How To Choose The Best Small Business Health Insurance

Are you offering your small business employees a health insurance plan you can be proud of?

From time to time, it’s important for all small business owners to evaluate the provided health insurance plan, and make sure that it satisfies the needs of their employees. Without the bandwidth, time, resources and connections that major corporations have, though, finding a suitable (and affordable) small business health insurance plan can be a challenge.

When you search for a new health insurance plan, tackle this logistically complicated process with a strategy in mind.

Do I Need to Offer Small Business Health Insurance?

This depends entirely on the number of employees in your company. As mandated by the Affordable Care Act, small businesses on the larger end of the spectrum (those with more than 50 full-time employees) must offer health insurance. The alternative, unfortunately, is paying a fine as a penalty.

Small businesses with fewer than 50 employees are not required to provide health insurance. However, offering medical insurance is a must for employers looking to remain competitive and retain employees.

Small Business Employee Health Insurance Keeps Workers Healthy, Productive, and Happy

If your employees have been with your company for a long time, then chances are they’re content with you, as an employer. Nonetheless, it’s your ongoing responsibility to give them as many reasons as possible to stay on, and not jump ship for a larger company with more resources.

Beyond merely checking off a box, health insurance can actually motivate employees to perform better in the workplace. According to a study by eHealth, 27% of business owners offer health insurance to boost productivity. The more flexible and comprehensive the health insurance policy, the more opportunity employees have to visit doctors and remain in the workplace.

Other business owners provide insurance plans because their employees would be unable to afford coverage otherwise.

Reaping the Benefits of Tax Deductions

While employee satisfaction is important, providing health insurance for your small business employees can pay off in other ways. Tax-savvy business owners can decrease the total cost of health insurance by claiming a tax deduction, assuming they meet the requirements.

As a business owner, utilizing an online bookkeeping service can help you to capitalize on other tax deduction opportunities, while you keep your eyes trained on growth opportunities.

Small Business Health Insurance Plans

In your search for the perfect health insurance policy for your business, you’re bound to come across a few popular options. These types of small business insurance plans control the type of medical care your employees and their families receive in a few ways:

  • Monthly insurance premiums
  • Per-visit deductibles
  • Freedom in selecting a doctor
  • Specialist referrals

HMO Plans: Minimal Costs, Barebones Provider & Specialist Options

Health Management Organization, or HMO plans, meet all of the basic criteria of an acceptable small business medical insurance policy. The premium and deductible costs are low, but with the reduced costs come greater primary care physician and specialist restrictions. Generally, this type of insurance plan works best for companies with younger employees without extensive healthcare needs. It also works well for business owners looking for their own policy.

The caveat here: in the event of an emergency, you may be left paying higher copayments for specialized treatment.

PPO Plans: Higher Costs & More Options

Preferred Provider Organization, or PPO plans, cost more for both employees and employers. With these costs, though, comes a greater degree of freedom. Employees enrolled in PPO plans have a higher degree of freedom in selecting their own doctors. This option is particularly important for companies with older employees, who might prefer to keep their physicians, rather than select a new one within the network. PPO plans also present fewer limitations for visiting specialists.

Additionally, you may also pay a percentage of the cost of the visit, rather than a flat deductible.

POS Plans: Greater Freedom, But With Required Referrals

Point of Service, or PPO plans allow the same degree of network freedom as PPO plans, but like HMO plans, require specialist referrals. Visits to specialists outside of your network will also incur lower copayments. The costs for these POS plans can also fall between PPO and HMO plans.

EPO Plans: Fewer Specialist Options Without Required Referrals

Exclusive Provider Organization, or EPO plans allow you and your employees to visit specialists without requiring a primary care provider referral. However, the options available will be decreased.

Other Small Business Health Insurance Options

For small businesses on the smaller end of the spectrum, typical health insurance plans might not make sense. These alternatives are perfect for businesses without the size to constitute a conventional group policy.

Purchasing Alliances: Small Business Group Health Insurance

Many business owners with fewer than 50 employees have good intentions in selecting an insurance plan, but are deterred by the costs. Purchasing Alliances and Associations are the perfect workaround.

In essence, these organizations unite business owners from separate companies together, allowing them to purchase plans at a reduced rate. These organizations may also offer multiple options.

Professional Employer Organizations

Like purchasing alliances, PEOs pair like-minded small business owners looking to cut costs on medical insurance policies. However, these plans also provide other convenient services for business owners as well.

S.H.O.P.

This government-sponsored health insurance policy enables business owners to purchase reasonably priced policies. Unfortunately, though, these plans may not always provide the comprehensive care options that business owners are looking for.

Small Business Health Insurance Cost

There are multiple types of costs associated with health insurance. These are some of the direct expenses that both the employee and the employer will pay.

Deductibles: Before the health insurance company begins covering your employees, they must pay a deductible.

Premiums: The health insurance premium is the amount paid in order to access healthcare services available under the plan. Generally charged on a monthly basis, the employer is required to pay at least 50% of this cost (though some opt to pay more), and the employee pays the balance. Plans with lower premiums tend to have higher deductibles, and vice versa.

Copays: While individual plans can vary, many require those who are covered to pay copayments. This is a per-visit fee, which can fluctuate depending on the deductible.

Aside from these direct costs, there are other variables that can affect the overall yearly price of health insurance.

Benefits & Health Conditions Covered

Health insurance plans with more extensive coverage are inevitably more expensive. While these plans might seem more desirable, companies with younger employees might prefer cheaper plans with fewer coverage options. Asking which conditions your employees would like to have covered is illegal, but making an informed choice based on coverage is crucial.

Type of Insurance Plan

Obviously, the type of plan that you select can figure into the cost of the policy as a whole. HMO plans are the cheapest option– but remember, you should also consider the opportunity cost of not offering a more flexible plan.

Time Spent Selecting & Managing the Plan

As a business owner, each managerial decision you make is time consuming, but health insurance especially. This process can be lengthy, but it doesn’t end there. You’ll also have to continuously fill out paperwork, touch base with employees about needs, and attend to open enrollment needs.

Cost Sharing: Finding a Balance Between Payments

How much of the total costs of small business health insurance will you, as the employer, pay for?

The answer to this question can play a significant part in determining the total cost of a policy. Employers are required to pay at least 50% of the cost of health insurance premiums. However, many business owners pay a higher share of these costs to further offset premiums for employees. Doing so can be a meaningful contribution, and play an important role in fostering a healthy, rewarding culture.

Naturally, the specific plan structure should also be a factor in the cost sharing distribution.

Health Insurance for Small Business With One Employee

Self-employed business owners without any employees face a unique challenge. They’re not required to provide a policy for anyone else (with the possible exception of family members), but the cost can still be high. Fortunately, there are ways to navigate around this problem without the same spending involved in a larger organization.

Group insurance plans– like the above-mentioned purchasing alliances and PEOs– are a great option, too.

Financing Health Insurance for Small Business

After all is said and done, medical insurance plans can be costly– there’s no doubt about it. Regardless, a slight lapse in revenue is no reason to miss out on the immense benefits of offering a policy that suits your company.

At National, our financing officers can help you access a true revolving line of credit to pay for the obvious and hidden expenses of health insurance. Between hiring a broker to discover the optimal insurance plan, paying monthly premiums and deductibles, and everything else, having cash on hand is a must. To get started, fill out our 60 second application, or call us at (888) 488-GROW!

About the Author, Joe Camberato
Joseph Camberato, President at National Business Capital & Services, developed a passion for business at a young age. Joseph has a true respect for anyone who owns a business and enjoys engaging them in discussions of how they “made it happen.”