How To Get Health Insurance For A Small Business – Small businesses are the backbone of the US economy – 99.9% of US businesses are small businesses. And almost half (46.4%) of all employees in the US are employed by one. That means the responsibility of providing affordable health insurance to a whopping 61.7 million American workers falls on small business owners.
Chances are you’re a small business owner weighing the pros and cons of offering employee health insurance and trying to determine what type of group health plan to offer. There are several things you can do for health insurance:
How To Get Health Insurance For A Small Business
Read on to learn more about what you can do for small business health insurance and why it’s so important to offer it to employees.
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According to healthcare.gov, health insurance is “a contract that requires your health insurance company to pay some or all of your health care costs in exchange for a premium.” Health insurance can be purchased as an individual or as a group.
Healthcare.gov defines group health insurance as “a health plan offered by an employer or employee organization that provides health insurance to employees and their families.”
According to the Kaiser Family Foundation (KFF), smaller companies are least likely to offer group health insurance. In 2022, the percentages of companies offering group health insurance are as follows:
The health insurance provider you choose will depend on the type of health plan you choose to offer.
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The main providers of fully funded plans are five legacy carriers known as BUCAH: Blue Cross Blue Shield (BCBS), United Healthcare, Cigna, Aetna and Humana.
Some legacy carriers also offer tiered financing plans, but there are modern health insurance companies, such as Sana and Oscar, that are more technological and specialize in tiered financing offers for small businesses.
Small business owners can also choose to offer health insurance through a professional employer organization (PEO), which acts as the official employer for many small businesses. PEOs allow small businesses to outsource their human resources functions and can give them access to lower health insurance rates than they could get on their own. The top PEOs are Paychex, Justworks, TriNet, ADP TotalSource, and Insperity.
There’s no denying the fact that healthcare, in general, is expensive. In addition, healthcare costs are rising every year – likely to increase by 6.5% in 2023.
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But there are ways to lower your health insurance costs while still providing great benefits to your employees. While traditional, fully funded plans are the most common (think big ones like Blue Cross Blue Shield, Aetna, Humana, United, etc.), their cost and unpredictability are forcing many small companies to look elsewhere. And where there is a demand, a solution will surely follow.
Self-funded plans are an alternative to traditional plans and are attracting small businesses across the country. It is important to understand the difference between a fully funded health plan versus a self-funded health plan.
A fully funded health plan is sponsored by the insurance carrier, not the employer. The carrier assumes all risks and maintains the policy. Your company pays a fixed monthly premium for the carrier to pay your employees’ claims and manage/administer the plan for you. No matter how many statements your employees make or how expensive those statements are, the carrier, not your company, is willing to pay (or refuse).
While a fully funded plan is predictable from month to month, it is very unpredictable from year to year. You may know exactly what you will pay during the annual term, but there is no way to know what you will pay next year. If your company’s overall health claims exceed what your carrier expected with its premium calculation, you can expect your rates to increase next year.
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A self-funded health plan is sponsored by the employer instead of the insurance carrier. This means that your company takes all the risk and pays your employees’ claims as they come.
This may sound overwhelming, but there are significant cost advantages with a self-funded health plan. First, by eliminating the carrier, you will avoid labeling fees and get some tax benefits. You also only pay for health care used by employees. Pay less when employee demands are low and more when they are high. A traditional carrier works like your car insurance: you pay a fixed premium regardless of whether or not there was any damage.
For even more protection against high claim costs, there is a type of self-funded health plan called a tiered health plan. A tiered plan includes stop-loss insurance to protect against “catastrophic” claims that could exceed your budget. Stop-loss insurance covers the excess above a set limit(s) that you must pay. If claims are higher than your limit, stop-loss insurance kicks in, and if claims are low, your company gets a refund to cover the difference. You’ll never see a refund from a traditional, fully funded plan.
Another benefit of some tiered health plans is that your employees won’t be required to choose “in-network” providers, no matter what type of plan they choose. For example, employees who want the cheapest plan with high deductibles don’t have to sacrifice the ability to choose their own doctors and specialists. Providing this flexibility to your employees is a great way to sweeten the benefits package that companies with traditional health insurance can’t do.
Health Insurance With A Pre Existing Condition
The Affordable Care Act stipulates that small businesses with fewer than 50 employees are not required to offer health insurance benefits to their employees or pay a non-coverage penalty to the IRS. That doesn’t mean you shouldn’t provide health insurance benefits.
Regardless of the size of the employer, health insurance benefits are a big deal for employees. A 2020 survey of 2,000 people found that 84% put health insurance at the top of their list of most desired benefits, and the Society for Human Resource Management (SHRM) reports that 92% of employees say benefits are important to their overall job satisfaction. . .
These numbers prove that benefits are a major contributor to talent acquisition and retention. Happy, healthy, well-cared-for employees are more loyal, productive and complementary to your business. Yes, health insurance plans can be expensive, but with so many small businesses (your competition) offering health insurance benefits, can you afford it? Think of health insurance benefits less as an expense and more as an investment that will result in higher quality employees.
If you are a startup or small business without health insurance benefits, now is the time to find a plan if you have the budget. The longer you wait, the greater the chance of losing good talent. To keep morale high and build your brand reputation, health insurance benefits should be a priority.
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Offering health benefits may depend on the size of your company. If you only have a few employees, you may not be ready to jump in right away, preferring to grow a bit first. Just remember that benefits have become an expectation, even for employees at the smallest companies. Some companies see their plan as another “assumption,” setting aside a portion of the budget they spend on a new hire for a health insurance plan that covers all employees. Startups often build the cost of a benefits package into their investor-funded financial plan.
Your employees have different health needs and budgets, so offering a variety of plan options is the best way to ensure that those who want to participate can find a plan that works for them.
Once you’ve selected health insurance and planned your options, you can offer health insurance to your employees as soon as your provider gives you the go-ahead. Open enrollment is a period of time that your employees must sign up for and is determined by the insurer. Not all employees need to apply, as some may already be covered by a spouse or parent’s plan, or may choose to seek their own health insurance.
Once open enrollment ends, employees who did not participate cannot enroll until the next open enrollment period, usually one year later. There are exceptions, such as if the employee has a qualifying life event (QLE) that includes losing a current health plan, getting married or divorced, having a child or adopting a child, or changing residence. New hires may apply at the time of hire, despite open enrollment dates.
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Health coverage is exciting, so market to your employees in creative ways across multiple channels. Be sure to allow time for questions and answers. Your healthcare provider should be able to answer any questions you cannot answer.
Sana lowers health care costs for small business owners and makes it easier for small businesses with lean (or non-existent) HR departments to offer health insurance for the first time. Get a quote today.
For most businesses, employer-sponsored health insurance is the second largest expense after payroll. When setting a health insurance budget, choose a monthly amount you can afford, keeping in mind that employers are expected to pay at least 50% of employee premiums (even if
