What Should You Know About Small Group Health Insurance?
You’ve probably been thinking about how to offer small group health insurance that meets your employees’ needs without it costing a fortune. You may have many questions about how health insurance will affect your business, what kinds of group health plans are available, and how to apply for group health coverage. HealthMarkets can provide answers to frequently asked questions employers like you may have about small business health insurance.
How Do ACA Laws Affect Small Businesses?
Affordable Care Act (ACA) employer mandate laws only affect businesses that are applicable large employers (ALEs). Under the mandate, ALEs that don’t offer qualified health insurance to full-time employees and their eligible dependents may pay an Employer Shared Responsibility Payment, which is a tax penalty.
To be an ALE for the current calendar, your business would need to have an average of 50 or more full-time employees, including full-time equivalent (FTEs), during the previous calendar year. In essence, this means you’re a small business owner if you have fewer than 50 employees. If this represents your workforce, then you make up the millions of firms that are not subject to the ACA mandate because the majority of companies in America are small businesses.1
Do I Need to Have Employees to Buy Group Health Insurance?
While it depends on how you purchase a plan and the state you live in, you may not need employees to buy group health insurance. For example, some states require that insurance companies offer guaranteed-issue group health polices to self-employed business owners with no employees.
Decide whether you want to buy your plan through a licensed insurance agent or company, or through the Small Business Health Options (SHOP) Marketplace.
To purchase a SHOP plan, you need to have at least one full-time equivalent employee. If at least one employee enrolls in the plan, you can then enroll yourself. A family member (including spouse), part-owner, or partner in your company is not considered an employee.
Small business owners who purchase a SHOP plan may also be eligible for a health care tax credit. The maximum tax credit covers 50% of the premiums paid for health coverage. Tax-exempt small business owners can receive up to 35%. To be eligible, you must:2
- Have less than 25 full-time equivalent employees (FTE)
- Pay an average wage of $56,000 per year or less per FTE
- Offer a qualified SHOP plan to your employees
- Pay 50% or more of costs of coverage (employee-only, not family coverage) for each employee
If you find out you are eligible, the health care tax credit is available for two taxable years, consecutively. The smaller your business, the larger your potential tax credit.
What Types of Group Health Plans Are There?
There a several types of small business health insurance plans for groups. You can choose from managed care (HMO, PPO, and POS), indemnity fee-for-service, and high -deductible health plans. Specific plans available vary by region.
Health Maintenance Organization (HMO): An HMO plan only covers medical services received at an in-network provider. All care is organized through a primary care physician (PCP). Patients must get a referral from their PCP if a medical condition requires treatment from a specialist. The only exceptions to getting a referral are for emergency room visits and routine, in-network care at an obstetrician or gynecologist.
Because HMO plans are more restricted, premiums and copays are usually lower than some other types of plans, such as a PPO plan. With lower employee premiums, you also put less money toward employer premium contributions.
Preferred Provider Organization (PPO): Comparing an HMO and a PPO plan, a PPO plan provides more flexibility because members can choose to visit an in- or out-of-network provider, and there’s no requirement to have a PCP. But the plan provides a lower percentage of coverage for going out-of-network. In addition to copays, PPO plans usually have coinsurance and annual deductibles. Patients may sometimes have to pay for care received out-of-network up front, and then file a claim with the insurance company to get reimbursed for covered medical services.
Point of Service (POS): This type of plan is a cross between an HMO and a PPO. The HMO aspect requires that patients first see their PCP to receive care and get a referral in some cases. The PPO element allows patients to receive some covered services at a provider outside the plan’s network, but this may require a referral from the PCP. With a POS plan, some medical services may not be covered out-of-network, and members may have to file all claims forms themselves.
Fee for Service (FFS): An FFS plan, also known as indemnity health insurance, lets members visit any physician, specialist, and hospital they choose. But this flexibility comes with higher out-of-pocket costs. The plan may pay healthcare providers directly or reimburse members for covered services after a claim has been submitted. An FFS plan can include a PPO option depending on the plan’s service area. By using a PPO provider, members typically have lower out-of-pocket costs, and they usually don’t have to file claims.
High Deductible Health Plan (HDHP): As the name reveals, members pay a high annual deductible for having this plan. To compensate for the high deductible, this type of plan usually has a lower monthly premium than other plan types. An HDHP in a small group health insurance benefits package is usually paired with a savings option (SO), such as a health savings account (HSA). An HSA is funded through pretax dollars that are automatically deducted from employees’ paychecks. Employees can use funds from the account to pay for out-of-pocket healthcare expenses.
Average Employee Premiums and Deductibles by Plan Type
These figures below can give you a general idea of what employees could pay in premiums and annual deductibles for certain plan types. The actual plan an employee chooses may not have a deductible. For instance, HMO plans usually don’t have annual deductibles.
2021 Average Employee Premium
2021 Average Annual Deductible for Employees
SOURCE: Kaiser Family Foundation (KFF) 2021 Employee Health Benefits Survey3
*These are general annual deductibles among employees who have a plan that has a deductible. PPO, POS, and HDHP/SO deductibles are for in-network providers.4
How Much Are Premium Contributions for Small Businesses?
Compared to large companies, small businesses had higher premium contributions for single coverage and lower contributions for family coverage. This was the reverse when it came to employee premium contributions at small firms—less for single coverage and more for family coverage. The survey lists small firms as those with 3-199 employees, and large firms as those with 200 or more workers. The following chart gives a comparison of premium contributions for health insurance in general (not specific to a plan type) among small and large businesses.
2021 Average Annual Worker and Employer Premium Contributions
|Small Firms (3-199 workers)
|Large Firms (200+ workers)
|Single Health Coverage
|Family Health Coverage
SOURCE: Kaiser Family Foundation (KFF) 2021 Employee Health Benefits Survey5
How Do I Know Which Group Health Plan to Choose?
Cost is, of course, a significant factor in deciding which small business health insurance plan to choose. So it may seem more logical to go for a plan that has less employer premium contributions. But this may not be what’s best for your employees. If you offer a plan that has a limited network of providers, for instance, it may cost less but not include the hospitals or physicians employees like to visit. In choosing a plan, it may also help to know what other small businesses are doing. According to the KFF 2021 Employer Health Benefits Survey:6,7
- 77% of small companies (3-199 employees) offer one type of plan
- 20% of small firms offer 2 types of plans
- 3% of small firms offer 3 or more plans
- Among small firms:
- 1% of employees are covered under a conventional indemnity plan
- 15% of employees have HMO coverage
- 18% of employees are enrolled in a POS plan
- 38% of employees have an HDHP plan with a savings option
- 50% of employees have coverage through a PPO
Can My Business Be Denied Coverage Based on the Health of the Group?
No. State and federal laws require insurance companies to sell all health plans on a guaranteed-issue basis to small employers with 2 to 50 employees regardless of the group’s health status. As mentioned earlier, a business owner with no employees can also get a guaranteed-issue group plan in certain states, but this is not a federal law requirement. Although health status is not a factor in eligibility for group coverage, an insurance company may deny an application unless certain requirements are met, such as covering a minimum number of employees and paying for a minimum percentage of employees’ premiums.
How Do I Know If I’m Getting the Best Price?
Because health insurance products and premium rates are regulated by each state’s Department of Insurance, the premium an insurance company charges for a specific health plan must be the same regardless of where you buy the plan.
What are the Advantages of Buying Health Insurance Through a Licensed Insurance Agent?
Working with a licensed insurance agent offers many advantages, such as:
- Advice: Searching for health insurance on your own can potentially be overwhelming. By working with a licensed insurance agent, you have a knowledgeable insurance resource to help you navigate the health insurance waters so you can focus on priority number one: running your company.
- Licensed professional: Working with a licensed insurance agent offers a sense of security because you know you’re working with someone who meets the state’s regulatory requirements to sell insurance products. You also get someone with the industry knowledge to help you understand health insurance terms and processes.
- Local help: With a licensed insurance agent who can meet with you in person, it may be easier to get answers immediately rather than go back and forth through telephone calls and emails.
What You Should Expect From a Good Licensed Insurance Agent
Your business and employees mean a lot to you, so it’s only fair that your licensed insurance agent puts a lot into helping you with health insurance small business solutions. These are a few of the main things you should expect from a good licensed insurance agent.
- Be there: A good licensed insurance agent should keep in touch throughout the year, not just when it’s time to reapply. Whether it’s through periodic phone calls or visits to your place of business, your licensed insurance agent should take an active role in keeping tabs on your health insurance needs.
- Help employees: This ties in with being there. Not only should a good licensed insurance agent be invested in your insurance needs as a business owner, but he or she should be available to address employees’ ongoing health coverage needs and answer related questions.
- Do follow-up assessments: A good licensed insurance agent should find out how employees are using their group health insurance to start planning for the next coverage year.
If I Already Have Group Coverage, Do I Need to Wait Until My Renewal Period to Meet With a Licensed Insurance Agent?
Not at all. The sooner you can meet with a licensed insurance agent to evaluate your current group health policy the better. Advance planning gives you time to decide which group health coverage would work best with your employee benefit package. Imagine trying to figure out your options at the last minute when you already have several priorities to attend to. Not only could this be stressful, but you may be more likely to renew a plan that isn’t really working for you just to get it out of the way. Rather than take this approach, which could be costly, it’s better to discuss your needs with a licensed insurance agent now.
What’s the Application Process for Small Group Health Insurance?
HealthMarkets can help. A licensed insurance agent can meet with you and each of your employees one-on-one to do a comprehensive needs assessment before you ever complete any paperwork to apply for small group health insurance. The consultation service is at no cost to you, and you’re never under any obligation to buy. The licensed insurance agent will perform several functions, such as:
- Analyze your group health insurance costs: The licensed insurance agent will perform a thorough cost analysis on what a group health insurance policy could cost your business and compare it to your current health plan, if any.
- Review options to provide you with the most cost-savings: For example, would a lower monthly premium and higher deductible be more suitable for employees? If so, then a high deductible health plan (HDHP) where you pay lower employer premiums may work best.
- Determine if you need to offer more than one heath plan: Depending on your employees’ diverse needs and your budget, the licensed insurance agent may evaluate if it’s practical to offer more than one plan option.
- Determine if and how you need to offer additional health benefits: Supplemental health benefits like dental and vision coverage are usually popular among employees. If employees are interested in such benefits, your licensed insurance agent might go over options to offer these benefits through a group plan, on a voluntary basis, or let employees buy their own individual or family supplemental health plan.
After your assessment is complete, the licensed insurance agent may review quotes for different plans available in your area that are most suitable to your needs and budget. Once you narrow down your choices, the licensed insurance agent will go over the next steps to apply for coverage.
Apply for Small Group Health Insurance Today
Schedule your appointment for small group health insurance today with HealthMarkets, at no cost to you. Call (800) 827-9990 to speak with a licensed insurance agent now..