Healthcare is not cheap – and the rising costs of insurance premiums do not just affect people on an individual level. Companies – especially smaller companies – often struggle to find affordable healthcare options. There is a delicate balance between meeting employee needs and ensuring your own financial security as a business. If you are a newer company still working to generate steady revenue, navigating the health insurance industry is even more difficult.
In addition to the question of cost, finding plans that encompass everyone’s unique health needs can also be trying. There are many unforeseeable factors at play, and a lot is contingent on overall employee health – which may not always be predictable.
While it can often feel overwhelming, you do have options. Even smaller companies can find something affordable with a little research and creativity. Below, we will provide a brief guide to help you get started.
What Are My Legal Obligations?
According to the Affordable Healthcare Act, if you have 50 or more full-time employees you must offer affordable healthcare options. In this case, affordable means employees cannot spend more than 9.83% of their household income on coverage. A violation of the ACA could have financial consequences for your company and you could end up owing a “shared responsibility payment” to the IRS.
If you have less than 50 employees, you are under no legal obligation to provide healthcare for employees. It may still be in your best interest to do so.
Health insurance is one of the biggest benefits employees look for when job hunting. Two thirds of businesses report offering health insurance as a way to both attract workers and retain them long term. Having health insurance also encourages a healthier workforce as it allows employees to be proactive about doctor’s appointments and routine examinations.
What Are Your Options As A Small Business?
While businesses with less than 50 employees may feel insurance is out of their price range, there are cost-saving options for smaller businesses on a budget. While you may not always be able to provide the same range of options as a larger company, you can provide adequate healthcare that will incentivize employees to stay with your company long term.
Group Health Insurance Plans
Group insurance is a medical insurance policy that provides health insurance to members of a company or organization at a lower cost. They are able to reduce prices because risk is spread across multiple members of the health plan.
To enroll, businesses need at least one full-time employee. Group health insurance usually requires 70% participation, so you will need to get the majority of your employees on board to enroll. The main benefit of group insurance is lower premiums. Depending on the size of your business, you may also qualify for a small business health care tax credit.
You can offer both HMO and PPO plans via small group health insurance. While HMOs usually have lower premiums, PPOs have greater flexibility when it comes to seeing doctors and specialists.
Association Health Plans*
Sometimes, small businesses can join with other small companies to buy large-group health insurance. This is usually reserved for companies with more than 50 employees, but you can get around this policy by applying for an association plan.
Association Health Plans can help you get the benefits of larger group plans – like more options for employees – even if you’re a smaller, younger company. It can also save money on overhead and administrative costs.
*As of July 1, 2021, all CA Association Health Plans must seek renewing existing large group contracts for small employers. By this date, no CA small employer will be eligible for an Association Health Plan.
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
Set up in Congress in 2016, under a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) you can offer employees a tax-free monthly allowance to put towards paying for their own healthcare plan. This is often cheaper than enrolling in group health insurance as it cuts down on administrative costs.
It also gives employees the flexibility to choose plans that make sense for their personal needs. QSEHRAs do come with a major downside as premiums are rising. A monthly allowance may not provide your employee with adequate coverage. However, if your business is young and growing, offering a QSEHRA until other insurance becomes financially viable can be a solid temporary solution.
How Can I Reduce Costs?
While health insurance for small businesses can be costly, there are many ways to reduce costs overall.
Providing an employee wellness program can help your employees stay healthier, keeping their premiums lower. This can include in-office health screenings, smoking cessation programs, or free gym memberships.
You should also shop around when looking at plans. The health insurance industry is huge, so different providers may have vastly different price ranges for similar services. Give yourself enough time to hunt for the best prices before settling on a plan.
Working with a third party insurance broker can be invaluable when it comes to finding a plan in your price range. Insurance brokers often have working relationships with major insurance companies, allowing them to negotiate the best costs. They also know creative ways to reduce costs overall.
Small Business Health Insurance: The Bottom Line
It can be hard to find a plan in your price range, but it is far from impossible. Having competitive benefits is key to attracting top talent. While your company may not be able to provide as extensive coverage as a larger company, you can provide coverage that meets your employee needs. When combined with other lower cost benefits, this can create an attractive benefits package that will keep your employees happy.
Need some help? At UBC Insurance Solutions, we worked for you – not insurance companies. We work one-on-one with every one of our clients to develop a cost-efficient benefits package to meet their unique needs. If you’re looking for ways to save, reach out here and someone will be in touch shortly.