Small Business Health Insurance: How to Select the Best Plan for Your Company
Although small businesses with 50 or fewer employees don’t legally need to offer business health insurance right now, there are many benefits to doing so. From attracting talent and keeping your employees healthy and productive to saving money on tax credits and deductions, there are plenty of pros. Health insurance is a sign of a successful growing business.
Unfortunately, getting small business health insurance is a complicated, often confusing process. There are so many companies, plans, and acronyms—but the process is not impossible to navigate. Here’s a breakdown of what you should know when you are trying to find the right health insurance for your small business.
1. Should You Get a Broker?
There are some industries where brokers are always a rip-off, but small business health insurance isn’t one of them. Although insurance brokers earn commissions off of the insurance plan you purchase (and may charge an extra fee as well), they actually can be very useful to small business owners.
Simply put, the efficiency and expertise that many insurance brokers bring to the table can be well worth their commissions. Besides helping you pick the plans that make the most sense and avoid those that don’t, insurance brokers can also assist with all your insurance paperwork, ensure your business is up-to-date and compliant, and aid you in implementing and renewing your health insurance plan.
As a small business owner, your time and energy is invaluable, so deferring to an expert might be the best way to go. Of course, you can always figure out options on your own, but don’t discount a broker just because of the cost.
2. Gather Documents Before Applying
When you apply for business health insurance, you’ll want to collect the relevant documents before getting started. This can save time and prevent some serious headaches down the road. Thankfully, there isn’t too much you’ll need right away. Here’s a short list to get started:
- Name of Business
- Business Address (Street address only; no P.O. boxes allowed )
- List of Employees
- Tax ID (EIN)
- Business Start Date
- Payroll Records
- Industry Code (SIC)
In addition, you’ll also need to report the demographics of the employees you’re covering, including their names, ages, ZIP codes, and the number of dependents they have. Health insurance companies will analyze this information in order to price your plan’s premiums.
3. Figure Out What Your Business Can Afford
Small business health insurance can be expensive which is why you need to figure out in advance how much you can afford to spend. You don’t want insurance costs to bankrupt your business; on the other hand, skimping on cheap and ineffective health insurance is probably not worth the expense, either.
Consider these factors when figuring out your budget:
- How many employees do you have?
- How much do you pay your employees?
- What kind of health coverage do they need? (More on this in the next step.)
- How is your business doing financially?
Generally speaking, you can look at your budget and try to calculate how much you can spend per employee, per month on health care. As of 2015, the average employer paid $5,179 annually (or $432 each month) per employee, accounting for around 80 percent of their premium costs.
4. Understand What You and Your Employees Need
The ideal health insurance plan finds the right balance, for you and your employees, between coverage and cost. You don’t want to pay for health care coverage that nobody needs—but you don’t want to leave important factors uncovered just to cut costs. Ask yourself the following questions to determine what sort of plan will work best for your company.
What plan structure makes sense? There are a few different basic health insurance plan structures to look at. While the nuances between HMOs, PPOs, POS plans, and EPOs are important, they often boil down to this point:
Some people are comfortable staying with their primary physicians and prescribed networks (especially older employees), while others will want to see specialists and test out different doctors. One or the other isn’t necessarily more expensive—if you pick the right plan. Ask your employees what their preferences are so you can tailor your plan to them.
How often are health care services needed? A basic trade-off of health care is higher premiums mean lower copays, and vice versa. (Premiums are the monthly payments for your health insurance plan; copays are fixed payments that you make for different services—they are your contribution to the doctor’s bill.)
This means understanding the frequency of doctor visits your employees expect can be helpful. If all of your employees are healthy, then you will want to get a plan with lower premiums; if some employees need to see doctors more often, then a plan with lower copays is ideal.
What do your employees definitely need covered? You can’t legally ask your employees for their medical records, but you can still have frank and open discussions in a group, one-on-one, or both, in order to make sure no one’s health is left out in the cold when you pick a plan. If some employees need certain conditions covered, then you may want to take that into account when picking a plan.
Choose the Right Plan for Your Business
Once you have figured out the type of plan your business can afford, what your employees require, and how you want to go about finding a plan, your next step is pretty straightforward: Find the best small business health insurance plan for your needs.
There are plenty of ways to do this, from researching and contacting health insurance companies on your own to using the government’s health insurance exchange, or finding a privatized exchange, also called a purchasing alliance. Whichever route you take, always keep these steps in mind.
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