Why Are Very Small Groups Turning to Small Business Health Insurance?
Updated on December 02, 2019
Updated August 1, 2019
With rising healthcare costs and an uncertain future for the health insurance market, this seemingly simple question has become an incredibly important challenge for modern businesses. Even if you don’t consider yourself a “business,” if you have at least one employee, you may be able to qualify for a small group health insurance plan and save money for everyone.
A report from eHealth shows that on a per-person basis, small group health insurance is more affordable, and has seen very little price increase (only 5 percent) between 2015 and 2018. On the other hand, the individual market has seen premiums increase 54 percent in the same period (from $286 in 2015 to $440 in 2018).
Likely due to this rapid increase of premium prices in the individual market, the same eHealth study also found that more and more very small businesses are opting to provide small group health insurance to their employees as a way to save on health insurance per individual.
Small group health insurance: what is it, and how does it save money?
The video below gives a brief explanation of group health insurance. Once you understand what this coverage is, keep reading to see how prices on small business plans have been relatively steady compared to the cost of individual plans.
The eHealth study found that very small businesses have been signing up for small group health insurance plans on a growing scale. The authors investigated what was driving this increase in small business health insurance coverage, and identified the following key factors:
- Cost Concerns– Cost is one of the most important factors in deciding what kind of coverage employers seek. More than 8 in 10 small businesses worry about affording coverage in the future, with 41 percent stating that they are “very concerned” and another 42 percent saying they are “somewhat concerned” about their continued ability to offer employee health benefits. This gives group plans a clear advantage over other options. In 2018, the average premium per person under a small business plan was 7 percent lower than the average premium for an individual plan ($409 vs. $440). The average deductible for small business plans was 31 percent ($1,438) lower than the average deductible for individual coverage ($3,140 vs. $4,578).
- Hiring Highlights– About 66 percent of small business owners in the survey said they offer small business health insurance as a way to attract and retain quality employees. This explains why such small businesses need access to affordable plans. Even though according to hhs.gov, businesses with less than 50 employees are usually not required to offer health benefits, many small business owners provide small group health insurance because they feel loyalty towards their employees and know that good workers are attracted to such benefits.
- Future Fears– Roughly 63 percent of employers said that if the premiums for their current health insurance plan increased by 15 percent, they would be unable to afford that plan. This suggests that while small group health insurance is a good option for very small businesses at the moment, it may not remain so if healthcare costs increase further.
Overall, the report finds both opportunities and risks. Very small employers that want to cover their employees have the chance to do so through small group health insurance plans. But this small business health insurance option may not be around for long, unless insurers and policymakers can find a way to keep premiums from going up.
Other small business health insurance insights
In addition to discovering that more firms are signing up for small group health insurance, the eHealth study found a number of other insights into the small business health insurance market, including:
- Limited Policy Impact– Both the passage of the Affordable Care Act in 2010 and the recent repeal of one of its key provisions were expected to have profound effects on the insurance industry. But at least for small business coverage, these effects seem fairly minor. The eHealth study found that 76 percent of respondents said the repeal of the ACA’s tax penalty will make no difference in their decision to offer health coverage.
- Additional Coverage– Besides providing basic health insurance, many small employers offer additional benefits in their small business health insurance plans. Likewise, 52 percent covered dental care, and 41 percent covered vision care.
For more information on group health insurance and other quality coverage options for individuals and employers, contact eHealth today or visit us at 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.