As a small business owner thinking about how to offer small group health insurance, you have a few concerns. You want coverage that meets the needs of your employees’ but without costing a fortune for you or them.
And you probably have a number of questions concerning recent health insurance laws and how they might affect your business. Then there are the questions about what kinds of group health plans are available and the best way to apply for group health coverage.
We can help you with all of these questions and will address some of them here, but one thing is certain: the costs have increased over previous years.
Affordable Health Care Keeps Getting Less So
A Kaiser Family Foundation survey found that the average annual premium for families increased 5 percent in 2019. This works out to almost $21,000, with workers paying and average of $6,015 each year and their employers the rest.
These increases were supported by the National Business Group on Health, which surveys large employers, and found that the total cost of health benefits is expected to rise 5 percent in 2020.
A 2019 article in The New York Times noted,
“Adding to the cost are higher deductibles — what workers must pay for their medical care before their insurance covers it. The average single deductible is now $1,655, double what it was a decade ago, Kaiser found.
One bright spot, according to a survey by the National Business Group on Health: More large employers say they are expanding their health plan offerings beyond high-deductible plans. Just a quarter of employers surveyed said they would offer only high-deductible plans next year, down from 39 percent in 2018, partly because of worker demand.”
Small business owners who want to provide insurance options for their employees have many concerns to consider. In addition to cost, however, there is also the question of what type of coverage is best for them and their employees, the initial set-up, annual renewal, and any on-going maintenance that may be needed.
Assessing Your Small Business Health Insurance Plan Needs
Selecting the best health insurance plan for your small business should be a well-informed choice based on both your own priorities, and those of your employees.
Let’s look at some basic questions that need to be asked in order to determine the overall needs of your employees and your business:
Who will be covered under your health plan?
Perhaps you need a plan that covers you and your family as well as employees and their dependents. If so, you’ll need to find a group plan with coverage that is affordable for all parties and can provide for the various medical needs of those covered. For many plans, it will be required that a minimum number or percentage of employees participate.
For example, we have found that 65 to 75 percent of eligible full-time employees must participate in a program and they cannot have Medicare, military benefits, or be covered under a spouse’s group plan.
How much of the premium cost-sharing can your business cover?
Group health insurance is employer-sponsored coverage, which means that monthly premiums are typically paid for by both the employer and employees. In California, as in most states, employers are generally required to cover at least 50 percent of the monthly premium for their employees.
At JC Lewis, we are able to offer contribution options as low as 50 percent and, depending on the insurance carrier, you can also choose between a monthly fixed dollar or percentage contribution. We offer flat dollar contributions as low as $100 monthly per employee.
Do your employees want higher premiums and lower deductibles, or or vice versa?
As you may already know, most health insurance plans with lower monthly premiums have higher annual deductibles, while plans with similar coverage but with lower deductibles often come require higher monthly premiums.
This is a difficult choice for many individuals but if, as a group, you and your employees tend to require few doctor visits, it might be better to go with a plan with a higher deductible so as to have a more affordable monthly premium. However, the deductible should still be reasonably affordable in case emergency services are needed.
What kind of benefits are more important to your employees?
In other words, are costs more critical than breadth of coverage? HIPAA and other federal privacy laws prevent employers from asking about an employee’s personal medical history, but you can inquire about which kinds of benefits are most valuable to them.
For example, is catastrophic coverage for serious illness or hospitalization sufficient (along with high deductibles) or are low deductibles and copayments more important? You will also want to get a consensus on the value of coverage for vision care and dental care.
Getting Professional Help With Your Small Business Health Insurance Plan
A group health insurance plan is a great way to keep and reward your valued employees by offering medical protection for them and their families. J.C. Lewis Insurance Services offers a variety of affordable and flexible options allowing companies to choose portfolios and contribution options suited to their specific needs.
We assist small business employers with between 1-50 employees with the set-up, renewal and on-going maintenance required. We are contracted to sell policies only from the leading carriers licensed to do business in California.
Frequently Asked Questions about Small Group Health Insurance
1. What factors should small business owners consider when choosing a small group health insurance plan?
When choosing a small group health insurance plan, small business owners should consider the coverage needs of their employees, the cost-sharing structure, and the type of benefits offered. It’s crucial to balance affordability with comprehensive coverage to ensure that the plan meets the medical needs of both employees and their dependents. Evaluating whether employees prefer higher premiums with lower deductibles or vice versa can also help in making the best decision.
2. How have recent health insurance laws affected small group health insurance costs?
Recent health insurance laws have generally led to increased costs for small group health insurance. For instance, a Kaiser Family Foundation survey found that the average annual premium for family coverage rose by 5% in 2019, amounting to nearly $21,000. These changes often result in higher premiums and deductibles, making it essential for small businesses to carefully consider their budget and the financial impact on employees.
3. What types of small group health insurance plans are available?
Small group health insurance plans come in various types, including HMOs, PPOs, and high-deductible health plans paired with Health Savings Accounts (HSAs). Each plan type offers different levels of flexibility, coverage, and cost-sharing options. HMOs typically have lower premiums but require using network providers, while PPOs offer more provider choices at a higher cost. High-deductible plans can be paired with HSAs to help employees save for medical expenses tax-free.
4. How can small businesses apply for small group health insurance?
Small businesses can apply for small group health insurance through an insurance broker, directly with insurance companies, or via online marketplaces like the Small Business Health Options Program (SHOP). The application process involves providing information about the business and its employees, selecting a plan, and setting up premium contributions. It’s beneficial to work with a broker to navigate the complexities and ensure the best plan selection.
5. What is the minimum participation requirement for small group health insurance?
Most small group health insurance plans require a minimum participation rate to ensure a balanced risk pool. Typically, insurers mandate that 65% to 75% of eligible full-time employees must enroll in the plan. This requirement helps maintain a stable insurance pool and prevent adverse selection. Employees with alternative coverage, such as Medicare or a spouse’s plan, may be excluded from this calculation.
6. How much should small businesses contribute to employee premiums?
In most states, including California, employers are required to cover at least 50% of the employee’s monthly premium for small group health insurance. Some employers may choose to contribute more to attract and retain employees. Offering flexible contribution options, such as a fixed dollar amount or a percentage of the premium, can help manage costs while providing valuable benefits to employees.
7. What are the benefits of offering small group health insurance to employees?
Offering small group health insurance can significantly benefit small businesses by attracting and retaining talented employees, enhancing job satisfaction, and reducing absenteeism due to health issues. Employees value health coverage as part of their compensation, which can improve morale and productivity. Additionally, providing health insurance can lead to potential tax benefits for the employer.
8. How can small businesses manage the costs of small group health insurance?
Small businesses can manage the costs of small group health insurance by exploring different plan options, negotiating with insurers, and considering high-deductible plans paired with HSAs. Offering wellness programs and preventive care can also help reduce overall healthcare costs. It’s important to regularly review the plan and adjust contributions and benefits to maintain affordability.
9. What are the common challenges in setting up small group health insurance?
Common challenges in setting up small group health insurance include understanding complex insurance terms, meeting minimum participation requirements, and managing the administrative burden of plan enrollment and maintenance. Working with an experienced insurance broker can help small businesses overcome these challenges by providing expert guidance and support throughout the process.
10. Are there alternatives to traditional small group health insurance plans?
Yes, there are alternatives to traditional small group health insurance plans, such as Health Reimbursement Arrangements (HRAs) and Professional Employer Organizations (PEOs). HRAs allow employers to reimburse employees for individual health insurance premiums and qualified medical expenses. PEOs can manage employee benefits, including health insurance, on behalf of small businesses, often providing access to more comprehensive plans and lower rates.
