As a new business owner, you may have questions about whether you should offer small business health insurance group coverage to your employees. You may also want to know what your options are when it comes to group health plans, as well as the costs of small business health insurance.
What is small business group health insurance?
Small business group health insurance is a type of health plan that covers the employees of a small business or startup. This insurance provides health benefits under a single policy shared by all employees, offering a cost-effective and comprehensive healthcare solution. The significance of small business health insurance lies in its ability to attract and retain talent, enhance employee satisfaction, and promote a healthier workforce. By offering health insurance, startups can gain a competitive edge, as it demonstrates a commitment to the well-being of their team. Additionally, small business health insurance can provide financial protection to employees, reducing the burden of high medical costs.Top of Form
Why offer startup health insurance?
If you own a startup with less than 50 full-time equivalent employees, then your company probably qualifies for small business health insurance. Although offering group health insurance is optional if your startup has less than 50 employees, there are several compelling reasons why startup health insurance can provide value to your new business.
- Offering group health plan coverage in a total compensation package can help you recruit and retain the best employees in a competitive market.
- Owners of startups and small businesses frequently look at health insurance group coverage as a way to hedge against price instability.
- Usually, group health plans offer guaranteed acceptance for the business owner, other employees, and their families.
- Startup and small business owners who enroll in group health plan coverage can provide benefits for their employees while also protecting themselves and their own families.
- Cost Savings for Both Parties: Offering a small business group health insurance plan can lead to significant cost savings for both employees and employers compared to individual plans, as group plans often have lower premiums and better benefits due to the pooled risk.
- Tax Advantages for Small Businesses: Providing a group health insurance plan can yield considerable tax advantages for startups and small businesses, as premiums are typically tax-deductible, and offering health benefits can qualify businesses for certain tax credits.
How much does healthcare for startups cost?
The costs of startup health insurance will depend on the plan that you and your employees choose, in addition to your business location, employee ages, and coverage and benefit preferences.
When your startup considers different small business health insurance options, it can be helpful to start with looking at themetal levelsof each group health plan. Metal levels, such as bronze, silver, gold, and platinum, represent each health plan’s actuarial value (AV), which means the percentage of total average costs paid by the health insurance company for covered benefits.
For example, if one of your startup’s employees had a health plan with a 60 percent actuarial value, then the health insurance company would pay an average of 60 percent of all covered medical expenses, while the startup employee would be responsible for paying 40 percent of medical costs until he or she reached the health plan’sout-of-pocket maximumlimit.
From a startup perspective, a bronze health plan may be a good choice due to its low cost. Bronze health plans tend to have low monthlypremiumsand high annualdeductibles, meaning that your employees pay less per month to be enrolled in a group health plan.
- A bronze plan could work well if your startup employees tend to be young and relatively healthy. Due to infrequent doctor visits and minimal medical expenses, these employees would probably have no need to meet their high annual deductible.
- On the other hand, you should also make sure that your plan remains affordable for employees who may have chronic health conditions, require more frequent doctor visits and prescriptions, or otherwise prefer a plan with a lower annual deductible.
- You should talk with your startup employees to find out their health insurance preferences, especially in terms of premiums, deductibles, out-of-pocket maximums, and emergencies.
What kind of group health insurance for startups should you choose?
After getting a sense of your startup’s cost preferences for group coverage, you should consider the different types of health insurance plans. You and your startup employees can select from several popularplan typesfor small business health insurance based on your budget and health care needs.
- Your startup employees might favor aPreferred Partner Organization (PPO) planover aHealth Maintenance Organization (HMO) planif they don’t want to see a primary care physician before visiting a specialist.
- Alternatively, your startup employees might prefer an HMO plan over a PPO plan due to the lower cost of an HMO, which comes from staying in a medical network for services.
In addition to HMO and PPO plans, there are other possible health plan choices for a startup with a young and relatively health workforce that prioritizes affordability and flexibility.
- WithExclusive Provider Organization (EPO) plans, your employees can use all specialists and providers with no referrals, although there is usually no out-of-network coverage. EPO plans tend to cost less than HMO and PPO plans, and could be a good choice for startup employees who do not expect much medical care and want to save money.
- APoint of Service Plan (POS) planis basically a combination of HMO and PPO plans, in that employees need to work with a primary care physician while usually having access to a wider range of health care providers. Startup employees might go with a POS plan if they want to benefit from access to a wider network.
- Another choice of health insurance for startups is theHealth Savings Account (HSA). These are specially designated, tax-advantaged savings accounts that employees can use to pay for expenses from high-deductible health plans. Money left over in an employee-owned HSA is saved over time and can earn interest. HSAs can work well for employees who prefer lower premiums.
- Health Reimbursem*nt Arrangements (HRAs)are employer-funded health plans that allow the employer to reimburse employees tax-free for medical expenses, up to a set amount each year. While the employee owns an HSA, the employer owns the HRA.
- Individual Coverage Health Reimbursem*nt Arrangements(ICHRAs) are a powerful type of HRA that allows companies of all sizes to reimburse employees for the cost of a health plan of their choice. Employers choose the categories of employees that qualify for these plans (full-time, part-time, seasonal, etc.)
Overall, cost, convenience, and the need for medical services should all be taken into account when selecting the type of small business health insurance plan for your startup.
Additional small business and group insurance plans
Small business & Group Dental Insurance
Small business and group dental insurance plans are designed to provide dental coverage for employees of small businesses, including startups. These plans typically offer a range of dental services such as routine cleanings, X-rays, fillings, and more extensive dental work. By offering dental insurance, small businesses can enhance their benefits package, contributing to higher employee satisfaction and retention. These plans often come with the flexibility to choose between different levels of coverage, fitting various budget and care needs. They also help employees manage the costs of dental care, which can be significant without insurance. For small businesses looking to provide dental benefits, understanding the options and choosing the right plan is key.
Small business & group vision insurance.
For small businesses looking to enhance their employee benefits package, incorporating small business and group vision insurance can be a strategic move. These plans are designed to cover a range of vision-related healthcare services for employees, such as eye exams, prescription glasses, and contact lenses. Offering vision insurance not only supports the eye health of your workforce but also demonstrates a commitment to the overall well-being of your team. With various plan options available, businesses can choose the coverage that best fits their needs and budget, making it a flexible option for small businesses. Group vision insurance can be a valuable addition to a company’s benefits, potentially improving job satisfaction and attracting quality talent.
Cost sharing in health insurance for startups
Since group plans are considered to be employer-sponsored health coverage, you should also decide how much your startup will share the costs of health insurance with your employees. Most states require employers to pay for at least 50 percent of monthly employee premiums, thereby splitting the cost with their workforce. As a startup founder and employer, you should also know that you can usuallydeduct employee premiumsfrom your federal business taxes.
It is usually up to you as a small business owner whether your group plan will cover employee dependents. Regardless of whether your business chooses to partially pay for the cost of dependents, employees can typically still choose to add dependents to their health plan.
Depending on your number of full-time equivalent employees and how much they are paid, your startup may be able to qualify for asmall business health care tax credit. If you are eligible, this tax credit may be able to help your startup reduce the cost of offering group health coverage to your employees.
How to get health insurance for your startup company
Although looking at health insurance for startups might seem overwhelming as a new business owner, it can serve as a valuable investment for your company and employees.
For more information about implementing group health coverage for your startup, you can look through eHealth’ssmall business preparation checklist. To find small business health insurance quotes, visiteHealth.comtoday or speak with one of our licensed health insurance agents.
This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.
