Small Business Health Insurance Deductible
Published on April 18, 2019
Updated June 10, 2019
Whether you’re looking for a new small business health insurance plan or trying to understand your current one better, it’s important to know the various costs associated with the plan.
In addition to premiums and out-of-pocket maximums, health insurance deductibles serve as an important area to consider when choosing a small business health insurance plan.
What is a health insurance deductible?
A health insurance deductible is the annual dollar amount you may be required to pay out of pocket before your insurance company begins to make payments for your medical claims. Most people know about the health insurance premium, because this is the price that you pay every month, regardless of whether or not you used health care services; it’s important to know that this cost does not count toward your deductible.
Not all plans require a health insurance deductible. For instance, although there are many exceptions, HMO plans usually do not require a deductible, while the majority of PPO and indemnity plans do.
If possible, it is recommended that you choose a health insurance deductible that is no greater than 5 percent of your gross annual income.
Determining your annual health insurance deductible
The cost of your health insurance deductible will depend on your small business health insurance plan. A convenient way to think about annual health insurance deductibles for your small business is to look at them in relation to your monthly premiums.
- If you want spend less on health insurance upfront, then choosing a plan with a higher annual health insurance deductible can allow you to keep your monthly premiums lower.
- If you don’t mind paying more upfront and less when using medical services, then selecting a plan with a lower annual deductible may be a good choice for you and your employees.
- Keep in mind that you should look for an affordable health insurance deductible in case of medical emergencies.
Another similar yet useful way to look at health insurance deductibles is to review the metal levels of each plan.
- Small business health insurance plans with higher metal levels, like gold plans, usually have a lower annual health insurance deductible but higher monthly premiums.
- Small business health insurance plans with lower metal levels, such as bronze plans, usually have lower monthly premiums but higher annual health insurance deductibles.
Health insurance deductibles in a small business context
Choosing a health insurance deductible for your small business health insurance plan will often depend on the anticipated health care needs of your employees. For example, an employee with frequent medical costs from prescription drugs and office visits might select a plan with a low health insurance deductible, since they would be able to meet the deductible fairly quickly. He or she would then be able to split covered medical costs with the health insurance company through co-insurance for the rest of the year.
Conversely, a relatively healthy employee with minimal medical costs might choose a plan with a high health insurance deductible and low monthly premiums. For instance, the employee might not meet a $1000 health insurance deductible if he or she only spends a few hundred dollars annually on medical expenses, so this high-deductible plan would allow them to save money though lower premiums.
Health insurance deductibles may be more affordable through a group plan
Group coverage for small businesses can often be less expensive per person than an individual insurance plan. This is usually due to the larger risk pool advantage found in group coverage, since risks are spread across all members of a medical plan.
According to an eHealth report on small business health insurance, the national average small business plan deductible was 31 percent lower than the national average deductible for plans in the individual market in 2018. Average plan prices in 2018 were as follows:
- Deductible for small business coverage: $3,140
- Deductible for individual coverage: $4,578
Enrolling in a group plan for your small business health insurance can cover everyone together under one policy and can also help you and your employees save money with lower annual costs for health insurance deductibles.
Health insurance deductibles in perspective
Understanding health insurance deductibles can help you choose the right small business health insurance plan for you and your employees. In addition to health insurance deductibles, you should also review monthly premiums and out-of-pocket maximums when deciding on a group plan. Overall, selecting a group plan with lower annual deductibles may be able to save money for your small business.
Visiting eHealth’s website today or speaking with eHealth’s licensed health insurance agents can help you find the best small business health insurance plan based on your budget and coverage preferences.
Always consult your tax and legal advisors to understand your specific tax and compliance situation. This article is for general information and not intended to provide any tax or legal advice.