Small Business Health Insurance is Cool

May 28, 2020

Small business health insurance can seem confusing. Here is what you should know about your options for coverage as your employees begin to return to work.

Photo of a an arm extended with a thumb up.

Health is all the rage right now.  You must remember when Billy Madison claimed, “You ain’t cool unless you pee your pants.”  Well, providing health insurance to employees is like that.  Kind of.  Not only is our society growing increasingly aware of health, but we are also focusing more on employee satisfaction.  Therefore, it is no surprise that employers recognize the importance of offering fringe benefits, keeping employees’ health and happiness in mind.  One such fringe benefit is small business health insurance.

Here is what you need to know about options for small business health insurance.  This will be especially relevant as employees begin to return to work after stay-at-home orders lift.

What are fringe benefits?

Now, small business health insurance is health coverage for businesses with up to 50 employees. The coverage provided is considered a fringe benefit for employees.  Fringe benefits are perks given to employees in addition to their regular compensation.  Common fringe benefits include vacation time, retirement plan contributions, and education assistance, among many other options.

When it comes to fringe benefits in general, most employers offer them, but only an estimated 55% of businesses with fewer than 100 employees offer health insurance.  Some speculate the reason small business owners don’t offer health insurance is simply because they don’t understand the process or options.  The cost of providing health insurance can also be a problem for some employers.

After experiencing the issues associated with the COVID-19 pandemic, however, we are all starting to realize the importance of fringe benefits.

What is small business health insurance?

So, what’s with the confusion surrounding small business health insurance?  Well, there are many health insurance providers and plan options.  Besides that, the rules aren’t always clear about which employers are required to provide insurance to employees.  Therefore, some employers simply let this fringe benefit fall by the wayside because they find the grey area to be daunting.

Nevertheless, it’s important for employers to understand what small business health insurance is, especially as businesses reopen after the recent shutdown period.  So, depending on the situation, sometimes business owners will simply opt for an individual or family plan, and then employees are on their own to find coverage.  Other times, they decide to cover all employees under a group plan, which is a small business health insurance plan.  Typically, a group plan requires a minimum of two members, but some states will even permit a “group of one,” as odd as that sounds.  Clearly, there is no business too small to have an option for a small business health insurance plan, which is the key takeaway here.

Related:  Transitioning Payroll Companies: Taking the Pain out of the Move

Why is small business health insurance important for employees?

Image of the word Important written in black colored pencil, with a red colored pencil underlining the word in red, indicating health insurance is important.

You might be wondering why employees can’t just go out and get their own health insurance.  After all, there are plans available for private individual policies.  Well, individual health insurance policies are expensive.  Due to the high cost, many employees will forgo individual health insurance.  Consequently, many people will not engage in the preventive healthcare that is proven to keep them healthy.  So, providing lower-cost health insurance to employees incentivizes them to invest in their health.  Furthermore, it takes the burden of the guesswork away from them.

What’s in it for me?

There are many reasons why offering health insurance is good for employees and business owners alike.  First, fringe benefits, in general, entice employees to work for your company.  Second, providing health insurance gives you a tax break.  Specifically, the insurance premiums for small business health insurance is a business expense.  So, you can deduct the cost of providing health insurance when you file your taxes each year.

Without a doubt, providing health insurance to your employees also benefits employers.

What are the small business health insurance options?

There are a variety of health insurance options for employers to choose from.  Here is a little snippet of what the following options offer:

  • Health Management Organizations (HMO) – This plan is a low-cost plan, and is typically for young and healthy employees. 
  • Preferred Provider Organizations (PPO) – This type of plan comes at a higher cost, but with more flexibility and options for people who have routine medical needs.
  • Point of Service Plans (POS) – Imagine if the HMO and the PPO had a baby, and you’d have the POS.  The notable thing about this plan is that you can see specialists, but employees will need a referral from their primary care provider.
  • Exclusive Provider Organizations (EPO) – This type of plan encourages employees to stay within a network of providers, although they don’t necessarily need a referral to see a specialist. 

Your employees’ needs and your company’s financial bandwidth will determine your small business health insurance options. 

Related:  The Affordable Care Act: What Employers Need To Know For 2018

Where can I get small business health insurance?

Image of two ladies looking at small business health insurance policies, with a calculator in front of them.
Photo by Dental Authority | Source | CC by

You can get small business health insurance several different ways.  One way is to contact the health insurance company directly to discuss which plan options are the best fit for your company and your employees.  Or, you could use the government’s health insurance exchange—SHOP—to compare insurance companies and plans.  If you would rather outsource this job, you could hire a broker to do the shopping.  Alternatively, you could partner up with a health insurance purchasing association. 

So, as you can see, you can manage as much or as little of this process as you’d like.

What’s up with the waiting period?

The waiting period is the length of time an employee must wait before coverage begins.  Sometimes the waiting period is called the elimination or qualifying period.  The waiting period can vary from plan to plan, so you’ll want to be sure to communicated that information to your employees.

Why not get small business health insurance?

There are definitely more reasons to opt in to small business health insurance than reasons not to.  If your company can afford to provide insurance benefits to employees, then you’ve eliminated the biggest obstacle.  After all, it truly is an investment in your business and in your employees.

In summary, there are lots of cool things you can do as an employer.  While we don’t recommend running around peeing  your pants—that’s so passé, circa 1995—we do think you should consider your options for small business health insurance.  It really is a cool thing you can do for your business.

Photo of a meme of Billy Madison with the words "You ain't cool unless you get small business health insurance."

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