Health Insurance Guide for Small Business Owners
Welcome to our health insurance guide for small business owners interested in providing their employees with health insurance options. In this article, we’ll cover the health insurance basics and walk you through key terms and concepts so you can work better toward the perfect health plan for your small business.
Understanding Health Insurance
Understanding health insurance is crucial to make informed decisions that benefit your business and employees. Health insurance helps manage healthcare costs by sharing the financial risk between the insurer and the insured. It can also assist in covering medical expenses like prescriptions, hospital stays, or doctor visits.
By providing your employees with effective health insurance plans, you’re helping them avoid shouldering the entire cost themselves.
Why Health Insurance Is Important for Small Businesses
A small business health insurance plan helps support your load-bearing employees. Your employees hold the company together on a much greater level than large companies. Caring for their health not only helps to keep them fit for work but also shows your employees that you care about their well-being.
Types of Health Insurance Plans
Choosing the right insurance place for your business can feel overwhelming with so many options available. Let’s break down the main types of health insurance plans so it’s easier to decide which is best for your employees and budget.
Health Maintenance Organization (HMO)
HMOs are business health insurance plans that limit coverage to doctors who are employed by the HMO or contracted specifically for the company. HMOs generally have lower monthly premiums than other plans on this list. However, they are limited in flexibility as all physicians covered by the business health insurance are in the same network.
Preferred Provider Organization (PPO)
Similar to an HMO plan, PPO coverage involves contracting with a network of medical professionals known as preferred providers. However, these two options diverge because PPOs offer coverage for when employees see professionals outside of the contracted network at a higher price.
PPOs are more affordable than many business health insurance plans, though they charge a higher monthly premium than HMOs. PPOs provide more flexibility to your employees but will come at a higher cost.
Exclusive Provider Organization (EPO)
EPOs are the local option for business health insurance. Exclusive Provider Organizations offer a local network of medical professionals and hospitals for employees and are generally more affordable than a PPO plan but costlier than an HMO.
Be aware that due to the local nature of EPOs, medical care may not be covered if you choose to get care outside your plan’s network, though this can change in the event of an emergency.
High-Deductible Health Plans (HDHP)
HDHPs are business health insurance plans with a higher deductible for employees to pay before the insurance company pays its share, but the monthly premium is usually lower for HDHPs.
HDHPs are HSA-eligible plans which can be combined with HSAs for tax-free health savings for medical purposes.
HRAs
HRAs aren’t business health insurance plans in the traditional sense.
Health insurance plans contribute directly to a network or health insurance provider, while HRAs are employer-funded group health plans where the employer contributes money for medical expenses throughout the year.
In this plan, the employee will use the funds from the HRA to contribute to medical expenses or even to pay for their own health insurance plan.
Rules for Offering Health Insurance to Employees
It is important to understand the rules for offering health insurance to employees.
Affordable Care Act (ACA) Requirements
The Affordable Care Act (ACA) was enacted in the United States to protect small businesses and their employees from overly expensive or otherwise unreasonable health insurance plans and policies.
As a small business owner, you are responsible for following ACA guidelines when offering health insurance to your employees.
Rules you should be aware of for your business health insurance plan:
- All businesses are required to report information about employees to the IRS, even if they don’t offer insurance to their employees.
- A 90-day waiting period in which you must offer health insurance to every full-time employee. The 90-day period begins on that employee’s date of hire.
- The Summary of Benefits and Coverage is information about the plans offered, which must be disclosed to each employee.
State-Specific Regulations
Business health insurance laws are regulated at the state level and may vary based on your location. It is important to be aware of your state’s health insurance regulations. Need help? GBS Benefits has experts who are prepared to answer questions and provide resources, simply reach out!
Health Insurance Employer Contribution Rules
Certain regulations are in place to ensure fair treatment and consideration are offered to employees who qualify for business health insurance plans by the employer. In this section, we’ll guide you through a few rules you should follow for your company plans.
Percentage Contributions
Employers are typically responsible for contributing at least 50% of the monthly premium for their business health insurance plans, though this varies by state. Check your state regulations for your monthly contribution requirement.
Fixed Amount Contributions
Though less commonly used, defined contribution plans and other similar business health insurance plans allow employers to make fixed-amount contributions. The employer contributes a specific dollar amount per month rather than a percentage of the monthly premium. Employers must still cover around 50% of health care expenses (depending on state laws) for each full-time employee, so be mindful of that regulation.
Do Employers Have to Offer Health Insurance?
Have you ever wondered, “Do employers have to offer health insurance,” or “Do I have to offer health insurance to all employees?” This section of the health insurance guide will show you the requirements for offering health insurance and the consequences of neglecting to provide a business health insurance plan.
Employee Thresholds
According to the most recent ACA employer mandate, all employers with 50 or more full-time employees must offer business health insurance options to their employees.
You should still consider offering a health insurance plan for your employees before reaching that threshold, as providing health insurance to your employees shouldn’t be done out of obligation.
Penalties for Not Offering Insurance
Under the Affordable Care Act (ACA), employers must offer coverage to at least 95% of their full-time employees and dependents.
Other regulations, such as offering no “affordable” coverage options or not paying the minimum cost of covered services, can also result in penalties.
The typical penalty for failing to meet ACA regulations is around $2,880/year for each full-time employee, minus the first 30 employees.
Strategies for Managing Health Insurance Costs
We know you want to give your employees the best without breaking the bank. To help you do that, we’ve compiled some useful strategies for finding the best health insurance plan while staying on budget.
Shopping Around for Plans
When shopping for different insurance plans, many variables can make your decision challenging. Consider the following factors to find the proper business health insurance plan for your employees.
- Number of full-time employees
- Unique needs of your workforce (are your employees more likely to need health coverage?)
- Monthly premiums
Juggling these different factors can be challenging, so professional assistance can help take the guesswork out of the equation. Discover how the experts at GBS Benefits can find the perfect fit for your business health insurance needs.
Wellness Programs
Many medical expenses that would require aid from health insurance can be prevented or avoided by healthy lifestyles.
Company wellness programs can greatly increase your employees’ physical and mental well-being, and GBS Benefits provides monthly health and wellness resources for your wellness programs.
Health Reimbursement Arrangements (HRAs)
Earlier in this health insurance guide, we briefly discussed HRAs and the differences between these arrangements and other health insurance plans. Simply put, an HRA is a group health plan allowing employers to contribute to a fund that employees can draw from for eligible medical expenses.
HRA contributions are up to the employer but can be significantly more affordable overall as you won’t need to pay monthly premiums for each employee’s health insurance plan.
Enhance Your Company's Employee Benefits with GBS Benefits
Employers have many factors to consider when choosing a business health insurance plan, which is why some of the most common types of are being displayed in this health insurance guide. Also included are some of the major regulations you should look out for in your contributions.
GBS Benefits has a team of experienced professionals capable of tailoring the perfect benefits packages for your company’s needs. Utilize our expertise to compile the perfect benefit package, complete with an ideal health insurance plan for your company.
Reach out for a consultation to learn more and discover your perfect health insurance plan!
