Depending on whose data you look at, the United States is home to millions of small businesses. In fact, according to the Small Business Administration, there are currently 32,540,953 million small businesses in the nation and small business health insurance is a major concern for them.
And there are over four million small businesses in the state of California alone.
Of course, these numbers may vary depending on the criteria used to define a “small business”, such as the number of employees, annual revenue, or industry classification.
For example, under the Affordable Care Act (ACA), small businesses are defined as those with 50 or fewer full-time equivalent (FTE) employees. And a full-time equivalent employee is an employee who works an average of 30 hours per week or more.
With so many small businesses in the country, it is almost certain that some owners are not completely familiar with the basics of small business health insurance.
SMALL BUSINESS HEALTH INSURANCE: A 33,000 FOOT VIEW
First and foremost, it is important for any small business owner to understand that businesses with fewer than 50 full-time equivalent (FTE) employees are not required to provide health insurance to their employees under the ACA.
On the other hand, they are certainly able to and can derive several benefits by doing so. For example, the ACA offers health care tax credits to small businesses that do choose to offer health insurance plans to their full-time employees.
Small businesses may be eligible for a tax credit of up to 50 percent of the cost of the health insurance premiums they pay for their employees. However, there are stipulations. To qualify for the tax credit, all of the following criteria must be met:
You have fewer than 25 full-time equivalent (FTE) employees
Your average employee salary is about $56,000 per year or less
You pay at least 50 percent of your full-time employees’ premium costs
You offer SHOP coverage to all of your full-time employees. (Note: coverage does not have to be offered to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.)
So, you may be wondering at this point what “SHOP” is. The ACA established Small Business Health Options Programs – individually known as SHOP – to help small businesses purchase health insurance for their employees.
SHOPs are essentially online health care marketplaces where small businesses can compare and purchase health insurance plans from different insurance companies.
The major benefit of going through a SHOP is that it can be easier for you as a small business owner to provide health insurance to your employees and qualify for health care tax credits. And, by providing access to health insurance, you can help your employees stay healthy and productive, which can benefit both your employees and your business.
UNDERSTANDING SMALL BUSINESS HEALTH INSURANCE TERMS
Simply put, small business health insurance is a type of health insurance that provides coverage for small businesses and their employees. It can also include medical, dental, and vision coverage for owners and employees.
Small business health insurance premiums are the amount you and your workers pay on a monthly basis to purchase coverage for medical, dental, and vision plans, although some plans employ quarterly or annual basis .
Deductibles are the amount you pay before your insurance starts covering costs. These are often factored as out-of-pocket maximums which are the most you’ll pay during a policy period (usually one year) before the health insurance begins covering 100 percent of the cost of health care.
Co-pays are fixed amounts you pay for covered services at the time of care.
Co-insurance is the percentage of costs you pay after you’ve met your deductible.
Lifetime limits are the maximum amount your insurance will pay for covered services during your lifetime.
Drug formulary is a list of prescription drugs covered by your plan.
TYPES OF SMALL BUSINESS HEALTH INSURANCE
When shopping for small business health insurance, there are four main elements you should be aware of concerning small business health insurance:
Coverage
Number of employees
Employee premiums
Shopping for coverage
Small business health insurance plans are designed specifically for small businesses.
There are several types of small business health insurance plans available in the market. The most common types include small group health insurance plans, health savings accounts (HSAs), and health reimbursement arrangements (HRAs).
Small group health insurance plans are the most common type of small business health insurance.
These plans are designed to cover a group of people, such as employees of a small business, and their dependents. These insurance plans are typically more affordable than individual health insurance plans because the risk is spread across a larger group of people. Small group health insurance also offers a wider range of benefits, including preventative care, emergency services, prescription drug coverage, and mental health services.
Health savings accounts (HSAs) are a type of savings account that can be used to pay for medical expenses. HSAs are paired with high-deductible health plans (HDHPs), which are health insurance plans with high deductibles but offer lower premiums. HSAs allow employees to save money on a tax-free basis to pay for medical expenses.
Health reimbursement arrangements (HRAs) are similar to HSAs in that they are used to pay for medical expenses. However, HRAs are funded entirely by the employer and can be used to reimburse employees for qualified medical expenses.
FACTORS IN CHOOSING SMALL BUSINESS HEALTH INSURANCE
When selecting a small business health insurance plan, there are several factors to consider. These include the cost of the plan, the benefits offered, the network of healthcare providers, and the level of customer service provided by the insurance company.
The cost of small business health insurance plans will vary based on several things, including the size of your business, its location, and the age and health of your employees. It is important to compare the costs of different plans to find one that fits your budget. Keep in mind, too, that costs involve more than the monthly premium.
The benefits offered by a particular small business health insurance plan can also vary so it is important to consider the specific healthcare needs of your employees when selecting a plan. For example, if several of your employees have chronic conditions, considering a plan with comprehensive coverage for prescription drugs and specialist care may be more appropriate.
Also, the geographic coverage of a health plan’s healthcare provider network is an important factor to consider. Some plans may limit the number of healthcare providers that are covered, while others offer a wider network of providers.
Often overlooked, the level of customer service provided by the insurance company is important to consider. Small business owners should look for a company that provides responsive and quality customer service to help employees navigate the healthcare system. Customer service is critical for business owners and their HR staff, as well.
J.C. LEWIS INSURANCE SERVICES – YOUR SMALL BUSINESS HEALTH INSURANCE EXPERTS
Another “basic” fact of health insurance is that you can reduce costs and save money by working with an experienced broker. And working with J.C. Lewis means we are working for you, not the insurance companies. That means we are able to compare the coverage of various insurers so as to find you the best rates and coverage in the market.
In other words, we can provide you with unbiased, cost-effective, and best-fit health coverage policy recommendations.
J.C. Lewis Insurance, a family-owned firm that has been based in Sonoma County since 1979, is made up of expert brokers who offer small business insurance plans. For the last four decades our mission has been to provide expert advice and assistance to small business owners for group health insurance and group medical plans.
In addition, our firm only provides small business health insurance plans from the leading health insurance carriers licensed to do business in the states where we operate.
We are licensed and certified by each insurance carrier to offer coverage to small-group employers in addition to Medicare supplemental and prescription drug plans for seniors.
We’re happy to answer all your questions about health insurance coverageat J.C. Lewis Insurance Services, and you can be confident that we will help you find the right solution.
Small Business Health Insurance FAQ Section
1. What is considered a small business for health insurance purposes?
Under the Affordable Care Act (ACA), a small business is defined as one with 50 or fewer full-time equivalent (FTE) employees. This means if your business has employees who work an average of 30 hours or more per week, you’re likely classified as a small business for health insurance purposes. This classification impacts your eligibility for certain tax credits and health coverage options.
2. Is my small business required to offer health insurance?
If your small business has fewer than 50 FTE employees, you’re not required by law to offer health insurance under the ACA. However, providing coverage can bring several benefits, including potential tax credits and improved employee retention. According to the Small Business Health Options Program (SHOP), offering insurance helps businesses maintain a healthier, more productive workforce.
3. What tax credits are available for small businesses offering health insurance?
Small businesses with fewer than 25 FTE employees may qualify for a tax credit of up to 50% of premium costs. To be eligible, your average employee salary must be around $56,000 or less, and you must cover at least 50% of your employees’ health premiums. This credit can make a big difference in overall cost savings.
4. What types of health insurance plans are available for small businesses?
Small businesses can choose from several types of health insurance plans, including small group health plans, health savings accounts (HSAs), and health reimbursement arrangements (HRAs). Small group health plans are the most common, offering broader coverage for employees and often including benefits like prescription drugs, mental health services, and preventative care.
5. What is a SHOP health insurance plan?
SHOP, or the Small Business Health Options Program, is an online marketplace where small businesses can compare and buy health insurance plans. SHOP allows businesses to provide coverage to their employees while potentially qualifying for health care tax credits. It’s designed to simplify the health insurance shopping process for employers.
6. How do small business health insurance premiums work?
Premiums are the monthly (or sometimes quarterly/annual) payments businesses and employees make to keep health coverage active. These costs vary based on factors such as the number of employees, plan benefits, and the geographic location of the business. Comparing premiums across different providers is critical to finding a cost-effective option.
7. Can my small business employees use HSAs or HRAs for medical expenses?
Yes, employees can use Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs) to cover medical expenses. HSAs are paired with high-deductible health plans and allow employees to save tax-free for future medical costs. HRAs, on the other hand, are fully funded by employers and reimburse employees for out-of-pocket expenses.
8. What factors should I consider when choosing a small business health insurance plan?
When selecting a plan, consider factors such as the cost, the healthcare providers included in the plan’s network, employee needs, and the quality of customer service provided by the insurer. For instance, if several employees need specialist care, a plan with a robust network of healthcare providers might be best.
9. How can offering health insurance benefit my small business?
Offering health insurance can make your business more attractive to potential employees and help retain current staff. Moreover, healthier employees are more productive. Studies show that businesses offering health benefits experience less absenteeism, improved employee morale, and higher overall productivity.
10. Is dental and vision coverage included in small business health insurance plans?
Some small business health insurance plans offer dental and vision coverage as part of the overall package, but it’s not guaranteed. You may need to purchase separate dental or vision insurance. Employers should assess whether adding these benefits makes sense based on the needs of their workforce.
