Health insurance helps you attract and retain valuable staff, creates a supportive company culture and keeps everyone as healthy as possible. So it is a worthwhile investment.
The Patient Protection and Affordable Care Act actually requires you to offer healthcare coverage if you have more than 50 employees, but many businesses looking to attract top talent also offer healthcare benefits to smaller teams even though the average cost of employee health insurance can be high.
For example, in 2020, annual premiums for family health coverage supplied by employers were around $21,342. From premiums to deductibles, let’s take an in-depth look at the factors that influence small business health insurance and the differences between the various types on offer.
Small group health insurance costs
Employee healthcare costs can make it difficult for small businesses to find an affordable option that still provides ample support for their teams. However, opting for small group health insurance can actually come out cheaper than if all employees were to sign up for an individual plan. In fact, in 2018, the average per-person premium for small group health insurance was $409 per month but $440 for an individual plan. The cost of small group health insurance works like most individual plans, with a regular premium payment and deductibles that must be paid before the rest of the medical expenses are covered.
Another cost associated with small group health insurance is copayment, requiring employees to pay for specific medical supplies or services, such as types of therapy, specialist visits, or ambulance services. Not all plans require copayments, and they tend to be for in-network medical services only.
There are also out-of-pocket costs and maximums to consider for small group health insurance. Out-of-pocket costs are personal payments made for medical services, and a maximum is an annual limit on how much the business is responsible for sharing medical costs with the insurance company.
However, the maximum limit doesn’t apply to monthly premiums, balance-billed charges from providers outside the network, or services the plan doesn’t cover. The amount will vary depending on the business’s chosen plan, but plans with lower maximums tend to have higher monthly premiums and vice versa.
Options for business owners
There are several options available when searching for a healthcare plan for employees. The most common options are state or federal marketplaces. They are typically available for companies with less than 50 full-time employees, but some allow up to 100 employees to sign up. A business can enroll in any plan on one of these marketplaces whenever they want, but there need to be enough employees that wish to participate. Below are the four plan levels available:
These healthcare plans tend to have a lower monthly premium but very high deductibles, making them suitable for young and healthy employees who hardly fall ill. The average cost of employee health insurance for a bronze plan is about 30 to 40 per cent cheaper than the highest-level platinum plan.
Silver and gold plans
These two plans are very similar in price and offer much of the same benefits. They are best suited for employees with young families or many dependents because they tend to cover much of the cost of frequent doctor visits. However, the premiums are typically higher.
The highest-level plan on offer is best suited for an older workforce who have medical conditions requiring them to spend more on healthcare due to a wide range of tests, doctors visits, and procedures. They come in as the most expensive plans, but they cover what is needed for this group of employees.
The silver plan tends to be the best option as the balance between cost and benefits suits most employees. However, these aren’t the only four health insurance options available for small businesses.
You can check with your industry trade associations to see if they offer group health plans. Alternatively, you can use a third-party benefits administrator to handle the enrollment and keep the costs low. Similarly, it’s also possible to contact a traditional insurance broker, but there tends to be a lack of variety on offer, which is why the federal and state marketplaces are so popular among small businesses. Lastly, a business can contact an insurance company directly, but this doesn’t always guarantee the best rate.
Minimizing costs of health benefits
A business will never avoid employee healthcare costs altogether, but there are ways they can be lowered. One of the best ways small businesses can minimize costs is through a health reimbursement arrangement (HRA). These allow a company to receive the same quality benefits as a typical health plan but on a tighter budget.
In an employer-funded plan, the HRA reimburses employees for qualified medical expenses and can also reimburse insurance premiums in some cases. As the employer, you can also claim a tax deduction for the reimbursements.
Some other ways to lower costs involve carrying out an audit of your healthcare program and eliminating underused elements to streamline your offering. It lowers your costs and also ensures employees are getting the most out of their program. By providing various plan options, you can also help employees get the coverage they need without paying for what they won’t use.
You should also consider plans that offer virtual options such as telemedicine. These are often cheaper or are offered at no extra cost compared to expensive clinic visits. Equally, consider switching to a fiduciary provider instead of an expensive pharmacy provider, as they are obliged to act in the best interests of their clients.
The importance of health insurance
Offering health insurance to employees can bring so many benefits to your business. It improves employee satisfaction and helps ensure your team stays with the company for the long term. However, as a business, you need to make sure you choose the right plan for your employees and minimize the average cost of employee health insurance to make it worthwhile. Then you can all enjoy the benefits of a healthy, happy team.