Do you wish to attract and retain top talents that will propel your small business to new heights? Do you have the financial muscle to wrestle the possible claims that will be directed to your business when you don’t have a health insurance policy? Is there a specific option that matches your business needs?
Today, more small businesses are required to provide health policy for their employees than ever before. Also, when you think about its influence in attracting and retaining employees, offering health benefit is a smart financial move.
Yet, deciphering the various small business health insurance options can feel like a daunting thing, especially when you have to think about taxes. There is no one-size-fits-all solution, but there are a few options worth considering.
Learn about your small business health insurance options here.
1. Traditional Group Health Insurance
This is a health plan chosen by the business to provide coverage to its workers and their dependents. The business pays a fixed premium for the coverage, but some employers ask their workers to pay a portion of the premium cost.
Workers are responsible for deductibles and copays associated with health services they seek.
The small business can buy this coverage through health options marketplaces or insurance brokers. This coverage is a good option for small businesses since it’s quite easy to obtain and most staff are familiar with how it works.
However, it is possible for your business to end up struggling with the administrative burden and inflexibility associated with the provider.
Looking at the past few years, the price for this coverage keeps increasing and the rising cost can cripple your business.
2. Self-Funded Health Insurance
If the traditional group health insurance is beyond your budget, you may consider self-funded health insurance. In this case, you don’t need an insurance broker and your business assumes all the financial risk associated with getting your employees insured.
You also don’t need to forfeit any tax benefit to insure yourself. The tax implication of this plan is the same as that of a fully insured plan.
Typically, your business will be required to set up a trust fund to reserve money. The money to pay claims is contributed by both the workers and the business. You can opt to pair the reserved funds with a stop loss policy that cautions your business against potential risk.
All expenses incurred as the business runs this health coverage, including claims, premiums and administrative fees are fully deductible company expenses. The claim and other fillings are managed by Third-Party Administrators.
However, this plan is way too risky and a larger than anticipated claim could easily put you out of business. You can only be comfortable adopting this plan if your business has financial muscle.
3. Association Health Plans (AHP)
This is where a group of small businesses come together and buy healthcare coverage as if they were one single large entity. Once the coverage is in place, it works much like the self-funded health insurance or regular group policy plan would.
However, an AHP is required by the law to offer more than health coverage for its members. Its members must have a couple of things in common.
Having more than one thing in common helps the insurer to have a better understanding of the group members and their health needs too. This is why franchise businesses appear to be the prime clients for AHPs.
4. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
This is a business-funded, tax-free health plan used to reimburse staff for individual health care expenses.
It’s an ideal health plan for small businesses since they can determine their own spending and offer a formal health coverage to all workers irrespective of workers’ personal circumstances.
This plan is meant for small businesses that have fewer than 50 full-time workers. The business must not offer any other group insurance coverage, including health, vision or dental.
The business is also free to include its part-time employees on this plan.
How Does QSEHRA Work?
With this plan, the business offers its staff a monthly allowance and workers are free to buy a package that matches their needs.
Here are the steps:
Step 1
The business determines a monthly allowance. This set budget represents the maximum possible amount of untaxed funds the business will give to the employees for health coverage. There are different plans for workers with families and those without families.
Step 2
Employees use the money given to buy health care services and products they need. This could include personal health insurance, purchase of prescription and nonprescription drugs, deductibles, and copays among other expenses.
Step 3
Employees turn in proof of expenses to the management. The expenses are submitted through formal documents that request you to attach receipts and explanation of expenditures.
Step 4
The management reviews the expenditures then reimburses the employees. You will only be reimbursed after the business’ management confirms that everything checks out.
5. Group Integrated HRAs
This is one of the most common health plans among small businesses.
With this plan, your business offers workers a monthly allowance of untaxed funds in addition to the group policy. Workers then select and pay for health coverage and you reimburse them up to their monthly allowance amount.
Your small business is free to create its own worker eligibility requirements as long as workers participate in the group coverage. Employees use this plan to cover expenses such as prescription drugs, deductibles, and copay.
This plan can be expensive to administer since it’s attached to group policy. It also covers less than many other policies and hence not favorable to the employees.
Discuss Your Small Business Health Insurance Options with an Expert Today
As a small business, you may feel overwhelmed by the costs of health insurance, but you should consider the risk of not having coverage available for your employees.
Consider the small health insurance options discussed above to protect your employees from high medical expenses. This is an important decision you need to make for your business.
Contact us today if you are looking for health insurance for your small business.
