If you are a small business with under 50 workers, you’re not required to offer benefits; however, we recommend that you look into the possibility. A comprehensive benefits package could help attract and keep top talent, and the government offers a variety of incentives to facilitate this. If you’re interested, we recommend SHOP, which we will discuss in more detail below.
How Does Health Insurance for Employees Work?
Employee health insurance plans are typically known as group insurance policies. Health insurance for groups is a single insurance plan that covers (usually) every employee. The plans are usually paid monthly, and the location of your business determines the monthly cost, the number of employees covered, and the age of your insured employees.
There are also various kinds that insurance policies come in. The four most popular kinds of plans are:
- Preferred Provider Organization (PPO): PPOs are usually regarded as the most accommodating kind of insurance plan, as referrals aren’t required, and the plan should, at a minimum, partially pay for out-of-network providers, however, they also typically have the highest cost of premiums. They are also the most popular insurance for groups.
- Health Maintenance Organization (HMO): HMOs tend to have lower monthly rates; however, employees will have to get primary medical doctor (PCP) prescriptions to receive any additional services.
- Exclusive Provider Organization (EPO): EPO plans provide services from the selected list of providers.
- Point of Service (POS): POS plans are like HMOs in that you must obtain an appointment to use certain services, but the POS plan will still charge for some services that are not in the network.
Every plan comes with the monthly cost of premiums and deductibles, which must be paid before the start of the plan, and copays that the insured could be required to pay for certain services.
We strongly recommend against picking the lowest plan without taking a closer look at the details. These plans are usually expensive because of a reason. We decided to explore the steps of choosing an insurance policy for groups and discovered that the most affordable plans also have significant disadvantages, such as the -n-network providers who were remote, providers who were only available during regular working hours, and many more. While it’s more challenging than it could be, it’s the best choice to read the fine print of every policy and the network.
How Much Does Health Insurance Usually Cost?
According to the Kaiser Family Foundation found that on average, employers pay $5,700 per employee for individual coverage plans, and $14,000 for family coverage plans every year. The insurance cost has been higher than the inflation rate year-over-year, and you’ll need to be mindful of that in case you’re considering offering health insurance benefits to employees in the long term. Additionally, the Bureau of Labor Statistics (BLS) states that the benefits of health insurance make up about eight percent of employees who receive total compensation across all of the U.S.
Employers can cover less than 100% of employee health insurance costs. In reality, just 27 percent of employees in small businesses are covered by a plan in which employers pay for the entire monthly cost. Under the IRS, Employers with over fifty full-time workers must “offer affordable health coverage that provides a minimum level of coverage to their full-time employees and their dependents.” Minimum coverage is typically defined as 60 percent of the health costs for the general population. It is also possible to use this Employer’s Coverage tool to find out if your plan meets standards.
You can deduct the amount you pay for the monthly premiums of your employees for business-related expenses. That signifies that any monthly fees you pay are tax-deductible to the fullest extent at the federal and state levels.
Additionally, small-sized companies may be eligible to receive an additional tax credit called the Small Business Health Care Tax Credit that allows the reimbursement of up to 50 percent of your health expense to claim as credits. To be eligible, your company needs to satisfy the following criteria:
- Do you have less than 25 full-time employees
- The salary of an employee is $50,000 or less.
- The company covers at minimum 50% of the employees’ insurance
- All full-time employees receive health insurance through SHOP
Tax deductions lower the amount of tax you pay and your tax rate. The amount to be save depends on your tax bracket. Tax credits, however, will lower the amount of tax you are liable to pay in a 1:1 ratio. If you owe tax on $10,000 and you receive the tax credit of $1,000, you owe $9000 in tax.
Tips to save the cost of Employee Health Insurance
The cost of Group insurance is overwhelming. However, there are several ways to cut down your costs.
Sharing costs among employees Providing health care benefits to employees isn’t just a simple task. Many employers share premiums with their employees. The most common ways to save money on premiums are to make employees pay for higher premiums or transfer costs to employees to copay levels and to negotiate lower premiums with the insurance company.
Make your own insurance company: If you believe that your employees are very healthy and safe, it is possible to create an individual health insurance company. Instead of enrolling in medical insurance, you put aside a portion of your budget to cover emergency health services. The danger of paying high health insurance costs lies with you as the employer. This could reduce costs in the short run. However, one costly health insurance bill must drain the entire budget.
Where to Find Health Insurance Plans
The first step is looking at the advantages your workers are searching for. For instance, if a large portion of people is seeking high-quality dental benefits, you’ll need plans that focus on the benefits they need. If your employees are looking for affordable, basic insurance, they’ll only use for emergencies, that’s good to be aware of.
Benenson Strategy Group reported that most of the employees surveyed agreed that they would prefer more health insurance than an increase of 10% in pay. This is, in other words, significant to employees.
After assessing their needs and requirements, you can begin to enter the insurance market by preparing a detailed list of items you’d like to be covered and your budget, two of the most useful first filters.
Small Business Health Options Program (SHOP)
SHOP is a marketplace in the federal government for small-business owners looking for health plans. Each state has its SHOP marketplace; however, they’re all the same. To be able to SHOP, companies have to satisfy the following conditions:
- You can have one to 50 employees
- Provide health insurance benefits to employees working more than 30 hours a week.
- 70 percent of your employees have to sign up for
- Are you an employee or office in the state where SHOP you’d like to purchase from
Employers can choose between three health insurance levels based on coverage and price. Once a tier has been chosen, the employees can visit the SHOP by themselves and choose their plan depending on the tier the employer has selected.
Private Health Insurance Marketplace
It is also possible to find health insurance plans through market-based health plans that are private. The quality and accessibility of plans will differ depending on where you live. We recommend exploring these options to determine the most appropriate plan to benefit your staff. There is a list of the four largest private exchanges:
- Via Benefits
- Right Opt
Like SHOP, employers can select an undefined contribution that determines the plans that employees can select from. Employees can select the plan they prefer, and employers receive a total bill for each employee. The marketplace will typically offer administrative support, such as online and call center support.
Use a Health Insurance Broker
If you need help to go through the process of comparing plans against one another and you’re looking to hire an agent. You can locate a reputable broker from your peers and friends or by contacting SHOP. A good broker can detail the more complicated aspects of selecting the right health insurance plan, like the benefits of various networks or the reliability of various insurance companies.
Professional Employer Organization (PEO)
PEOs are distinct from traditional insurance providers and usually leverage their vast economies of scale to offer lower-cost HR services for small companies and start-ups. In most cases, PEOs like Justworks provide health insurance benefits at lower or comparable costs than traditional health insurance companies costs.
If you’re self-employed, think about your options under the Health Insurance Marketplace available for those who don’t have employees. Depending on your income and household size, you’ll likely be eligible for tax credits, which can help reduce the cost.
The advantage of this Health Insurance Marketplace is that you’ll see the taxes and insurance plans you’re eligible for through a single application. Like many other marketplaces, Health Insurance Marketplace is also a marketplace for tax credits. Health Insurance Marketplace also groups its plans according to the tiers.
Common Terminology You Should Know When Shopping for Health Insurance
We’ve put together the most frequently used terms and phrases employed by health professionals.
- Premium This is the monthly payment to the healthcare insurance company, usually divided between the employer and employees. It doesn’t include copays or deductibles.
- Deductible is the minimum cash an insured person must pay before health insurance coverage is activated. Depending on the plans, the deductible amount can range between a few hundred and several thousand dollars. The deductible is reset every year in the calendar.
- The Copay Most plans require the insured person to pay a copay between $10 and $50 in addition to their monthly premiums for each visit to the doctor, and usually, the copay is paid at the time of the visit. Sometimes, copays are used towards your annual deductible.
- Out-of-Pocket Maximum Most insurance plans have an upper limit on the amount an insured person can pay before the plan covers the entire cost of services that include copays. The cost is usually greater than an annual deductible.
- Primary Care Physician (PCP): HMOs and similar plans which require referrals to consult specialists require insured people to identify PCP. The PCP then becomes the one who refers patients to specialists, if required.
- Network Most insurance plans are part of the network or a select set of providers known as the network. Insurance plans typically offer different coverage depending on whether they are “in-network” or “out-of-network.” It is the duty of the insured to make sure their doctor is covered if the services are covered more fully under the plan.