How Small Businesses Can Navigate Group Health Insurance with Confidence

Finding a group health insurance plan for your business is a major task. With so many policies to choose from, it can also be overwhelming. Fortunately, with a few helpful tips, you can navigate group health insurance with more confidence and ease. If you’re ready to start your search for the perfect plan, our team at Beckham Insurance Group is here to help. Read on to learn more about group health insurance for small businesses. We’ll also answer key questions concerning coverage requirements, options for pre-existing conditions, ACA requirements, and potential tax benefits.

Employer Group Health Insurance 101

Employer group health insurance, also known as a group health plan (GHP), is an employer-provided health insurance plan available to active, full-time employees. Employers have the choice to offer this coverage to part-time employees, too. Group health plans are bought for a bulk group of employees. Keep in mind that nondiscrimination rules apply to GHPs.

For example, under the Affordable Care Act (ACA), insurance companies can charge tobacco users up to 50% more for their health insurance premiums than non-tobacco users. However, due to nondiscrimination rules, the same rule does not apply to GHPs. Under employer-group health insurance, each individual’s risk is spread evenly through the group rather than being left to one person.

Do Small Businesses Need to Offer Group Health Insurance?

What legally qualifies as a small business? According to The Small Business Administration, a small business is any business with 500 or fewer employees. However, the definition of a small business is very different under the ACA (Affordable Care Act) which defines a small business as having fewer than 50 full-time employees. If your employee count exceeds fifty participants, you may need to apply for large group coverage and meet the minimum standards set for that insurance type. For any group health plan to be valid, employers typically need to receive at least 70% plan participation from their employee pool.

How Much Do GHPs Cost for Small Business Owners?

According to the Kaiser Family Foundation’s 2021 report, the average annual health insurance premiums for small businesses was $7,813 for individual coverage where employers contributed 83% or $6,485; and $21,804 for families where employers contributed 63% or $13,737. From these numbers, we can see that small business owners typically pay at least half of their employees’ insurance premiums. This is not especially surprising as paying at least 50% of employee premiums is a requirement for employers if they hope to claim federal small-business health care tax credit.

Is Health Insurance Tax Deductible for Small Businesses?

While providing health insurance options for a large employee pool can be costly, there are tax benefits small businesses can take advantage of to offset some of the strain. In fact, small business owners are usually able to deduct their group-health-insurance-related expenses from their federal business taxes, or at the very least pay for the difference with pre-tax funds that save money in the long term. Deductible-eligible expenses may include monthly premiums, contributions to HSAs (Health Savings Accounts), and tax-advantaged dollars.

Note that while many group-health-related expenses are tax-deductible for small business owners, there are still expenses that will not be. It’s important to be in contact with your personal accountant about which expenses will qualify for tax benefits.

About the Small Business Health Care Tax Credit

If you are a small business owner with fewer than 25 employees, there are ways that you can save money while also providing your employees with the coverage they need. Consider enrolling in a Small Business Health Options Program (SHOP) plan. By doing so, you may be eligible for the Small Business Health Care Tax Credit. To qualify for the tax credit, you must meet all of the following requirements:

Fewer than 25 full-time employees
The average employee salary is roughly $56,000 per year or less
You pay at least 50% of your full-time employees’ premium costs
You offer SHOP coverage to all of your full-time employees. (Note: You don’t have to offer it to dependents or part-time employees to qualify for the tax credit.)

Are GHPs Cheaper than Individual Plans?

Typically, no. Group coverage is usually a much more cost-effective choice for small business owners than individual coverage options for a few reasons. Primarily, it’s more expensive for employees who must pay their full premiums with individual care rather than having their employer pay half. But employers also lose out on key tax benefits as they won’t be able to benefit from pre-tax savings as they are normally able to do when paying the employees’ premium.

What Do Group Health Plans Usually Cover?

Group health plans provide employees with medical coverage to offset the financial strain of various health-related expenses. These usually include coverage for doctor’s services, inpatient treatment, outpatient treatment, prescription medications, pregnancy-related expenses, childbirth-related expenses, mental health services, and more. These plans often come with optional supplemental policies to provide additional assistance for employees. The most common of these supplemental plans are vision and dental insurance.

Group Health Insurance & Pre-Existing Conditions

According to federal law, pre-existing conditions are any conditions–whether physical or mental–that a patient may need to seek either medical advice, diagnosis, care, or treatment within six months of enrolling in their health plan. Note that there are exclusions to this rule concerning pregnancy and children under the age of nineteen. These pre-existing conditions may be covered by a group health insurance plan, but they may also be subject to a pre-existing condition exclusion period. These exclusion periods dictate periods where an employee may not receive insurance assistance for a pre-existing condition until the term is completed. States regulate these periods, as do HIPAA and the ACA to ensure fairness.

ACA for Small Business Owners

The ACA (Affordable Care Act) established a program specifically for small businesses known as SHOP (Small Business Health Options Program) to govern health and dental coverage for small businesses. This program dictates certain things small business employers must do when providing their employees with health options. They include:

Providing certain information about the Marketplace to employees, regardless of whether health coverage is offered,
Granting employees a ninety-day maximum waiting period for coverage eligibility if health insurance is offered.
Providing employees with a Summary of Benefits and Coverage (SBC) disclosure to explain the offerings and costs of any health insurance options they may receive.
Potentially being required to make employer-shared responsibility payments if they have fifty or more employees and don’t meet insurance minimum requirements.

How Do Small Businesses Find GHPs for Employees?

Once you decide to offer group health insurance, you need to consider how many employees you’re covering, what kind of coverage you want to offer, and your employee premium costs. When you’ve gathered this information, it’s time to determine which small business health insurance plan is right for you. You can choose from a preferred provider organization (PPO), health maintenance organization (HMO), health savings account-qualified plans (HSA), and indemnity plans.

#1 Preferred Provider Organization Plans (PPOs)

PPOs are the most common health insurance type. This plan allows employees to choose both in-network and out-of-network providers, depending on their preferences. If they select an in-network provider, the insurance company receives a larger percentage of the claim filed. Additionally, these plans cover a broad range of services that include but are not limited to, preventative care, hospitalization, emergency care, medications, outpatient surgery, and certain specialist treatments. However, with PPOs, participants must pay a $10-15 fee every time they visit an out-of-network provider and may face higher copays as well. They will also be responsible for filing their claim paperwork if they visit an out-of-network provider.

#2 Health Maintenence Organization Plas (HMOs)

HMOs work with a wide range of healthcare options provided by a group of exclusive contract providers. These plans require each employee to have a primary care physician for the majority of their healthcare—writing referrals to specialists when needed. These plans tend to be lower in cost because healthcare costs are often negotiable between provider networks. However, employees may struggle with this healthcare option because they are strictly limited to doctors and facilities listed in their network. They will also need a referral from their primary care physicians before seeking assistance from other medical professionals–even for routine care.

#3 Health Savings Account-Qualified Plans (HSAs)

An HSA-qualified plan is a PPO plan specifically engineered to work with a health savings account. This allows employees to reap three separate tax benefits:

They may contribute pretax money to their HSA and then pay medical expenses with pretax funds.
Employees can earn compound profits without being taxed on them.
Any money an individual doesn’t use from their HSA in one year will automatically roll over so they don’t lose any contributions.

However, to qualify for this plan, a small business’s employee participants must have an HDHP (High Deductible Health Plan) with a minimum deductible of $1,350 for single coverage and $2,700 for group coverage. Unfortunately, high-deductible health plans can sometimes result in individuals not seeking care when they need it, so that factor must be considered when shopping for this insurance type.

#4 Indemnity Plans

Indemnity plans give employees more control over their healthcare. With this plan, your employees can visit the doctors and hospitals they choose without a penalty fee. The insurance company will also pay a portion of the total medical expenses accrued. In some cases, employees may need to pay for key services upfront and then apply for reimbursement later. These plans work by giving quick, easy cash payments for qualifying incidents so that medical costs may be taken care of efficiently. Additionally, these plans may include other wellness benefits like telemedicine options that other plans don’t provide. However, if members have pre-existing conditions, they may have to wait as much as twelve months before they qualify for coverage.

How to Shop for Small Business Health Insurance

Comparing coverage options and quotes from multiple carriers is an excellent way to ensure you find the best policy for the best rate. If you’re considering adding new health benefits for your employees, it’s important to speak with a professional to determine the best policies for your company. If you need help navigating the complicated world of employee benefits, our team at Beckham Insurance group is here to help. Located in Charleston, SC, and St. Simons, GA, we are proud to offer full access to all group health and supplemental insurance markets and products. Creating a competitive benefits package that meets the needs of your business couldn’t be easier.

To get started, contact us today for a free quote. We can’t wait to help you create a healthier and happier workplace!