What Should You Know About Small Group Health Insurance?
You’ve probably been thinking about how to offer small group health insurance that meets your employees’ needs without it costing a fortune. You may have many questions about how the recent health insurance laws will affect your business, what kinds of group health plans are available, and how to apply for group health coverage. This article can provide answers to some of the frequently asked questions employers like you have about small business health insurance.
Do I Need to Have Employees to Buy Group Health Insurance?
It depends on if you want to buy health insurance for small business through an insurance agent or company, or through the Small Business Health Options (SHOP) Marketplace. Some states require that insurance companies offer guaranteed-issue group health polices to self-employed business owners with no employees. This chart from Kaiser Family Foundation shows states where a self-employed group of one can buy a guaranteed-issue group health policy.
To purchase a SHOP plan, you need to have at least one full-time equivalent employee. If at least one employee enrolls in the plan, you can then enroll yourself. A family member (including spouse), part-owner, or partner in your company is not considered an employee.
What Types of Group Health Plans Are There?
There a several types of small business health insurance plans for groups. You can choose from managed care (HMO, PPO, and POS), indemnity fee-for-service, and high -deductible health plans. Specific plans available vary by region.
Health Maintenance Organization (HMO): An HMO plan only covers medical services received at an in-network provider. All care is organized through a primary care physician (PCP). Patients must get a referral from their PCP if a medical condition requires treatment from a specialist. The only exceptions to getting a referral are for emergency room visits and routine, in-network care at an obstetrician or gynecologist.
Because HMO plans are more restricted, premiums and copays are usually lower than some other types of plans, such as a PPO plan. With lower employee premiums, you also put less money toward employer premium contributions. The chart below shows average employee premiums for HMO and other plan types reported from Kaiser Family Foundation’s 2018 Employer Health Benefits Survey.
Preferred Provider Organization (PPO): Comparing an HMO and a PPO plan, a PPO plan provides more flexibility because members can choose to visit an in- or out-of-network provider, and there’s no requirement to have a PCP. But the plan provides a lower percentage of coverage for going out-of-network. In addition to copays, PPO plans usually have coinsurance and annual deductibles. Patients may sometimes have to pay for care received out-of-network up front, and then file a claim with the insurance company to get reimbursed for covered medical services.
Point of Service (POS): This type of plan is a cross between an HMO and a PPO. The HMO aspect requires that patients first see their PCP to receive care and get a referral in some cases. The PPO element allows patients to receive some covered services at a provider outside the plan’s network, but this may require a referral from the PCP. With a POS plan, some medical services may not be covered out-of-network, and members may have to file all claims forms themselves.
Fee for Service (FFS): An FFS plan, also known as indemnity health insurance, lets members visit any physician, specialist, and hospital they choose. But this flexibility comes with higher out-of-pocket costs. The plan may pay healthcare providers directly or reimburse members for covered services after a claim has been submitted. An FFS plan can include a PPO option depending on the plan’s service area. By using a PPO provider, members typically have lower out-of-pocket costs, and they usually don’t have to file claims.
High Deductible Health Plan (HDHP): As the name reveals, members pay a high annual deductible for having this plan. The table below shows the average annual deductible for HDHPs and other plan types from the Kaiser Family Foundation (KFF). To compensate for the high deductible, this type of plan usually has a lower monthly premium than other plan types. An HDHP in a small group health insurance benefits package is usually paired with a savings option (SO), such as a health savings account (HSA). An HSA is funded through pretax dollars that are automatically deducted from employees’ paychecks. Employees can use funds from the account to pay for out-of-pocket healthcare expenses.
Average Employee Premiums and Deductibles by Plan Type
These figures below can give you a general idea of what employees could pay in premiums and annual deductibles for certain plan types. The actual plan an employee chooses may not have a deductible. For instance, HMO plans usually don’t have annual deductibles.
2018 Average Employee Premium
2018 Average Annual Deductible for Employees
SOURCE: Kaiser Family Foundation (KFF) 2018 Employee Health Benefits Survey
*These are general annual deductibles among employees who have a plan that has a deductible. PPO, POS, and HDHP/SO deductibles are for in-network providers.
How Much Are Premium Contributions for Small Businesses?
Compared to large companies, small businesses had higher premium contributions for single coverage and lower contributions for family coverage, according to the 2018 KFF survey. This was the reverse when it came to employee premium contributions at small firms—less for single coverage and more for family coverage. The survey lists small firms as those with 3-199 employees, and large firms as those with 200 or more workers. The following chart gives a comparison of premium contributions for health insurance in general (not specific to a plan type) among small and large businesses.
2018 Average Annual Worker and Employer Premium Contributions
|Small Firms (3-199 workers)||Large Firms (200+ workers)|
|Single Health Coverage||$1,133||$5,681||$1,207||$5,723|
|Family Health Coverage||$6,781||$11,957||$5,046||$14,926|
SOURCE: Kaiser Family Foundation (KFF) 2018 Employee Health Benefits Survey
How Do I Know Which Group Health Plan to Choose?
Cost is, of course, a significant factor in deciding which small business health insurance plan to choose. So it may seem more logical to go for a plan that has less employer premium contributions. But this may not be what’s best for your employees. If you offer a plan that has a limited network of providers, for instance, it may cost less but not include the hospitals or physicians employees like to visit. In choosing a plan, it may also help to know what other small businesses are doing. According to the KFF 2018 Employer Health Benefits Survey:
Can My Business Be Denied Coverage Based on the Health of the Group?
No. State and federal laws require insurance companies to sell all health plans on a guaranteed-issue basis to small employers with 2 to 50 employees regardless of the group’s health status. As mentioned earlier, a business owner with no employees can also get a guaranteed-issue group plan in certain states, but this is not a federal law requirement. Although health status is not a factor in eligibility for group coverage, an insurance company may deny an application unless certain requirements are met, such as covering a minimum number of employees and paying for a minimum percentage of employees’ premiums.
How Do I Know If I’m Getting the Best Price?
Because health insurance products and premium rates are regulated by each state’s Department of Insurance, the premium an insurance company charges for a specific health plan must be the same regardless of where you buy the plan.
What are the Advantages of Buying Health Insurance Through an Agent?
Working with an agent offers many advantages, such as:
- Advice: Searching for health insurance on your own can potentially be overwhelming. By working with an agent, you have a knowledgeable insurance consultant to help you navigate the health insurance waters so you can focus on priority number one: running your company.
- Licensed professional: Working with a licensed agent offers a sense of security because you know you’re working with someone who meets the state’s regulatory requirements to sell insurance products. You also get someone with the industry knowledge to help you understand health insurance terms and processes.
- Local help:With a local agent who can meet with you in person, it may be easier to get answers immediately rather than go back and forth through telephone calls and emails.
What You Should Expect From a Good Insurance Agent
Your business and employees mean a lot to you, so it’s only fair that your agent puts a lot into helping you with health insurance small business solutions. These are a few of the main things you should expect from a good insurance agent.
- Be there: A good agent should keep in touch throughout the year, not just when it’s time to renew. Whether it’s through periodic phone calls or visits to your place of business, your agent should take an active role in keeping tabs on your health insurance needs.
- Help employees: This ties in with being there. Not only should a good agent be invested in your insurance needs as a business owner, but he or she should be available to address employees’ ongoing health coverage needs and answer related questions.
- Do follow-up assessments: A good agent should find out how employees are using their group health insurance to start planning for the next coverage year.
If I Already Have Group Coverage, Do I Need to Wait Until My Renewal Period to Meet With an Agent?
Not at all. The sooner you can meet with an agent to evaluate your current group health policy the better. Advance planning gives you time to decide which group health coverage would work best with your employee benefit package. Imagine trying to figure out your options at the last minute when you already have several priorities to attend to. Not only could this be stressful, but you may be more likely to renew a plan that isn’t really working for you just to get it out of the way. Rather than take this approach, which could be costly, it’s better to discuss your needs with an agent now.
What’s the Application Process for Small Group Health Insurance?
HealthMarkets is here to help. One of our licensed insurance agents will meet with you and each of your employees one-on-one to do a comprehensive needs assessment before you ever complete any paperwork to apply for small group health insurance. Our consultation service is free, and you’re never under any obligation to buy. Your agent will perform several functions, such as:
- Analyze your group health insurance costs: Your agent will perform a thorough cost analysis on what a group health insurance policy could cost your business and compare it to your current health plan, if any.
- Review options to provide you with the most cost-savings: For example, would a lower monthly premium and higher deductible be more suitable for employees? If so, then a high deductible health plan (HDHP) where you pay lower employer premiums may work best.
- Determine if you need to offer more than one heath plan: Depending on your employees’ diverse needs and your budget, your agent may evaluate if it’s practical to offer more than one plan option.
- Determine if and how you need to offer additional health benefits: Supplemental health benefits like dental and vision coverage are usually popular among employees. If employees are interested in such benefits, your agent might go over options to offer these benefits through a group plan, on a voluntary basis, or let employees buy their own individual or family supplemental health plan.
After your assessment is complete, your agent may review quotes for different plans available in your area that are most suitable to your needs and budget. Once you narrow down your choices, your agent will go over the next steps to apply for coverage.