Small Business Group Health Insurance: Why It’s Important And What To Consider
Dan Levenson January 22, 2020
If you’re an entrepreneur, responsible for employees, or managing a small business understanding group health insurance is crucial.
Offering a high-quality health insurance plan to your employees might seem expensive at first, but it can save you thousands, if not millions of dollars in the long term.
Studies show that healthy workers are more productive, efficient and cost-effective. The Department of Labor reports that for every $1 invested in health insurance and wellness programs, small businesses can get up to $6 back. And group health insurance is one of the most appropriate options for small businesses.
What Is Group Health Insurance?
Group health insurance refers to a medical coverage designed to help you, your employees and sometimes your dependents pay for expenses arising from healthcare.
Unlike individual plans, group health insurance plans are engineered to be more cost-effective for small businesses. And that’s just the tip of the iceberg. The coverage also offers the following benefits.
Benefits of Small Business Group Health Insurance
Any cost related to health insurance that an employer incurs is usually tax-deductible. Therefore, you can set things up in a way that your employees save tax money.
For example, with little paperwork, your employees can contribute to the health insurance cost on a pretax basis. That means you deduct premiums before taxes are calculated. And as a result, your employees take home more pay.
As an employer, you also enjoy benefits such as:
- Tax-deductible contributions
- Reduced payroll taxes
- Reduced worker compensation premiums
Improves Recruitment And Retention
A study by Glassdoor reveals that employees consider health insurance as the most important benefit they can get from employers. In fact, most of them look at health insurance offered when deciding whether to accept a job offer or reject. So if you want to attract top-tier talent and retain them, you must offer the best coverage.
Boosts Employee Productivity
A study from the University of California found that offering health insurance and other wellness programs can offer up to 76% return on investment due to higher productivity.
As an employer, having focused and productive employees is a top priority if you’re going to take your business to the next level. Failure to do so will only keep your employees worried about their health and stressing about the burdensome process of enrolling in individual plans.
Other benefits of offering group health insurance to include:
- It provides access to more doctors and healthcare practitioners than individual plans.
- Promotes teamwork and job satisfaction
Now that you know the benefits of offering group health insurance, let’s look at how you can choose the right plan for your business.
How To Choose The Right Group Health Insurance
As mentioned earlier, healthcare coverage is essential for your business to succeed. But choosing the right plan can be dizzying. Why?
Unlike big companies, you don’t have enough resources to spend hours comparing plans. The good news is that you just need to consider the following factors to narrow down your search.
The Demographics Of Your Employees
Employee demographics impact the type and cost of group health insurance for your business. Generally, most insurers look at the health history and ages of your employees before offering a quote.
Therefore, it is wise to be one step ahead to choose a plan that’s flexible enough to cover all your employees’ needs. Consider conducting an anonymous employee census or survey. Find information such as:
- Spouses and kids they intend to cover
- Type of plans preferred
- How much premiums each employee prefers to pay
Remember, the HIPAA stops you from asking your staff sensitive information like personal health details. Also, you can’t disclose any health information about your staff to an insurer. So make sure your study is light and high-level.
What Your Competitors Offer
The current low unemployment rate means small businesses have to devise new ways to compete for the few available talents. Although there are several ways to compete with peers in your industry, having an attractive health insurance policy is one of the best ways to lure high-quality talent.
So be sure to look at what your competitors offer. For starters, take a look at their careers sections. You will see what applicants are offered and then strive to either surpass, or match them.
What Can You Afford?
You have to balance your workers’ needs with what you can afford. So make sure the premiums fall within your budget.
However, if you have less than 50 employees, you may not be legally required to contribute a certain percentage of your workers’ health insurance premiums. Also, you may qualify for small business tax credit if you enroll through SHOP Marketplace.
Different Types Of Plan Designs
It is also important to understand the different types of plans that you can offer your employees. Generally, there are three:
- Health Maintenance Organization (HMO): This plan cuts costs but limits your workers’ healthcare network. For example, they will require a referral from their healthcare specialist to see a specialist.
- Preferred Provider Organizations (PPO): Although PPO premiums are higher than HMO, it’s more flexible because employees don’t need referrals and can, therefore, see doctors outside and inside the network. However, they will save money if they choose doctors inside the network.
- Exclusive Provider Organization (EPO): This is a hybrid plan. Workers still maintain access to a network of healthcare practitioners, but they don’t require any referral to see a specialist.
Clearly, you must balance lower costs versus plan restrictions to pick the right plan for your business. To do so, think about your employees. Will they be frequent recipients who might be hesitant to use the plan because of restrictions?
Evidently, most employees mention health insurance as their top benefit from employers. Finding the right plan is, therefore, the best way to keep employees happy, engaged, and satisfied to reduce your turnover. For a small business, group health insurance is the right place to get started. Want to learn more? Contact Insure Your Company to speak with one of our industry experts.