How Much Does Small Business Health Insurance Cost?Back
Providing employer-sponsored, group health insurance is one of the top benefits a small business can provide for employees. It’s also one of the costliest expenditures. Fringe Benefit Analysts is committed to helping small business owners navigate the health insurance benefits landscape and decipher just how much it costs for small business health insurance.
First—What is Group Health Insurance?
Group health insurance, also commonly referred to as employer-sponsored health insurance, helps employees pay for healthcare expenses. Small businesses may enroll in a group health insurance plan any time and then offer benefits to eligible employees. Group health insurance plans typically reduce the cost of health insurance, which can be beneficial for both small businesses and their employees.
In most cases, group health insurance requires that a company pay a portion of an employee’s insurance premium, while the rest comes from that employee’s paycheck. A premium is a fixed monthly amount that is paid to the insurer for coverage. The coverage that an employee receives depends on the group health insurance plan that the employer chooses, but it may include medical, vision or dental care.
Average Cost of Small Business Health Insurance
In 2020, the average, annual premiums for employer-sponsored health insurance were $7,470 for single coverage and $21,342 for family coverage, according to a Kaiser Family Foundation survey. Since group health insurance is employer-sponsored, small businesses often ask employees to share in the costs, which can help to reduce the overall cost for both employer and employee. Most employees make a contribution toward the cost of their healthcare coverage premiums, averaging about 17% for single coverage and 27% for families in 2022.
How much health insurance costs your small business is dependent upon how much of the employee premium you opt to cover. The more an employee pays out-of-pocket, the less cost to your business. Other small business health insurance cost considerations include minimum participation, cost share and administrative costs.
Are Employers Required To Offer Small Business Health Insurance?
The ACA (Affordable Care Act) does not currently require employers with fewer than 50 full-time employees to provide group health insurance coverage. Any employee who works at least 30 hours a week is considered to be full time. Businesses with 50 or more full-time employees must provide affordable, minimum essential health insurance.
Coverage is only considered to be “affordable” if the employee contributions don’t exceed a specific percentage of that household’s annual income (9.83% in 2021). A plan that has “minimum” value should pay at least 60% of the cost of covered services, which includes copays, coinsurance and deductibles.
Benefits Of Offering Healthcare to Employees
Both businesses and individuals benefit from offering and participating in a group health insurance plan. For employees, group insurance is typically more affordable than an individual health insurance policy. Small businesses may qualify for tax credits and deductions.
For employees, offering health insurance is critical to attracting and retaining top talent. The Society for Human Resource Management (SHRM) estimates the average replacement cost of a salaried employee is equivalent to six to nine months’ salary. When small businesses think of health insurance as an investment, rather than simply an expense, the result can be higher-quality, longer-lasting employees. The happier employees are, the more productive they are, and that benefits your bottom line.
Another benefit associated with offering health insurance to employees is the reduction of absenteeism. Healthy employees are less likely to miss work, and good healthcare coverage allows employees to seek care when they are sick and prevent many illnesses. Plus, employees who have health insurance report better job satisfaction and workplace morale.
Many businesses that offer small business health insurance find that it is much more convenient for their employees than requiring them to find private health insurance through healthcare.gov or on a state-sponsored exchange. Saving your employees that time and those headaches can be invaluable and can help them feel more loyalty toward your business.
Types of Healthcare Plans
The four most common health insurance plans are HMOs, PPOs, POSs and EPOs. Understanding each type can help businesses determine which plan is best for their employees’ needs as well as assess the associated costs for their business.
- HMO (Health Maintenance Organization): This type of plan is usually easier on the pockets, but limits choice of doctors to a smaller network. The network of HMO providers all agree to accept a certain payment for services, which helps lower costs. However, employees who require the services of an out-of-network specialist may have to pay out-of-pocket for care.
- PPO (Preferred Provider Organization): This plan can be pricier but usually provides coverage for a wider range of physicians and specialists. In a PPO plan, employees can choose any doctor, specialist or hospital, even if they’re out-of-network, which provides greater flexibility. However, monthly premiums and copays for office visits are often higher.
- POS (Point-of-Service): A POS plan requires the insured to choose a primary care physician and obtain referrals to see other providers. This helps keep overall costs low, but does lack in flexibility to see a wide range of providers.
- EPO (Exclusive Provider Organization): This type of plan falls somewhere between an HMO and a PPO in terms of flexibility and cost. EPOs offer coverage for in-network providers, but don’t require referrals for seeing specialists or out-of-network providers and have lower premiums than PPOs.
The team at Fringe Benefit Analysts can help you find the most effective plan for your small business. Some businesses like to get their employees involved in the process so they can provide feedback as to what coverage they would prefer as well as how much they feel comfortable paying each month.
Choosing the Right Insurance
Choosing the right insurance products to meet healthcare and fiscal needs is crucial. That’s why it’s important to navigate the waters with a qualified and experienced employee benefits consultant. Fringe Benefit Analysts provides the personalized attention and professional experience to guide you and your employees through the process of choosing the best health insurance options. Contact one of our dedicated professionals in any of our six Utah locations today.
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