Running and building a business is a costly endeavor. While some businesses have greater overhead than others, no one gets away without incurring some level of start-up and then ongoing expenses. And, often times, health insurance costs can be a major expense, especially for small businesses.
For example, according to Zippia.com, employers pay 78 percent of single coverage employee health insurance plans and 66 percent of family coverage plans on average. When you consider that the average annual cost for premiums is close to $6,500 for single coverage in California, that’s close to $5,000 per year per employee that an employer is contributing.
And family coverage is significantly higher.
As the Kaiser Family Foundation (KFF) has reported, annual family premiums for employer-sponsored health insurance averaged more than $22,400 in 2022. KFF went on to note that, on average, workers were contributing $6,106 toward the cost of family premium last year, with employers paying the rest.
Some states are far more expensive for businesses, as well. While California, for example, ranks about halfway among all 50 states in terms of how expensive it is to start and run a business, states like Nevada,Colorado, and Arkansas are the least expensive. Others such as Minnesota and New York are the most expensive for business owners.
Some Steps For Lowering Health Insurance Costs
The United States has the most expensive health care in the world. Experts debate the actual reasons and underlying causes, but it is highly unlikely that there will be any substantial changes in the foreseeable future.
In the meantime, small businesses must take steps to effectively manage and even lower their own health insurance costs.
Here are some tips from LandrumHR.com for managing small business health insurance costs:
Survey potential and current employees to determine what benefits they value most
Provide benefit selection education to help employees understand their options
Add telehealth alternatives to your plan
Offer a variety of plan choices
Consider an HSA plan option
Utilizing the expertise and experience of a reputable insurance firm such as J.C. Lewis Insurance Services, for example, is also a great way to effectively manage your health insurance costs.
Five Tactics For Small Business Health Insurance Costs Management
There are several tactics that a small business can implement for effectively managing its costs around health insurance.
Here are five proven and actionable tips for managing your small business health insurance costs:
Shop Around for Competitive Rates
Obtain quotes from multiple insurance providers to compare prices and coverage options.
A good recommendation is to request quotes from at least three different insurance companies and carefully review the details to find the most cost-effective plan for your small business.
Implement Cost-Sharing Strategies
One popular approach is to provide your employees with an HDHP option and contribute to their HSAs to help cover medical expenses. This can result in reduced premiums for both the employer and employees.
In addition, encourage employees to take more responsibility for their healthcare expenses, leading to lower overall costs.
Embrace Wellness Programs
The goal here is to promote employee wellness initiatives such as preventative care, exercise programs, and healthy lifestyle choices.
By lowering health risks and promoting healthy habits, these efforts can lead to reduced healthcare costs over time.
Offer discounted gym memberships, organize health challenges, or provide incentives for employees who participate in wellness activities.
Evaluate Alternative Insurance Models
For example, consider partnering with other small businesses to form a self-insured group, which will allow you to share the financial risk and potentially access lower-cost healthcare plans.
Explore additional insurance models such as joining a captive insurance group.
These models may provide more control over healthcare costs and reduce premiums.
Educate Employees on Healthcare Benefits
Some good ways to do this are to conduct educational sessions or provide informational resources to ensure employees make informed decisions regarding their healthcare utilization and choose cost-effective options.
This will help employees understand their health insurance plans, coverage details, and cost-saving options.
It can also encourage them to utilize in-network providers, generic medications, and telemedicine services.
Remember, your business is not like any other and each small business has unique needs. Therefore, it’s essential that you assess your specific situation and consult with insurance professionals to tailor these strategies accordingly.
J.C. Lewis Insurance Services Can Help With Your Health Insurance Costs
We have been in the business of offering quality health insurance plans here in Sonoma County since 1979. J.C. Lewis Insurance Services works only with the leading health insurance carriers licensed to do business in the states that we operate in.
As a family-owned and operated health insurance agency for over 40 years, we, too, are a small business. Which means that we understand the particular needs and challenges small business owners face. In addition to being specialists in finding and managing affordable health insurance plans for small businesses, we are also licensed and certified by each insurance carrier we represent.
So, whether you’re considering small group health insurance for you and your employees or you’re simply looking to make changes to your existing plan, we understand that you’ll likely have questions and concerns.
We always welcome your questions about health coverage insurance, and you can be confident that we will help you find the right solution for your needs.
J.C. Lewis would love to be your preferred partner, helping you to make the right decisions for your company’s health coverage needs.
Frequently Asked Questions
1. How can small businesses reduce health insurance costs for employees? Small businesses can reduce health insurance costs by shopping around for competitive rates. Compare quotes from at least three different insurance providers to find the best coverage. Another effective strategy is to offer a High Deductible Health Plan (HDHP) and contribute to employees’ Health Savings Accounts (HSAs). This reduces premiums while still providing coverage. Additionally, incorporating wellness programs that promote healthy lifestyles can lower long-term healthcare expenses by reducing claims. Source: Kaiser Family Foundation
2. What are the most affordable states for small businesses offering health insurance? Some of the most affordable states for small businesses to offer health insurance include Nevada, Colorado, and Arkansas, where premiums are generally lower. On the other hand, states like New York and Minnesota tend to have higher costs. For example, California’s average premium cost for single coverage is around $6,500 annually, but other states may offer lower rates. Source: Zippia
3. What is the average contribution of small businesses toward employee health insurance? Small businesses typically cover around 78% of the premium for single coverage and 66% for family coverage. This means for an employee with single coverage, the business could contribute about $5,000 annually. For family coverage, where premiums average $22,400, the employer may cover around $16,300, with the employee paying the rest. Source: Kaiser Family Foundation
4. What are the benefits of adding telehealth options to a small business health plan? Adding telehealth options to a small business health plan can significantly reduce overall costs. Telehealth allows employees to access medical consultations remotely, often at a lower cost than traditional doctor visits. It also increases convenience and reduces the need for time off for medical appointments, which can enhance productivity. Source: LandrumHR
5. What’s the impact of wellness programs on small business health insurance costs? Wellness programs, such as discounted gym memberships or preventative care initiatives, can reduce health insurance costs by promoting healthier lifestyles. These programs help lower the frequency of medical claims by encouraging employees to adopt healthier habits, which can reduce premiums over time. Companies offering wellness programs have seen an average ROI of $3 for every $1 invested. Source: Harvard Business Review
6. How can cost-sharing strategies help manage health insurance costs for small businesses? Cost-sharing strategies, like offering employees an HDHP with an HSA, can help small businesses save on health insurance premiums. Employees contribute to their HSA accounts, which helps them cover out-of-pocket medical expenses, while employers enjoy lower premiums due to the higher deductibles. This approach gives employees control over their healthcare spending. Source: J.C. Lewis Insurance
7. Can small businesses pool resources with others to get better health insurance rates? Yes, small businesses can collaborate with others by forming self-insured groups or joining captive insurance plans. This allows businesses to share the financial risk and access more affordable group health insurance rates. By pooling together, companies can often negotiate better premiums than they would individually. Source: U.S. Small Business Administration
8. How does employee education on healthcare benefits reduce health insurance costs? Educating employees on their healthcare options can significantly reduce costs for small businesses. When employees understand their plans better, they are more likely to choose in-network providers, opt for generic medications, and use cost-effective options like telemedicine. This can lower the overall claim costs for the business. Source: Society for Human Resource Management (SHRM)
9. What are the cost benefits of offering Health Savings Accounts (HSAs) in small businesses? HSAs provide tax advantages for both employers and employees. Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free. For small businesses, offering an HSA plan can result in lower premiums due to the high-deductible nature of the health plan. It also empowers employees to manage their healthcare costs efficiently. Source: Healthcare.gov
10. How does offering multiple plan options benefit small business health insurance? Offering a variety of health insurance plan options allows small businesses to cater to different employee needs and budgets. Some employees may prefer a higher deductible plan with lower premiums, while others may want comprehensive coverage. By providing choices, businesses can balance costs while ensuring employee satisfaction. Source: National Small Business Association
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