Group Health Insurance for Very Small Companies

Why Do Small Businesses Offer Health Insurance Coverage to Their Employees If They Don’t Have To?

Companies that have fewer than 50 full time employees are not presently required by the Affordable Care Act (or any other Act we’re aware of, for that matter) to offer group health insurance to their employees as of this writing.

That said, many of these smaller companies choose to offer various forms of employer health insurance coverage and/or stipends despite not being legally required to do so in most cases.

So, what are some of the advantages of taking into account your employees’ healthcare needs even when there is no mandate requiring it?

In What Situation Might a Company Negotiate Broker Fees?

While far, far less common of an occurrence in the world of insurance than it is in car sales, the answer is that it may be possible to negotiate for reduced fees and commissions with a broker. The likelihood of that negotiation being successful, however, varies widely depending on a few key factors – specifically, the size of the buyer’s company, the type of fees and commissions in questions, and the policies of the provider with regard to matters of broker compensation.

• Healthy Employees are more Productive Employees: Having quality healthcare coverage in place provides employees peace of mind, and less time spent worrying about how they can afford any medical treatment they may require leads to more time they can remain focused on the job your company has hired them to perform. Further, quality insurance coverage enables employees to better proactively manage their health issues, which can lead to healthier employees overall, fewer sick days, and greater productivity overall.
• Talent Acquisition and Retention: There’s an increasingly competitive market for talent in many areas and industries, which can lead employers to seek out any advantage they can get when it comes to attracting and retaining quality employees. For this reason, many small businesses who would otherwise not be required to do so are choosing to offer their employees some form of help with their health insurance needs as an additional incentive and form of compensation for their work.
• Economic Factors: For employers who recognize the advantages of having a happy and healthy workforce, the value of providing coverage options to employees is obvious. But there are still additional benefits to be gained potentially through cheaper premiums as a result of employee pooling, deductions and write-offs for healthcare payments as a business expense, and potentially even health care tax credits for qualifying employers.
• Qualifying for a small business health insurance tax credit will depend upon a number of factors – the smaller the company (in terms of full-time employees) and the smaller the average salary of the employees, the larger the tax credit.
• Typically, to qualify a company must have:
• Fewer than 25 employees with an average annual salary of less than 55k.
• Also, the business must pay at least 50% of the employees’ premiums, and the health care coverage needs to be procured through the ACA market place or other Small Business Health Options (SHOP) marketplaces.

Do I Need a Broker to Procure Health Insurance Coverage for My Small Business?

While it is never a bad idea to work with a health insurance broker in order to evaluate coverage options, it is not necessarily required in order to get your employees the coverage you’re seeking. For example, a company could bypass brokers and agents entirely by going directly to the ACA or SHOP marketplaces mentioned above.

Further, there are a number of potential options to address the healthcare needs of your employees while avoiding traditional group insurance coverage altogether:

• Self-Insure: Instead of paying out monthly premiums and contributing toward the administrative costs of an insurance provider, some small companies choose to self-insure and fund the costs of their employees’ health care out-of-pocket, sometimes with the help of a third-party administrator. This can be a risky proposition for small companies, however - especially those with limited liquid capital on hand - given the potential year-to-year swing in payout for such a small pool of employees. Learn more about employer sponsored self-insured health plans.
• Health Reimbursement Arrangements (HRA): Sometimes used in conjunction with relatively cheap, high-deductible group coverage plans and sometimes used as stand-alone solutions, these ‘arrangements’ allow employers to offer essentially tax-free stipends to their employees to cover health related expenses. A relatively new variation is the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) for companies with fewer than 50 employees, which provides employees a stipend to procure their own health care and/or cover deductibles and co-pays or out-of-pocket expenses. These stipends circumvent payroll and/or income taxing if certain conditions are met.
• Association Health Plans: In order for small businesses with a relatively small number of employees to get the benefits and economies of scale that come with pooling a larger number of employees, some small businesses procure healthcare for their employees through an Association Health Plan. In these scenarios, numerous small business in a like industry (dentist offices, architecture firms, etc.) have banded together to offer healthcare coverage options to members of the association. Depending on the industry and association in question, minimum coverage requirements found in the traditional marketplaces may not apply, which can lead to a greater variety of coverage options.
• Professional Employer Organizations (PEOs): Similar to Association Health Plans, some small businesses choose to contract with a PEO in order to reap the economies of scale that come from pooling larger numbers of employees. PEOs also typically provide additional services like some HR administration, which may be appealing (or not) to any given company.

Should I Get Health Insurance Coverage for the Employees of My Small Business?

Whether or not to provide health insurance to your business’s employees is clearly a decision that must be made by each company independently. Whether the benefits and advantages that come from providing such coverage outweigh the costs must be taken into account. Companies must also determine the best type of coverage to provide in order to maximize those advantages while minimizing the associated costs.

In any case, it certainly never hurts to explore the options, and there is never any downside to getting in touch with a small business health insurance broker. These professionals can provide additional information not only about traditional coverage but also about some of the upsides and detriments to the various other potential courses of action outlined above.

To find a great broker in your area with experience working in your industry with businesses just like yours, search Mployer Advisor to find the broker that is best suited to helping you sort through all of these issues and more.Find Health Insurance Brokers in Your Area

About Mployer Advisor

At Mployer Advisor, our focus is creating transparency in the insurance and insurance broker, consultant and advisor space to the advantage of the employer. Analytics is our core and we will bring to light new information, tools and resources to aid employers in making more cost-effective decisions. As a phase I, we are here to help employers find the right broker or consultant and the right insurance company for them. Giving choice and initial transparency is a first step in creating an employer centric insurance marketplace.

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