Three ways small businesses can solve the group health coverage question
Since the rollout of the Affordable Care Act (ACA), many individuals are looking to their employers to help them secure the health coverage they need to comply with these regulations. While not all businesses are required to offer employees healthcare insurance, many choose to in order to attract and retain top candidates and quality workers.
For small businesses, this is a fundamental decision. According to the National Small Business Association, the average monthly per-employee cost of health insurance premiums is $1,121.1 Multiply those average premiums by five to ten employees and that's likely a significant portion of your business' annual revenue.
While many employers share the premium cost with employees, health coverage remains a significant expense. Here are 3 ways small businesses are thinking about offering group health insurance.
1. High Deductible Health Plans (HDHPs)
High Deductible Health Plans, as their name implies, have higher deductibles in exchange for lower monthly premiums. While a lower premium is more affordable upfront, employees will pay more when they need medical services.
- Offering a supplemental gap plan can help prevent the sting. A healthcare policy typically covers a portion of an employee’s expenses for medical procedures, testing, doctor visits and other services. However, an employee pays out of pocket for expenses related to deductibles, co-payments, co-insurance – that’s where supplemental gap medical coverage helps.
- Another option is pairing HDHP plans with tax-advantaged savings accounts that help employees do more with their health care dollars. These include Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), which both help offset employees’ upfront costs for care.
2. Narrow Network Plans
Narrow network plans are aimed at reducing premiums, and consumers benefit additionally from lower overall out-of-pocket expenses. Much of the cost savings comes from increased use of primary care physicians and decreased (or more-efficient) use of specialists.2
Narrow network plans are comprised of local, community-based medical providers making them a good option for a company where all employees work at a single location or within close proximity. But keep in mind, out of area coverage can be limited or not available with some narrow network plans.
3. The SHOP Marketplace
The federally-facilitated SHOP Marketplace is offers plans from private insurance carriers for businesses with 50 or fewer full-time equivalent employees (FTEs). (Smaller businesses, with fewer than 25 FTEs and average annual wages of about $50,000 or less, may qualify for special tax credits if they provide group health insurance coverage and pay at least 50% of employee premiums.)
SHOP is a good option for companies with a diverse workforce because it offers choice and flexibility to satisfy employees and the company bank account. For example, SHOP allows business owners to:
- Offer employees one plan, or let them choose from multiple plans;
- Offer only health coverage; health and dental coverage; or only dental coverage;
- Choose how much to pay toward employees’ premiums, and whether to offer coverage to their dependents.
SHOP works well for small business owners who are comfortable using online tools and resources, since the entire process is done online via the SHOP website. It’s less ideal for firms with offices/employees in multiple states, since a company must meet all the requirements for each state's SHOP Marketplace, which can be tricky and time-consuming.
Manage Costs, Maintain Health
For small businesses, carefully considering how to offer health benefits helps employers manage health care costs while still providing employees with benefits that satisfy their needs.
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