Small Business

Supplemental Health Insurance for Small Business

Updated on December 09, 2019


While numerous studies and surveys highlight how health insurance is one of the most popular benefits among employees, small business owners creating a benefits package for their workforce may be wondering what other worthwhile employee benefits they should consider.

Although they are typically not required to do so, many small businesses decide to separately offer supplemental health insurance plans to help their employees with paying for medical expenses not otherwise covered through their group health plan.

What is supplemental health insurance for small business?

A supplemental health insurance plan provides separate coverage for medical services that a basic essential group medical plan does not cover.

Examples of common supplemental insurance plans for small businesses include:

Supplemental health insurance is optional, and a small business (with less than 50 full-time equivalent employees) is not required to offer this kind coverage to its workers. Still, depending on your company’s budget and coverage preferences, it may be worth exploring the possibility of providing supplemental insurance plans to better meet the medical needs of yourself and your employees.

What are the most popular small business supplemental health insurance plans?

According to a 2018 eHealth survey, the two types of supplemental insurance most often offered by small businesses to their employees are dental (52 percent) and vision (41 percent) insurance plans.

  • Group dental plans – The main types of supplemental dental insurance are indemnity plans (which usually have less network restrictions), managed-care plans (such as PPO and HMO plans, which usually require a provider network), and discount plans. You can learn more about these group dental plans by reading our comprehensive guide to supplemental dental insurance.
  • Group vision plans – The two primary forms of vision insurance are ancillary insurance (which covers a percentage of eye care costs, while your employees pay the rest out of pocket) and optional rider insurance (which provides access to a specific dollar amount of insurance coverage by paying a monthly premium). Learn more about small business vision coverage here.

Source: eHealth 2018 Small Business Health Insurance Report

Why might a small business decide to offer supplemental insurance?

There are several compelling reasons why a small business may consider providing supplemental health insurance to its employees.

  • Hiring strategy – According to a 2018 eHealth report, 66 percent of small business owners offer group medical coverage to better recruit and retain the best employees. Prospective workers may be more likely to join companies that offer appealing benefits packages, and group medical, dental, and vision insurance tend to be among the most desirable of employer-sponsored perks.
  • Affordability – With vision and dental plans starting as low as $12 per month per individual on eHealth, it is easy to see why a significant number of small business owners decide to offer supplemental health insurance benefits to their workforce. Your small business may also be able to limit your actual costs through tax deductions and cost-sharing for employee premiums.
  • More comprehensive coverage – No one wants to be uninsured when they need a major dental procedure or new pair of glasses. Making supplemental insurance available to your employees may provide more complete coverage for less frequent yet equally important medical services.

Overall, even though offering supplemental health insurance coverage means paying for a larger portion of employee premiums each month, the long-term benefits of offering additional plans may well outweigh the costs. Whether in the form of greater employee retention or coverage when you and your workforce need it most, supplemental plans may provide significant advantages for your small business.

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.

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