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:
- 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.
So, when you’re thinking of purchasing health insurance for yourself and your employees – and possibly vision and dental coverage – you will likely have several questions and concerns.
We’re happy to answer all your questions about health insurance coverage at J.C. Lewis Insurance Services, and you can be confident that we will help you find the right solution.