The Complete Guide to Selecting the Best Small Business Health Insurance Plan
Updated on December 04, 2019
As a business owner, you probably understand the benefits that a small business health insurance plan can provide your company, employees, and even your own family. You may also have concerns that you lack the resources of larger organizations, so you might wonder how the costs of buying and administering health insurance will impact your business. This guide to selecting the best small business health insurance will give you the information and resources you need to make good decisions for yourself and your company.
Most important, you should not make choices about small business health insurance costs in time or money before taking a few minutes to explore all of your options. These will vary by your location, business situation, and even personal preferences. At any time, you can start comparing a variety small business health insurance plans online at eHealth. You can also call to speak with a licensed, small business health insurance broker during business hours.
Small business health insurance facts
Before you explore small business health insurance options for your own company, you may benefit from some facts about the group health insurance market in the United States.
- According to the Bureau of Labor Statistics, eighty to ninety percent of medium-sized and large companies and government employers provide health plans for employees and their families.
- In contrast, only about half of companies with less than 50 employees offered small business health insurance.
- Since small businesses provide employment for such a large portion of Americans, only about 60 percent of all adults and 49 percent of children rely upon group coverage in the United States, according to the Kaiser Family Foundation.
Small businesses might struggle with the idea of offering group plans for a variety of reasons. Business owners commonly cite concerns over small business insurance costs for their company and for their employees. Since small businesses often lack a dedicated human resources department, owners also wonder if administering the plan will take too much time away from other activities.
You should know that none of these problems are inherent to small business health insurance. The licensed health insurance brokers at eHealth can answer questions, alleviate worries, and best of all, help you develop the right strategy to compare, buy, and implement group health insurance for your unique organization.
If you lack a good strategy to compare, buy, and administer group health insurance:
- You may not know that you can find a variety of health plans at various price points.
- You may adjust premiums by changing such factors as deductibles, copays, type of health insurance, and employee contributions.
- You may not have considered the ways that the benefits of small business health insurance can positively impact your bottom line through tax advantages, employee access to good medical providers, and even a better company image.
- Also, insurers and licensed brokers can offer support and online tools that make choosing, implementing, and servicing an employee health plan efficient and fast.
Why offer small business health insurance?
As noted above, large organizations usually do offer group health plans. At the same time, only about half of all small businesses provide employees with these benefits. Rather than focusing upon companies that don’t offer group medical benefits, you might find it helpful to learn why other small employers have chosen to provide their employees with these plans.
In a recent survey, eHealth asked their own small business customers why they decided to provide their employees with health insurance:
- Over 60 percent said that group coverage helped them compete for and keep good workers.
- About 40 percent of small employers felt a sense of responsibility towards their people. Almost 30 percent worried that employees and their families could not afford health insurance without help.
- Over half of the surveyed companies also offered such additional benefits as dental and vision plans or contributions to health savings accounts. They found that adding extra benefits made their company more and not less competitive.
- Even though small businesses won’t get penalized for failing to offer small business health insurance, over 90 percent of employers said that change to the law would not impact their own coverage. They may have gotten group health insurance to avoid the Obamacare penalty but decided to keep it even without it.
Small companies may have to operate with fewer resources than larger businesses or government organizations. Still, the small business owners who did choose to provide their employees with group coverage believed that these benefits gave them a competitive advantage over other similar companies. In other words, small business health insurance helped their company enjoy the competitive advantages of much larger businesses.
The surveyed small business owners also said:
- Group health insurance attracted and kept better employees and positioned the company as one that acted responsibly towards its employees.
- These ideas are also backed well by studies that demonstrate group health plans may help decrease turnover and attract new employees.
In any case, you might consider employee loyalty and increased competitiveness for good employees as strong advantages over other businesses that lack group health plans. These don’t even account for the main benefits that group health insurance provides, including affordable access to good medical providers. Business owners can help keep their employees healthy and in return, reap the rewards of having their workers appreciate them for it.
Instead of deciding that your business doesn’t need group coverage because similar companies lack it, you might begin to look at the ways that offering small business health insurance can give your company a competitive advantage over rivals.
Small business health insurance costs
As a small business owner, your primary alternative to having your own group health insurance may be an individual or family health insurance plan for yourself and your household. You also might expect your employees to do the same. When eHealth compared average small business health insurance costs to individual and family plans, they found that premiums for individual and family plans increased at twice the rate as group coverage.
Very often, owners of very small businesses and startups looked at group coverage as a way to hedge against price instability. Typically, group plans also offer guaranteed acceptance for the owner, other employees, and families. While business owners may implement medical plans to benefit their company and employees, they also do it to protect themselves and their own families. With that in mind, these are some average premiums for group plans for smaller companies from eHealth’s own data:
- Average per-person premium: $397
- Average per-individual deductible: $2,754
- Average total premiums each month for small business with an average group size of three: $1,769
In contrast, average per-person premiums for individual health insurance were about $440 a month, and that was for an average deductible of over $4,500. It’s very likely that a business can offer better health benefits for less money with a group plan. While eHealth serves all sorts of small businesses, average customers tend to run companies with three to four employees, including the owner. Business owners of these micro companies can also benefit by obtaining group coverage for themselves and their own families.
Premiums for your own business will depend upon such factors as the kind of plan chosen, the insurance company, the location, and the average age of employees. It only takes a few minutes to obtain competitive premium quotes for your own business with eHealth’s online quote form, and you’re also welcome to call to discuss your needs with a licensed broker.
Actual costs vs. small business health insurance premiums
You should remember that the premiums won’t represent the actual small business health insurance cost for your company. These factors should reduce the actual cost your company will pay for employee health plans:
- Cost sharing: With eHealth, about 40 percent of surveyed companies shared premiums equally with employees, and not quite half paid at least 75 percent.
- Tax credits: Companies with 24 or fewer employees may qualify for small business health insurance tax credits through the ACA Marketplace.
- Tax deductions: Small businesses can also take advantage of tax deductions for their small business health insurance costs, including premiums and administrative costs.
To estimate small business health insurance costs, you should consider how you want to share premiums with your employees. After that, factor in any tax credits and deductions that might further reduce the actual impact of premiums on your company’s bottom line.
Even if an average small business might have premiums of about $1,700 a month, the actual impact on the bottom line should be much less. Besides cost sharing and tax benefits, you may find that you can offset costs in reduced employee turnover, more competitive recruiting, and of course, better health. Some insurers may also offer discounts for companies with wellness and safety programs that help reduce the amount of claims.
An eHealth small business insurance broker can offer some guidance, but you may also run your numbers past your accountant.
Guide to Shopping for group coverage for a small business
To make sure that you can buy the best small business health insurance for your company, you can develop a strategy for comparing, purchasing, and implementing your group plan.
Your strategy should include:
- Making certain that your business qualifies for group coverage
- Determining which employees to offer benefits to
- Figuring out how to maximize employee participation
- Gathering the information about your business that insurers will need to supply quotes
- Learning about various insurance companies, plan, and plan options
Make sure your small business qualifies for a small group policy
At this point, you should ensure that your company qualifies as a group for health insurance. The definition of a small group can vary by state. This is a quick guide to small business health insurance requirements:
- Most states follow federal rules and consider a company with at least two employees who live in different households as a group. For instance, even if a small company employs both spouses and has no other employees, it might not qualify as a group.
- Some states allow self-employed individuals to form a group with only one employee, so you and your dependents can enjoy the benefits of small group health insurance even if you’re a sole proprietor or contract employee. Otherwise, you may need to buy an individual or family plan if you are your company’s only employee.
- Small business groups have a maximum of 50 employees. Insurers and the government typically consider companies with more than 50 employees to constitute a large group.
Typically, you need to offer coverage to all full-time employees if you offer it to any of them. You might not need to offer your plan to part-time employees or contract workers. On the other hand, some companies may offer group coverage to part-time or 1099 employees to help them qualify for group coverage and in some cases, for better rates.
These are some reasons to consider including part-time or contract workers in your group health insurance plan:
- If your population of 1099 or part-time employees is younger than your permanent employees, your entire business may benefit by allowing these contract workers to join your plan.
- If you’re the only permanent, full-time employee, you might be able to qualify as a small group if you open your plan to part-time or 1099 employees.
While you may need to offer to pay at least half of the premium for full-time employees to qualify for tax credits, you may not need to help fund the group plan for other employees. The rules can vary considerably, depending upon your state and tax benefits you may qualify for. A licensed health insurance broker at eHealth can give you the information that you need to make the best financial decision for your business.
Consider ways to maximize employee participation
Most states will require at least 70 percent of full-time employees to participate in the group or to have a valid exemption. Examples of exemptions could include having medical insurance through a spouse or through Medicare. Depending upon the state, the small business health insurance requirements for the participation rate could vary from 50 to 75 percent.
Obviously, you hope to encourage participation by offering a benefit that employees will find affordable and valuable. Previously, you might have only thought about the cost of health insurance for your company. At this point, you also should consider the amount employees would have to pay for their share of the premium. Of course, to actually use their coverage, employees will probably also need to pay for deductibles and copays. To satisfy your people, you will need to provide coverage that they find affordable to buy and to use.
To encourage participation, employers will need to shop for benefits that their employees will find both valuable and affordable. Before making a final decision about the health plan, you might consider surveying your employees to learn more about their expectations. You can use that information to shop for plans that offer the most value for a premium that both you and your employees find affordable.
Gather business and employee information
To obtain accurate small business health insurance quotes, you should prepare by gathering the following information about your company:
- Business name, start date, and physical address
- SIC industry code, tax ID, and payroll records
- Employee census with names, ages, ZIP codes, and the number of dependents
Compare types of group health insurance plans
You should also familiarize yourself with common kinds of small business health insurance. The most common kinds of group health plans use a provider network to help reduce costs for both insurance companies and plan members. Doctors, hospitals, and other medical providers will agree to charge the amount the insurance company allows in order to contract with them and join the plan network.
These are common types of small business group health insurance plans:
- HMO: Health maintenance organizations, usually called HMOs, do a good job of controlling costs; however, they typically only pay for care outside of the plan network when it’s an emergency or another unusual situation. With an HMO, you need to choose a primary care doctor and get referrals from that doctor to visit specialists. Most of the time, an HMO will be the cheapest kind of plan to purchase and to use.
- PPO: Preferred provider organizations, or PPO, also use a network to help control costs. At the same time, they will cover services outside of the network at lower amounts. While PPOs offer more flexibility than HMOs, they typically cost more to buy and use. You don’t need a primary care doctor or referrals for specialists.
- POS: These hybrids between PPO and HMO plans are called point-of-sale plans. A POS will still offer some coverage outside of the provider network, but it will require referrals for specialists. Expect to find POS prices between those of PPOs and HMOs.
- EPO: An exclusive provider organization is another kind of PPO-HMO hybrid. You still need to seek covered services inside of the network, save for rare exceptions, but you can visit a specialist without a referral from your primary care doctor. Like POS plans, premiums for an EPO should fall between those of an HMO and a PPO.
HSAs and high-deductible health insurance for small businesses
In addition, you may choose a high-deductible health plan that works with a health savings account, or HSA. You and/or your employees can contribute to this plan to help defray the cost of such out-of-pocket expenses as deductibles and copays. You must buy an HSA-qualified plan to use an HSA, but the savings account can also help pay for certain medical expenses, such as dental visits, that medical insurance does not cover.
These are some benefits of HSA plans for small businesses:
- Within limits, whoever makes the contributions can deduct them from their taxes, so they offer a way to pay for out-of-pocket expenses with pre-tax dollars.
- One good thing about HSA plans is that any unused money will roll over from year to year.
- Disciplined savers tend to be satisfied with high-deductible health insurance and HSAs.
Alternatives to typical small business health insurance
Very often, to obtain health insurance for a small business with one employee, the business owner may need to consider an individual or family health plan. As noted above, a few states allow business groups with only one employee, but they usually require at least two. In addition, some small companies may employ more than one person but expect them to either rely upon a spouse’s coverage or to buy their own plan on the individual market.
Depending upon your company’s situation, you could also consider some of these alternatives to group health insurance.
A qualified small employer health reimbursement account, called a QSEHRA, allows you to give employees a tax-free allowance each month. Employees can choose how to spend the money, and they can get reimbursed for their expenses.
Since employees may each have their own requirements or preferences, this option has grown increasingly popular because you won’t have to choose a one-plan-suits-all health insurance plan for everybody. For instance:
- An older employee with a family may want to spend more on their health plan than a younger employee who does not have children.
- Some employees may have insurance through a spouse and might want to use the reimbursement for out-of-pocket expenses.
Your business can simply set a budget for employees and let them choose their own options. You can learn more about setting up a QSEHRA on the IRS website.
An integrated health reimbursement account, usually just called an HRA, works somewhat similarly to an HSA but has some important differences.
This list contrasts an integrated HRA to an HSA:
- Like an HSA, an HRA account helps employees pay for certain out-of-pocket medical expenses that they may incur. An HRA isn’t meant to pay premiums. Also like an HSA, an HRA isn’t really an alternative to group coverage. Instead, it serves as a way to supplement health insurance.
- To earn tax advantages, the company doesn’t need a qualified, high-deductible health plan; however, an HRA does need to work with health insurance that offers minimum essential coverage, as defined by the ACA.
- Employees or employers might contribute to an HSA; however, only the employer contributes to an HRA account. While money in an HSA typically belongs to the employee, the money in an HRA belongs to the business.
Private health insurance exchange for small business
The rules for private exchanges can vary by state. Sometimes called health insurance coops, these private exchanges may allow groups of small businesses to band together to increase their purchasing power. While a private exchange may open up better alternatives, it also means that the business owner cannot customize the plan for his or her own business.
Taxable stipends for employee health insurance
Even though offering wage increases, bonuses, or other compensation for employees to use for health insurance isn’t a formal alternative, it’s surprisingly common. Small companies may simply offer extra money with the intention that employees use this money to buy health insurance or defray healthcare costs.
Since this doesn’t count as any sort of qualified plan, employees will have to report this extra income on their taxes, but in some cases, they may be able to deduct such qualified expenses as premium. Of course, the employer doesn’t have any way to force their employees to use the extra money on health insurance.
Examples of small business health insurance companies
Before you get started with your personalized quotes, you might have an interest in learning about a few popular companies that offer health insurance to small groups in most parts of the country. Depending upon your location, you may have a selection of nationwide and local insurance companies to choose from. Just as small business health insurance requirements can vary between states, so can the choice of insurers, plans, and premiums.
This list profiles some of the largest insurers that operate across the United States:
- Aetna: Founded in the 1800s, Aetna now boosts of a health insurance network with millions of providers and thousands of hospitals.
- Blue Cross and Blue Shield: The nationwide network of Blue Cross companies evolved from the oldest health insurance provider in the country and has members in every ZIP code and a contract with 90 percent of the nation’s healthcare providers.
- United Healthcare: The largest health insurance company in the country serves all 50 states and is heavily invested in innovation and technology.
Why call upon the licensed brokers at eHealth for help?
At eHealth, both the online quote system and licensed brokers can help you compare a great variety of small business health insurance companies in your own local area. This gives you an advantage over an agent who only represents one insurance company with a limited selection of plans. Even though you can purchase Obamacare small business coverage through eHealth, you can also gain access to plans that aren’t listed on the ACA Marketplace.
You won’t pay higher premiums if a broker assists you. Your request for quotes an information also doesn’t obligate you to purchase health insurance for your small business.
In return, these professionals can help you save time and money by:
- Helping you compare a variety of plans, premiums, and insurance companies
- Making sure that both you and your employees understand how various health insurance plans work
- Demonstrating the impact on your company’s bottom line of various choices
- Working with you and the insurer you select to implement your plan
- Uncovering solutions that you might use to reduce premiums and improve employee health
- Providing ongoing service to help resolve any billing or claims issues
- Assisting in renewals or new coverage selection
You can begin comparing customized group health insurance quotes for your business at any time online. All you need to do is to enter your ZIP code and the number of employees you intend to cover to begin. You are also welcome to call the toll-free number to speak with a licensed business health insurance broker. Besides group health insurance, eHealth can also help you find individual health insurance, dental insurance, and much more.