You have a small business, and while your goals and the needs of your workforce may not be the same as a bigger enterprise, they are just as important. That’s why we’re going to help you find the best small business health insurance plans.
Not only are small business health insurance policies legally mandated under The Affordable Care Act (ACA) for any business with 50+ people, but they are a major incentive to prospective employees, helping you attract—and keep—the talent you want.
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Health insurance is essential to getting proper health care, but it’s also a major and potentially financially crippling, expense. This is why 30% of employees are willing to accept a position where the wages were lower if the company offered a robust health insurance plan.
But you have to get your health insurance in place first.
Don’t sweat it: we’ve got you covered. Keep reading for a rundown of what you need to know to get the best group health insurance plans for small businesses, and why you need to make this plan part of your company’s growth plan.
But first—the basics.
There’s a pretty wide range in what constitutes a small business. Small businesses can have as little as one employee or as many as 1,500.
The U.S. Small Business Administration even considers companies with up to $35.5 million in sales of small businesses, though a company’s ability to fit into this definition also depends on the industry they are in.
When most of us think of small businesses, however, we’re thinking of companies with 500 employees or less. And these are the types of businesses that make up the majority of this slippery classification.
It used to be that you only really had one option: small group insurance. This is still a valid choice but now, you also have two other legitimate ways to provide your employees (and yourself) with health benefits.
Let’s take a look at your options:
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This form of fully-funded group insurance is most often used by employers with fewer than 50 full-time employees. The exception to this rule occurs in a handful of states where the insurance can also apply to businesses with up to 10 employees.
The way group health plans work is they provide coverage to a collection of people (employees of a business or members of an organization). The insurance is at a reduced cost because the insurer’s risk is dispersed across the group of people who have a policy.
As the employer, you purchase the plan but your employees can contribute to some or all of the payment, depending on what you choose. You can also offer them different levels of coverage, like gold, silver, or bronze for they have more control over what they spend. Keep in mind, however, that it is up to your employees to accept or decline participation in the policy. It’s not mandatory.
This point matters because in most cases, insurance companies need at least 70% participation in the policy for the plan to be valid.
The reason?
Remember that risk we talked about? If the risk pool is too shallow, it’s no longer profitable for the carrier to offer the reduced rate. And if you as the employer aren’t fronting at least a little of the cost of the premium, then you run the risk of not enough of your employees bothering with your small-group policy at all.
Incentivize Joining Your Small Group Health Insurance Plan
Small business health insurance plans are meant to be an incentive, so when you’re considering how much you want your employees to contribute, make sure the savings they accrue joining your policy are noticeably more than they could get buying their own policy off the state exchange–or, taking their talent to a company that will really invest in their health and well-being.
Another point to consider when thinking about small-group plans: do you want to include family members and dependents in the policy?
If yes, this will cost more, but it is a major advantage and will attract more talent and encourage less job-hopping—and job-hopping will cost you. On average, employers spend over $1,500 training each new employee they hire. So, the longer you can keep your employees around, the better for your bottom line and company morale.
Sweeten the deal with a small business health insurance plan
You can buy small-group health insurance plans through an exchange or broker. What’s more, you can register anytime. As a small business owner, you’re not limited to open enrollment periods.
Advantages of Small-Group Small Business Health Insurance Plans
Disadvantages of Small-Group Small Business Health Insurance Plans
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Self-funded plans mean that employers set aside funds in a special trust or account and then pay claims out of pocket. If you go this route, you can do the claim processing in-house or you can partner with a third-party administrator to do the processing, premium collection, and any other tasks that are part of the system you decide to set up.
With a self-funded insurance plan, you as the employer assume the risk—not an insurance carrier.
How to Set Up a Self-Funded Small Business Health Care Plan?
You won’t do it alone. Develop an administrative service agreement and enlist the help of a third-party administrator to come up with plan documents, even if you don’t keep this person on more permanently. It’s also worth considering bringing on board brokers, CPAs, and board partner fiduciaries to help streamline and simplify the process as you set it up.
You’ll have to ensure that you met HIPAA, ERISA, and other legislative mandates as well. Your team of professionals can help with this.
Finally, you’ll want to write up a plan description and Summary of Benefits and Coverage (SBC) that you can give to all employees who are covered.
Advantages of Self-Funded Small Business Health Care Plans
Disadvantages of Self-Funded Small Business Health Care Plans
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This final form of small business health insurance is fairly simple: employees pay their costs out-of-pocket and then submit a claim for tax-free reimbursement of their expenses.
HSAs (Health Reimbursement Arrangements) have undergone a recent transition and have more tax advantages. With these reimbursements, employees don’t have to recognize income tax, employers don’t have to pay payroll tax and reimbursements also count as tax deductions for the company when made by the company.
To establish an HRA, go through a third-party advisor to ensure your plan, which you can customize, meets HIPAA requirements.
You also want to make sure you are selecting the right HRA plan for you. There are two main types: Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) and Individual Coverage Health Reimbursement Arrangement (ICHRA). The main difference between these two plans is that ICHRA has no company size limit and no maximum contribution limits.
Talk to your CPA about which is right for you.
Advantages of HRA for Small Business Health Insurance
Disadvantages of HRA for Small Business Health Insurance
That depends on your business! If you’ve read through the three main options above, you likely have an inclination that one will suit you better than another. Talk to your CPA if you have any questions—they can help advise you so you make the best possible choice.
Know what you want? Request a free quote. We can help you get a feel for the pricing to expect.
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That depends on the option you choose. Regardless, there will be some expense, even if it’s mainly the set-up expenses of an HRA or self-funded insurance plan.
Request a free quote to get a better idea of the cost of health insurance for your small business.
The Affordable Care Act (ACA) has made some form of small business health insurance mandatory for any business with 50 or more employees.
That depends on your budget, your business and the needs of your workforce. HRAs and self-insured policy options can save you money, but they can leave you open to paying hefty claims incurred by your employees and cost a lot of time and money to establish. Traditional small-group small business health insurance plans generally have higher premiums, but you don’t have to shoulder any of the risk and there is no set-up cost.
