As a small business owner, you are already familiar with the intricacies of building, operating, and growing a business. And when it comes to providing employee benefits such as affordable health care coverage, the complications can seem to compound.
The health insurance industry has always been a multifaceted and somewhat complex field to navigate, which is why most business owners turn to brokers and agents for guidance.
However, with the passage of the Affordable Care Act, or ACA, in 2010, the complexities of choosing and purchasing group health care coverage made this type of help all the more necessary.
For example, when shopping for health insurance plans for a small business group, it is important to understand the different options available to business owners. While it may be tempting to forgo the effort of selecting and offering small group health insurance for those businesses that are not required, employers and employees can often be better served by an employer-based policy.
If you are an employer with fewer than 50 full-time equivalent workers, you can choose to simply refer your employees to the California health insurance office, Covered California. However, we believe it is beneficial for all parties involved to consider a group health insurance plan.
In order to cover health insurance, all companies have options
Some definitions might be useful first. For example, what exactly do we mean when we talk about “collective coverage” of companies?
according to one definition From HeatlhCoverageGuide.org,
“Group medical coverage refers to a single policy issued to a group (usually a business with employees, although there are other types of groups that can get coverage) that covers all eligible employees and sometimes dependents.”
Of course, the IRS has a copy located at address 26 of Internal Revenue CodeAnd the
The term “collective health plan” means a plan (including a self-insured plan) of or contributed to by an employer (including a self-employed person) or an employee organization to provide health care (directly or otherwise) to employees, former employees, or the employer or others associated or previously associated with the employer in a business relationship or their families.”
Not so long ago, group health insurance plans for small businesses were seen as more of a premium feature than an expectation by employees. However, more and smaller companies are offering their employees group health insurance plans, with some employers covering the entire premium.
In 2020, the Kaiser Family Foundation (KFF) released its program Employer health benefits survey Which revealed, among other trends, the following findings:
- 55 percent of small businesses offered health benefits to at least some of their employees.
- 27 percent of employees covered by small businesses are in a plan in which the employer pays the entire premium for one coverage/
- 28 percent of employees covered by a plan where they must contribute more than 50 percent of the premium for family coverage.
So, the question is not whether small businesses should offer group health insurance plans, but what kind should they offer?
The most popular types of group health insurance plans for small businesses
Here is a brief overview of some of the most popular types of group health insurance plan options available for small businesses:
Fully insured plans are one of the more traditional options. Fully insured plans include an insurance company that charges your business an annual premium for the benefits on the policy. This premium is paid in part by your employees.
Self-financing places the burden of covering employee health costs on the employer. This can often result in reasonable rates and more plan control, but the trade-off is that your business accepts the risk of having to pay for any catastrophic claims.
This route is often seen as an option for larger companies, but small groups can also benefit from what are known as partially self-funded plans. This option limits your risk so that you can still reap some of the benefits of self-financing without taking on the full burden of any catastrophic claims.
Funded plans vary tiered in that they are based on a monthly payment rate. Insurance companies will use the census information to determine how much your small group should pay. This rate depends on factors such as fees, premiums for stop loss coverage and claims allowances. At the end of the year, the insurance company adjusts the monthly level based on the performance of the group.
- Health Maintenance Organization (HMO)
HMO is a group coverage organization that has group members who pay for specific health services through monthly installments. With HMO, you will have access to a network of healthcare providers and locations, but the services will be limited to those that fall under that network. HMOs are usually more affordable than other types of health insurance plans.
- Preferred Provider Organization (PPO)
PPO plans are similar to HMO plans but offer more flexibility. PPOs have a network of health care providers and facilities but allow group members to see other doctors or locations not in the plan’s network. These visits lead to a higher subscriber pay and additional service costs, though, but they give members more freedom than they would on an HMO plan.
- High Deductible Health Plan (HDHP) and Health Savings Account (HSA)
HDHP offers lower premiums and higher discounts to group members. This means that members with this type of health insurance will have to pay more of their money before the plan pays for their share. This option allows for lower monthly premiums, making it a good group health insurance option for some employees who do not use many medical services.
The primary benefit of choosing a group plan is that it spreads risk across a group of insured individuals. This is a benefit for group members as this helps keep premiums low, and the insurance company can better manage risk when they have a better understanding of who they are covering.
some the main points To consider when considering group health coverage:
- Group members receive insurance at a reduced cost because the insurance company’s risk is spread across the group of policyholders.
- Plans typically require at least 70 percent participation in the plan to be valid.
- Premiums are split between the organization and its members, and coverage may extend to members’ families and/or other dependents at an additional cost.
- Employers can enjoy favorable tax benefits for offering group health insurance to their employees.
Your local source of expertise for group health coverage
JC Lewis Insurance is a local family owned business based in Sonoma County since 1979, and our expert brokers offer individual and small business insurance plans.
Additionally, our company only offers health insurance plans for small and individual businesses from leading health insurance companies licensed to do business in California.
In addition to being professional, experienced brokers, we are licensed and approved by each of these insurance companies to offer coverage to individuals, families, and employers in small groups as well as supplement and prescription drug plans for seniors.
When you’re shopping for health insurance for your employees, or for you and your family, or vision and dental coverage, you likely have many questions and concerns.
At JC Lewis Insurance Services, we welcome your questions about insurance coverage, and you can trust that we will help you find the right solution.