Finding the right health insurance for small businesses
Small business owners have a responsibility to do right by their customers. But first, they have to do right by their team. A big part of caring for your team is offering health benefits and insurance. That said, determining health insurance for small businesses is anything but simple.
Before you pick up the phone and start calling insurance companies, let's take a look at the different health insurance plans for small businesses, and who they're suited for. And make sure you ask yourself whether health insurance is something you even want to offer.
Do you need to have health insurance?
Contrary to popular belief, businesses don't need to offer employee health insurance, even to full-time employees. The Affordable Care Act (ACA), also known as Obamacare, gave way to the insurance marketplace, and greatly expanded Medicare. But it also made it possible for employers to forego the employee health insurance benefit.
That said, there is an exception to this rule. If your company has 50 or more full-time employees, you must offer health insurance as an option. Businesses that opt for health insurance can take advantage of the small business health care tax credit. This allows businesses to claim 50% of the health insurance premiums they pay on behalf of employees.
It's also worth noting that your business will have to pay a no-coverage penalty if you don't offer health insurance and have 50 or more full-time employees. This penalty amounts to $208.33 per month for each uninsured full-time employee after the 30th employee. That total might be less than the amount paid in health insurance coverage, but it can add up—especially if you have a large number of employees.
While you’re free to skip health insurance, it’s still a great perk to offer your employees. For businesses that plan to offer health insurance, there are several types of insurance that could be a great fit.
There are a number of small business health insurance plans, and each offers something different. To find the best plan for your team, you'll want to shop around and think about which insurance policies and coverage options are best for you. To get you started, here are the most common types of health insurance options:
1. Group health insurance plans
A group health insurance plan covers a group of people — in this case, your employees — with a lower health care cost than individual plans. Group health insurance plans are typically used by small business employers who need group coverage but don’t want to break the bank.
A group insurance plan generally covers less than an individual or private plan, but it comes with lower costs. If your business is still in its early stages, a group health insurance plan is definitely an option to consider. This type of coverage will allow you to offer some employee coverage, While also leaving capital free to help expand your business.
Once your business reaches a certain point, you'll want to consider leaving a group plan and moving to a traditional plan like a preferred provider organization (PPO). (More on this later.)
2. Individual health insurance
An individual health insurance plan is one purchased on the insurance marketplace. These plans are purchased by people within your company, and can also be purchased by freelancers needing individual coverage.
An individual health insurance plan typically comes with higher copays and higher overall insurance costs than a group plan or traditional insurance. However, individual plans still provide health insurance coverage and are far better than no insurance.
If you go the route of having your employees use individual insurance, they'll need to shop around the insurance marketplace and find the right plan for them. They'll be able to write off most of these costs as a deductible, but this doesn’t really count as providing insurance as an employer. This means you'll have to pay the previously mentioned no-coverage penalty.
3. Health savings account
A health savings account (HSA) is offered in tandem with a high-deductible group health insurance plan. An HSA health plan gives employees the option to set money aside from their check for coverage of medical expenses. This money is both tax-free and tax-deductible.
The money in an HSA can be used to cover copays, prescription drugs, medical procedures, glasses, medical equipment, and more.
High-deductible plans that accompany HSAs typically have a low health insurance premium, making them a slightly higher risk for employees but also less of a financial burden.
4. Health maintenance organization
An HMO operates within a network of care providers like doctors, specialists, and hospitals. An HMO is generally low-cost, carrying a low deductible and monthly premium. But HMOs also require you to use in-network care to take advantage of the full benefits. Otherwise, you have to pay hefty out-of-network fees.
Despite network restrictions, HMOs typically provide solid care when employees are in a central location. If you decide to go with an HMO, be mindful of the network an HMO uses, and where the providers are. If you have employees around the country and the HMO largely utilizes providers in a specific region, you'll leave your other employees in the dark.
For small startups with a local team, HMOs are a great insurance type with an affordable price tag.
5. Preferred provider organization
A PPO is similar to an HMO in that it operates within a network of care providers. However, a PPO generally offers a wider network and more options for out-of-network care. This comes with higher premium costs, but gives your team a wider selection of health coverage.
Whether your team is large or small, a PPO will ensure they're taken care of. This is due to the larger network and wider number of health provider choices.
6. Point of service plan
A point of service health plan is essentially a fusion of a PPO and HMO. art of a broad network, this type of plan offers better insurance coverage for those who stay in-network.
A point of service plan generally requires you to establish a primary care physician. This physician can then refer you or your team to specialists, allowing you to receive specialized care while staying in-network. In this way, a point of service plan can offer a wider breadth of care than an HMO, but it can also delay specialist visits.
Point of service plans generally have wider networks than HMOs. They function much like a PPO with more in-depth service — if you establish a primary care physician. This makes a point of service plan a potential fit for companies with both distributed and centralized workforces.
At the end of the day, only you know what's best for your business and your team. And lso, no two health insurance providers will have the same offerings. So shop around before deciding which plan you’ll use. And keep in mind that each plan type will be better suited for different sized teams, as well as those with more remote or distributed workforces.
Health insurance is all but necessary for a business. Sure, you don't always legally need it to operate. But offering health insurance, even during your company's infancy, signals to employees and prospective employees that you truly care about them, and that they can trust you.
Setting up health insurance will take time and money, but it's time and money well-spent. Securing health insurance now is one way to ensure a brighter, healthier future.