Building a business from the ground up is tricky enough as it is, without the added complication of finding the perfect small business health insurance plan. It’s common knowledge that small businesses and self-employed individuals face particular challenges when shopping for insurance. But by staying informed on all the options at your disposal, finding the best coverage for you and your employees can be a breeze.
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Small Business vs. Self-Employed
Before we begin, it’s important to make the distinction between small businesses and self-employed individuals with regards to health insurance. Whereas self-employed individuals typically opt for coverage to reduce any risks as they grow their business, those who own small businesses often sign up for health insurance plans out of necessity, as they recognize that hiring the best talent simply isn’t possible without employer-sponsored health benefits.
Why Small Business Health Insurance is Important?
Let’s not mince words; as the owner of a small business, purchasing health insurance is essential. Here are a few reasons why health insurance coverage is vital to your small business:
Financial Protection
Without proper coverage, your finances can be ruined. Indeed, insurance has helped many families and businesses avoid bankruptcy after an injury or hospitalization. As your coverage entitles you to lower medical rates, fees charged for a regular office visit will usually be twice as high without insurance, meaning that you could be on the hook for medical bills you could never afford to pay alone.
Health Protection
Medical care is expensive; without coverage, it can be difficult to afford the cost of quality care, particularly for major injuries and issues. However, health insurance isn’t just necessary for severe issues; preventative care and checkups included within your medical plan often lead to a healthier lifestyle. Lastly, health insurance ensures you get necessary treatments for life-threatening chronic conditions. If you don’t have coverage, you may not qualify for these treatments until you make an up-front payment.
Business Protection
Small business health insurance allows you to protect your business from your personal medical expenses. Unexpected medical expenses can hinder your business significantly, but limiting any personal liability will ensure that your business stays above water while you get healthy.
What health benefit options are available for small businesses?
Although small businesses are not technically required to offer health insurance, many opt to do so in order to keep their employees happy and healthy, as well as to attract new workers. Here are some of the most popular health benefits options available to small businesses:
1) Traditional group health insurance
The Small Business Health Options Program (SHOP) gives small employers the option to provide health and dental coverage to their employees. This option is available to businesses with 1 to 50 employees.
2) QSEHRA
The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) reimburses employees for their health care expenses from a monthly tax-free allowance. As such, it allows businesses to set their own budgets but still offer coverage.
3) Integrated HRA
An integrated HRA option allows small businesses to offer group health insurance plans in combination with a monthly allowance for health care expenses.
4) Health insurance purchasing co-op
Health insurance purchasing co-ops provide multiple small businesses with the option of banding together and collectively purchasing health insurance for their employees. However, it is important to note that the availability of purchasing co-ops varies from state to state.
What Is an Applicable Large Employer (ALE)?
Under the Affordable Care Act, an applicable large employer refers to any business that has employed 50 or more full-time employees for at least six months. To determine if your business meets the criteria of an ALE, you must count your full-time employees, as well as the full-time equivalent of your part-time employees. If the combined total of full-time employees and full-time equivalents is 50 or more, your business is considered an applicable large employer.
Types of Group Health Insurance Plans
A variety of different insurance plans are available to provide small businesses with numerous options when selecting hospitals and doctors. Ultimately, the best plan for you, your family, or your company will come down to the level of protection you desire, and the costs you’re willing to incur. Here are the four most popular types of group health insurance plans:
1) Preferred Provider Organization (PPO)
In essence, a PPO refers to a plan that requires those seeking insurance to get medical coverage from doctors or hospitals within a specific network. If you opt to receive services from a provider that is not in the network, the plan may only cover some of the expenses, or none at all. PPO coverage is ideal for those looking to save money and who don’t mind receiving services from specific doctors or hospitals.
2) Health Maintenance Organization (HMO)
HMO is a plan that offers a variety of health care services from a limited network of providers. The plan provides affordable, comprehensive health coverage with relatively low out-of-pocket costs, but most care must be done in-network to avoid additional costs. People who value preventative care, checkups, and immunization will benefit the most from HMO coverage.
3) Health Savings Account (HSA)-Eligible Plan
In most cases, these plans are a PPO with a HSA attached. These flexible spending accounts allow users to save pre-tax dollars for medical expenses. As this option is ideal for those who don’t visit the doctor too often, they tend to benefit healthy individuals the most.
4) Indemnity
With indemnity plans, members have the ultimate control over their health care, as they can visit the provider of their choice. Usually, members of these plans pay upfront and then submit their claims to an insurance company. But while this plan certainly offers a massive degree of freedom, the premiums associated with it are usually very high.
Individual, Family & Small Group Coverage
Individual, family, and small group coverage are relatively self-explanatory concepts. Individuals and families can apply for coverage if they do not receive it from a group plan, or if they do not like a group plan they qualify for. Meanwhile, group health insurance plans offer coverage that is subsidized due to the number of individuals in the plan. In these cases, the employer and the employee tend to share the costs of coverage. Usually, this coverage extends to dependents of the employee, too.
What are the differences between PPO & HMO?
There are several differences between PPO and HMO plans, but the major ones come down to flexibility and affordability. While premiums are often higher for PPO plans, they tend to offer a larger network that provides members with more flexibility than HMO plans.
How to compare small business health insurance options?
There are several factors to consider when weighing health insurance options for your small business. When conducting your research, we recommend looking at the following factors:
1) Monthly Premiums: It is vital to determine what you and your employees will be able to afford every month.
2) Deductibles, Copayments, and Coinsurance: Ensure that the type of payment required is manageable for both you and your employees.
3) Medical Provider Networks: Make sure your preferred doctor or hospital is included in the network of your insurer.
4) Prescriptions Drug Coverage: Ideally, the insurer and plan you select will cover the costs of certain prescriptions.
5) Coverage Add-ons: Some plans include vision and dental care to ensure that your employees are fully covered.
Tax Credits For Small Businesses
There is no denying that offering insurance coverage to your employees can be a costly ordeal; however, it should be noted that there is yet another benefit to consider. As a result of the Affordable Care Act, small businesses that provide group health coverage for their employees will receive significant tax credits. In other words, offering coverage is one of the best ways to reduce your company’s tax burden.
The Importance of Providing Health Insurance to Employees
There are a plethora of benefits to providing health insurance to your employees. Firstly, the pricing obtained with your group of employees will almost always be better than searching for individual or family plans. Secondly, businesses often struggle to hire or retain top-tier talent without offering health insurance. If your company requires highly skilled employees, you’ll have to provide coverage.
Small Business Health Insurance & You
If small business health insurance is of interest to you, your family or your employees, it’s vital to speak with an insurance specialist before making any impulsive decisions. Health insurance is always complex, and it’s best to examine all the options available before making a decision.
Differences Between Small Business Health Insurance & Individual Insurance Plans
While the coverage might be similar, there are several key differences between group health insurance plans and individual insurance plans.
Group health insurance coverage for an employee typically starts shortly after the employee is hired. Conversely, individual health insurance plans require more planning, as a new employee must spend time shopping for a plan. Whereas group health insurance plans provide your employees with coverage they may not be able to afford themselves, individual coverage essentially entails that employees must get coverage for themselves in compliance with the Affordable Care Act.
FAQ
Do Small Businesses Need to Offer Health Insurance?
Technically, small businesses are not required to offer health insurance under the Affordable Care Act. Instead, large businesses that don’t offer coverage to their employees will be forced to pay a no-coverage penalty to the IRS on their tax filing.
How Does Obamacare Impact Small Businesses?
Under the Affordable Care Act, businesses with the equivalent of 50 or more full-time employees must provide health insurance, or pay a tax penalty. Conversely, businesses with fewer than 50 full-time-equivalent employees are not required to provide health insurance, and won’t face tax penalties for not doing so. Regardless, it is vital to inform employees about whether they will be covered, as they are obligated to seek health insurance coverage under the Act.
Can I Reimburse My Employees for the Cost of a Private Insurance Plan?
No, employers cannot reimburse their employees for the cost of a private insurance plan. Under the Affordable Care Act, reimbursing employees for private insurance is no longer allowed, as of July 1, 2015. According to the Act, this type of arrangement fails to satisfy market reforms, and may be subject to a hefty penalty if applied.
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