally required to provide group health insurance to your employees, there are a number of reasons why you should strongly consider doing so. One of the advantages is that offering health insurance as part of your employee benefits package is an effective way to attract top talent, as many prioritize benefits over salary when looking for jobs.
Being a small business, you may not be able to offer the same compensation as your larger competitors. However, you can make up for this by having appealing benefits, like small business health insurance. Aside from attracting talent, providing health insurance can also retain talent, boost morale, and increase productivity.
The healthier your employees are, the happier they will be. Not only does offering health insurance show them that you care, it also encourages them to stay on top of their health. Those with insurance are more likely to have routine checkups done and go to the doctor when they’re sick than those that do not. As a result, productivity of your entire workforce will increase.
There are also a number of financial advantages to offering health insurance to your employees, including tax breaks based on your state and the ability to deduct contributions from your taxes. Plus, if you use the Small Business Health Options Program (SHOP) Marketplace to purchase your small business health insurance, you may also qualify for additional federal tax breaks and credits.
When it comes to securing health insurance for your employees, buying individual plans is never the way to go. Instead, group health insurance is the most affordable way for small businesses to provide health insurance. It is often considerably cheaper than purchasing individual plans, as the insurer’s risk is dispersed between a group of policyholders.
To qualify for small business group health insurance, your small business must have between one and 50 employees. Though, this can vary slightly based on the state you live in. Other requirements include:
Your part-time and seasonal employees do not count towards the group, though you do still have the option of offering them group health insurance.
Note: If your small business is family-run, make sure to verify your eligibility for group health insurance, as you must also have employees that are not related to the owner in some way. If your company only consists of family members, you will need to apply for family health insurance instead.
The four main types of group health insurances that small businesses can select are as follows:
HMO plans consist of a network of doctors, hospitals, and other care providers. They require the selection a primary care provider (PCP) to handle your care and members can only use providers in the HMO network in order to receive their benefits.
This type of health insurance is often the cheapest, with fixed copays, and low deductibles and premiums. Though, members must receive a referral from their PCP in order to see a different doctor, even for regular care.
These plans are the most common form of health insurance available. With this option, you are not required to choose a primary care physician. Instead, members receive maximum flexibility when it comes to selecting providers, as PPO networks are much larger than HMO networks. Members are able to choose both in-network and out-of-network doctors and hospitals.
However, premiums are generally higher with PPO plans and participants will pay higher out-of-pocket costs if they choose to go outside of the network. If you desire more flexibility out of your health insurance plan and still moderate cost-savings, a PPO plan may be the ideal choice for your small business.
These types of plans are ultimately PPO plans that are intended to be paired with a health savings account (HSA). An HSA is a bank account where participants can set aside their pre-tax dollars to be used at a later date for medical expenses. To qualify for an HSA, members need to have a high deductible health plan, or HDHP.
The most significant advantage of a health savings account is the triple tax benefits, meaning you contribute with pretax money, pay for health expenses with pretax money, and then get compound profits tax-free. Plus, you’ll never lose your money as any unused balance in an HSA automatically carries over to the next year.
Though, on the downside, the high deductible of HSAs often deters members from seeking out medical care at all.
With indemnity health plans, also called “fee-for-service” plans, participants are able to manage their own healthcare and visit any physician or doctor they choose. The insurance company is responsible for a fixed portion of your total medical bill. Essentially, these plans issue cash payments to the member when a qualifying incident occurs, such as an accident or serious illness.
They don’t, however, provide comprehensive coverage. The benefits associated with an indemnity plan only apply to specific incidents, like a doctor’s visit or admission to the hospital.
Shopping around for the ideal small business group health insurance plan can be an exceptionally difficult and time-consuming process. There are numerous ways to accomplish your goal of obtaining health insurance to offer to your employees and while outsourcing a lot of the work is helpful, it will cut into your budget.
If your small business has less than 50 employees, here are some of the ways to go about finding affordable small business health insurance coverage:
If you do the research and have a good grasp on the insurance companies and plans that best fit the needs and preferences of your business, you can absolutely contact those providers directly. While some may only allow you to go through a broker, companies like United and Aetna will openly with small business owners.
The Small Business Health Options Program (SHOP) is an insurance exchange database created by the Affordable Care Act. By using it, you may be eligible to get tax credits of upwards of 50% of premiums, thus saving your business a ton of money in your search for health coverage. SHOP allows you to find health insurance based on your state with user-friendly charts to compare a variety of tiered plans.
Also commonly called private health exchanges, purchasing alliances are micro marketplaces that connect small businesses so that they can purchasing health insurance together as a group. This lets you offer multiple choices to your employees, instead of single one-size-fits-all health plan. Plus, it also decreases costs for everyone involved.
Although purchasing alliances are great for giving your employees choices, as the business owner you will not get the same tax credits and comprehensive selection that come from using SHOP.
While hiring a professional insurance broker is an added expense, it can save you a ton of time and effort in narrowing down the ideal plan that fits you, your business, and your employees. Brokers will tackle all the unpleasant paperwork, keep you legally compliant, help you implement your chosen plan, and be available when it comes time to renew.
If it’s a professional insurance broker that you need, the team at Taylor Benefits Insurance Agency can help! Contact us today to start developing the best plan for your small business.
Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.
Todd Taylor with Taylor Benefits gives our small business the kind of personal service we need. Insurance benefits are important to our employees and Todd helps us find a balance between benefits and value. Todd responds immediately to my phone calls & e-mails. He has even gotten in touch with me on a Sunday when we were in need of coverage answers immediately. We are very pleased with the hands-on service Todd and his staff provide.”
-Ken and Linda Orvick, Orvick Management Group, Inc.
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