Small Business Health Insurance

Saturday, March 30, 2024 12:54 Posted by Admin

While starting your own company is a massive undertaking in and of itself, finding the best small business health insurance can be one of the most challenging components of running a small business. With so many options to choose from, questions left unanswered, and likely just you, instead of an entire human resources department, it’s understandable to be a little overwhelmed when it comes to small business health insurance.

Continue reading to learn more about the importance of small business health insurance, how it works, the types of health insurance available to small businesses, and more.

How Small Business Health Insurance Works

As a small business owner, there are four key factors that you must understand regarding small business health insurance: number of employees, coverage, employee premiums, and finding the ideal small group health insurance coverage.

1. Number of employees: In order for your company to be eligible for small business health insurance, you need to have at least one employee on your payroll. Though, depending on the state you live in, you may be able to establish yourself as both the business owner and an employee.
2. Coverage: If you qualify for a small business health plan, your coverage is usually assured to be supplied by the insurance company. This means that neither you, nor your employees, nor your dependents can be denied coverage because of pre-existing medical conditions. It also means that all of your qualified employees and their dependents can sign up for a new plan, irrespective of their current medical condition(s).
3. Employee premiums: You are required to pay no less than 50% of your employee’s monthly health insurance premiums. Though, this minimum percentage may differ based on the state you live in and/or the insurance company you select.
4. Finding coverage: As the owner of a small business, you are able to shop around for health insurance coverage whenever you like. You do not have to wait for an enrollment period or for your current health plan to conclude. Once you select and purchase a particular plan, you are usually committed to that plan for at least a year. During this time, however, you can remove coverage for former employees and also add in new employees and their dependents. Then, once your contract runs out, you are given the option to renew your current plan or choose a new one.

Do Business Owners Have to Provide Health Insurance?

According to the Affordable Care Act (ACA), small businesses that have less than 50 employees are not legally obligated to provide health insurance to their employees. On the other hand, this means that businesses that have 50 or more employees are legally obligated to offer affordable group health insurance to said employees.

For the insurance to be deemed “affordable,” the employee’s yearly cost cannot be more than 9.78% of their yearly income. If you do not offer health insurance to your employees, you are subject to a penalty of $2,320 for every full-time employee after the first 30.

Why Offer Small Business Health Insurance?

Undeniably, starting up your own business can be pretty expensive. For this reason, it’s common for small business owners to shelve the idea of offering health insurance simply to stay on budget. Though, health insurance is crucial to the success of your business, as helps with attracting and retaining quality employees.

The following are just a couple reasons why, even if you’re not legally required, we highly advise offering small business health insurance to your team:

1. Group insurance generally costs less.

Individual health plans only give coverage to you and your dependents, while group coverage is purchased by a business and then offered to eligible employees and their immediate family members. As the name suggests, group health insurance provides coverage to members of a group – whether it’s members of an organization or employees of a company.

Since the insurer’s risk is spread across the entire group of insured members, group insurance is typically more affordable and also provides more extensive coverage.

2. Qualifying tax advantages.

By purchasing group health insurance for you and your team of employees, you may qualify for a number of tax credits. However, you must buy the plan through the Small Business Health Options Program Exchange, an insurance exchange developed by the Affordable Care Act, and meet these requirements:

• Have less than 25 full-time employees
• Offer health coverage to all of your full-time employees
• Pay no less than 50% of employee’s premium costs
• Issue annual salaries that are less than $50,000 per full-time employee, on average

If you, as a small business owner, meet these requirements, you may be eligible to receive up to 50% of your contributions toward employee premiums as a tax credit. This can greatly decrease the overall cost of providing health insurance to your team.

3. Increases recruiting success, retention, and employee productivity.

It has been proven that offering health insurance as a part of your employee benefits package is an excellent way to attract and retain top talent. It shows that you value your employees and many people prefer to have access to health insurance over a higher salary.

After all, a healthy team is a productive team. By providing comprehensive health coverage, you will increase employee productivity and morale. Employees that lack proper health insurance are less likely to get routine checkups or go to the doctor when they get sick. This can result in them getting even sicker and having to take time off of work.

Additionally, if you are a self-employed small business owner, having health insurance is absolutely critical. It protects yourself, your business, and your dependents in the event of an unexpected devastating illness.

Health Insurance Types for Small Businesses

When it comes to small business health insurance, you have four main options to choose from: HMO plans, PPO plans, HSA-qualified plans, and indemnity plans.

1. HMO (health maintenance organization) plans: These plans offer a comprehensive array of services through a network of providers that are contracted exclusively with the HMO, or agree to provide their services to members of the HMO plan. In most cases, employees that are on this plan have to choose a primary care physician (PCP) who will manage their care. If needed, the employee’s PCP will refer them to a specialist. HMO plans tend to be the cheapest option, but you can only choose doctors and facilities within the network.
2. PPO (preferred provider organization) plans: These are the most common form of health insurance out there, allowing covered employees the choice between in-network and out-of-network physicians or hospitals. However, if the employee chooses an in-network provider, the insurance company will be responsible for a bigger percentage of the claim.
3. HSA-qualified plans: This refers to PPO plans that are designed to be paired with a health savings account (HSA). HSAs are essentially bank accounts that let employees set aside pre-tax money to pay for future medical expenses. In order to be eligible for an HSA, participants have to have a high deductible health plan (HDHP).
4. Indemnity plans: These health insurance plans give members more control over their healthcare, allowing them to visit any physician or facility they desire. The insurance company pays a fixed amount of the total medical bills, but employees may end up having to pay for some services upfront and then apply for a reimbursement.

Average Cost of Small Business Health Insurance

Since there is such a wide variety of small business health insurance options to choose from and every business is unique, costs can vary considerably. Though, according to a report done by the Kaiser Family Foundation in 2020, the average annual premium for small businesses was $7,483 per full-time employee. Employers contributed about 84% of this premium, with employees left to fund the remaining 16%.

Taylor Benefits Insurance Agency Can Help!

At Taylor Benefits Insurance Agency, we have been helping small businesses like yours for more thirty years. Regardless of the size of your business, we can help you find the right health insurance plan that fits the needs of your company and your workforce.

We’ll assist you with all the paperwork, ensure that your business complies with pertinent laws, help you with implementation, and even provide assistance when it comes time to renew. Best of all, we focus on tailoring plans to the unique needs and budget of each company we work with.

So, what are you waiting for? Don’t hesitate – contact us now to get started!