How to choose a health insurance plan for a small business

Meghann Showers

Running a small business has a lot of demands, including everything from perfecting your products to fixing an overflowing toilet. But one of the trickiest parts can be finding the right health insurance for you and your employees. Under the Affordable Care Act, companies with 50 or more full-time employees […]

Running a small business has a lot of demands, including everything from perfecting your products to fixing an overflowing toilet. But one of the trickiest parts can be finding the right health insurance for you and your employees.

Under the Affordable Care Act, companies with 50 or more full-time employees or the equivalent in part-time employees have to provide health insurance to employees and their dependents or pay a fine, $3,860 per employee in 2020. Consequently, 83.1% of American workers were offered insurance in the first quarter of 2016.

Smaller businesses with fewer employees, however, are exempt. So, should your small business provide insurance? That depends on several factors, like can you afford it and do your employees need it?

If you hire mainly high school or college students who are covered under their parents’ insurance, you probably don’t need to induce them to work with health coverage. But if you have a small team of dedicated adults, they probably don’t just expect insurance, they need it.

According to a 2018 study by Luntz Global Partners for America’s Health Insurance Plans, 46% of U.S. adults said health coverage was the deciding factor in taking their current job, while 56% said it was key to deciding whether to stay in their job.

Other things that are important to employees, according to the survey, are prescription drug coverage, preventive care and emergency care.

But can you afford health insurance for your employees? One of the best options for small businesses, according to healthcare.gov, is SHOP insurance. Nonprofits and businesses with fewer than 50 employees qualify, and they don’t have to wait for an open enrollment period to sign up. Employees can all join the same plan or they can each choose their own, according to their personal needs. Empty-nesters will have different needs than young adults looking to start a family and look for different benefits in their insurance.

SHOP insurance also allows the business to contribute to their employees’ premiums and to decide whether to cover their dependents, plus it offers dental insurance.

If SHOP insurance isn’t available, businesses can contact a health insurance provider, scout them online or go through a health insurance agent or broker, who will compare plans and prices, then let you know your options.

So, bottom line, what’s it going to cost?

According to research by eHealth in 2018, it’s actually cheaper per person to have insurance through a small group than to have an individual insurance plan, with the idea being that more people are paying in to the risk pool so the average is less.

Here are the 2018 numbers from eHealth:

  • The average per-person premium for small group health insurance was $409 per month in 2018, compared to $440 for an individual plan.
  • Small group health plans had an average deductible of $3,140 per year, compared to $4,578 for individual plans.

Small-business owners will need to assess their employees and figure out premiums, deductibles and co-pays. If their employees are relatively healthy, they’re going to want lower monthly premiums and higher deductibles and co-pays, since their employees don’t go to the doctor frequently. But if the employees go to the doctor often and need regular medication, they’re going to want higher premiums with lower deductibles and co-pays.

Benefits, including health insurance, lead to employee loyalty and fewer sick days, studies show, so if you want to build a good, dependable team, coverage is important.

Health insurance coverage can be one of the most complex parts of a small-business owner’s jobs, but there is a way to work through the maze and have healthier and happier employees.

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