As one of the most expensive aspects of running a small business, health insurance is top of mind for many employers. What is the best way to provide insurance? Should you provide insurance at all? Are there alternatives? If you’re asking yourself any of these questions, this article is for you. Understanding the different types of health insurance for small business owners doesn’t have to be overwhelming; in this article we’ll examine the following options and share benefits, costs, and use cases for each:
- Group health benefits for small businesses
- Self-insured health insurance plans
- ICHRA plans
- PEO group insurance plans
Why Health Insurance For Small Businesses Matters
Offering quality health insurance plans as a small business owner gives you a competitive edge when recruiting and hiring talent. To be blunt, if you want to find the best people, you have to offer the best benefits—especially when it comes to health insurance.
When it comes to recruitment, 46% of people say health insurance was either the deciding factor or a positive influence in choosing their current job.
And the importance of providing high-quality health insurance doesn’t wane when you’ve found the right employee. Look at this eye-popping stat:
56% of people with employer-sponsored health benefits said that whether or not they like their health coverage is a key factor in deciding to stay at their current job.
Health Insurance For Small Business Owners: 4 Options
1. Small Group Insurance Plans
How it works: Employers purchase group plans and then offer them to eligible employees. In the small group market:
- Rates are regulated
- Plans typically require 70% or more employee participation
- Plan options may be limited
- Carriers have contribution requirements
Essentially, you have three options for purchasing health insurance coverage in the small group market: through a licensed broker, a health insurance carrier, or the open market (called different things in different states). Either way, your small business has access to certain products, which usually don’t include many of the more robust insurance plans offered to larger companies. Keep in mind there is little-to-no support for education for this option, or for gaining insights into how the health insurance plans will change from year to year.
Who should use it: Purchasing a group insurance policy for small business might be a good option for you if you meet the requirements: you understand the insurance market, know how to compare prices and products, and have time to handle plan administration, open enrollment, etc.
Historically, fully insuring your company in the small group market has been the most common means of offering health insurance to employees, though it may not be the most advantageous to you. (Keep reading for our recommendations!)
2. Self-insured Plans
How it works: Self-insured employers pay insurance claims out of pocket instead of paying a predetermined premium to a carrier for a small group plan. Companies ensure losses on a self-insured plan, as they have enough income to pay out claims and can take the risk that an employee’s claims won’t exceed what the employer can pay.
Who should use it: This option may be appropriate for some large companies who can afford to carry significant risk, as they are responsible for paying out actual claims. We do not recommend this option for small businesses.
3. Individual Coverage Health Reimbursement Account (ICHRA) Plans* (Genesis Pick)
Individual Coverage Health Reimbursement Account s are not insurance plans; instead, employers can offer ICHRAs to provide payment for insurance, allowing employees to select individual plans at pretax prices in the open market.
How it works: ICHRA requires employers to provide funds for employees, on a pretax basis, to purchase their own health insurance. Employees can use pretax dollars to pay for the plan that works for them. Unlike other employer-sponsored health insurance plans, HRAs require no administration, no renewal each year, and no decision-making on behalf of your employees.
Who should use it: ICHRA is a good strategy for small businesses and startups and for busy business owners who want to give employees the option to pick a plan themselves. Choosing an HRA is one of my favorite options for small businesses.
ICHRAs honor the individual’s choice. Not every person uses health insurance the same way, and by providing an HRA, employees are able to choose the coverage that best fits their needs and lifestyle. Employers are more likely to ensure their employees are happy by allowing them to pick their own coverage, as opposed to picking a small group plan, which, by nature, is required to be one-size-fits-all.
*GenesisHR can help your small business get HRA plan documents; administer your ICHRA; take deductions through payroll, and more. When choosing an HRA, you’d simply opt out of our master plan and select individual coverage. You can learn more here.
4. PEO Group Insurance* (Genesis Pick)
PEO stands for “professional employer organization”; small and midsize businesses that engage a PEO gain an ally when it comes to health insurance. Not only does a PEO open up doors when it comes to offering better benefits packages but it also handles all the administrative aspects such as selection, renewals, open enrollment, employee education, onboarding, and even advocating for your employees if there’s a claim issue.
How it works: A PEO brings individual clients into one “large group” arrangement that allows for access to product offerings they can make available to their small business partners. From the initial policy selection to the annual renewal and open enrollment—all is handled by the PEO.
Who should use it: A PEO partnership is the best plan for small businesses and startups in growth mode. If you’re a business owner who wants to provide the very best options to attract and retain top talent, a PEO can help you do that—plus remove the time-consuming burden of administration.
PEO health insurance benefits add value to your employees’ lives. This benefit is arguably the most important. By partnering with a PEO to offer competitive health insurance coverage, you protect the investment you make in your employees—happy, valued employees are less likely to leave your company in search of other opportunities.
Which health insurance option is best for your small business? Connect with Genesis to get answers.
If you’re a small or midsize business looking for excellent healthcare benefits for your employees, GenesisHR can help. We are proud to have best-in-class provider Blue Cross Blue Shield of Massachusetts as our healthcare partner. In fact, we are the only PEO in Massachusetts to offer this premier coverage to our clients and their employees throughout the country! With a BCBS Massachusetts plan from Genesis, you get to choose one or more health plans that fit your organization’s budget and the needs of your team perfectly.
That partnership is just one of the reasons to explore working with Genesis; we also have many additional benefits-related offerings that allow you to attract and retain the best employees, including:
- Group Health, Dental, and Vision
- 401(k) Options
- Long- & Short-Term Disability Coverage
- Employee Assistance Plans (EAP)
- Health Savings Account
- Health Reimbursement Account
- Flexible Spending Programs
- Retail & Entertainment Discount Program
- Integrated Employee Onboarding
- Online, Mobile-Friendly Access To Review/Enroll in Benefit Plans & Offerings
If you’d like to know more about how Genesis HR Solutions might be able to remove the considerable burden of finding and managing health insurance plans off your shoulders, get in touch with us today. We’ll look at your health insurance benefits strategy and discuss how we can work together to offer your employees the highest-quality health plans simply.