Getting coverage through a small business health insurance plan can be more affordable than buying coverage by yourself.
Updated April 12, 2019
How much does small business health insurance cost?
According to research published by eHealth in 2017, the average small business health insurance plan purchased through eHealth cost $1,769 per month in total premiums and covered three people.
Employer and employees then split these costs (ratio of who pays what will depend on certain laws and in some cases, the employer’s preference).
The 2017 eHealth study also found that:
- The average per-person premium for small group health insurance was $397 per month in 2017, compared to $440 for an individual plan. This means a difference of about $500 per person per year.
- Small group health plans had an average deductible of $2,754 per year, compared to $4,578 for individual plans.
Why is the average cost of small business health insurance lower than the cost of individual health insurance? This is partially because of the risk pool advantage, which is one of the primary theories of insurance. The Small Business Administration explains this value of group health insurance plans as follows: the larger the group of people, the more monthly payments there are coming in, meaning that the insurance company has more money available for when one of the enrolled members needs care.
In other words, getting coverage through a small business health insurance plan can be more affordable than buying individual plan coverage by yourself.
What factors influence the cost of small business health insurance?
It is important to understand that the costs mentioned above are averages. What you end up paying for premiums may be influenced by at least three factors:
- The ages of the people in your group and where you’re located
- Your preference when it comes to out-of-pocket costs
- How you shop for and buy coverage
Let’s examine each of these influences on plan cost in more detail:
Age and location of group plan members
First, your group plan costs may be affected by the age of the people who are going to be covered, and where you live.
Insurers set premiums by the ages and location of the employee group, as well as the specific plan features and coverage levels.
Under the Affordable Care Act, pre-existing medical conditions generally won’t affect your premiums, and no one can be turned down for coverage because of his or her medical history.
Second, if you want to spend less in monthly premiums, you may want to pick a plan with higher annual deductibles and out-of-pocket costs.
Conversely, if you want a plan that offers lower annual deductibles and out-of-pocket costs, you may consider paying more in monthly premiums.
Why is this the case? This is generally because determining out-of-pocket costs tends to be based on your answer to the question of whether you want to pay more up front and less when sick, or vice versa.
If you and your employees do not visit the doctor frequently, it may make sense to get a higher deductible plan, as long as the deductible is affordable in the case of a medical emergency.
When reviewing small business health insurance costs, your goal should be to find a balance between a monthly premium and annual deductible that works for as many people in your group as possible.
Shopping for coverage
Finally, you should know that who you buy your plan from will NOT affect your small business health insurance costs, but shopping around can still save you money.
You won’t save anything by buying a plan directly from the insurance company, instead of through a licensed agent, because insurance prices are fixed by law for each plan. However, a licensed agent that represents multiple insurers can help you compare multiple plans from different companies to find the best match for your needs and budget.
To learn more about your small business health insurance options today, visit eHealth.com.
This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.