If you are a small business owner, you’re already acutely aware of just how much you depend on your employees for the success of your small business. In larger organizations, an individual’s workload is more easily absorbed by the other team members when employees take time off or go through periods of low productivity due to personal challenges. Employees working for large corporations typically have extensive employee benefits packages and paid time off policies.
This makes it more challenging for small businesses to attract and retain top talent. Although small employers with fewer than fifty full-time equivalent employees do not legally have to provide health insurance benefits for their employees. It is common knowledge that health insurance and other employee benefits reduce turnover and attract better talent. If you have superior talent compared to your competitors, you have an advantage that will help you grow your business. The number one reason small business owners do not offer group health insurance is the investment in capital. Here are four ways small business owners can save money on their small business health insurance benefits.
1. High Deductible H.S.A. Plans
Major health insurance carriers across the country offer high deductible health insurance plans that are H.S.A. compatible. High deductible plans in the Bronze metal tier are the most affordable out of the standard group health insurance options. These plans are ACA-compliant and focus on offering protection for catastrophic health issues. They offer little, however, when it comes to co-pay benefits for primary care, specialist visits, urgent care, or E.R. visits. An H.S.A. is an employer-sponsored program that allows employees to invest pre-tax money directly deposited from their paychecks into a bank account that they can use for many health-related expenses. This is used as a buffer to cover the employees’ medical costs up until the health insurance plan pays 100% of the medical expenses until the end of the year. The main benefit of the H.S.A. is that balance remaining in the account at year-end, can be rolled over to the following year. This allows employees to build a financial nest egg to cover potential medical expenses in the future. There is an annual limit to what can be deposited into an H.S.A. with pre-tax dollars. The employer has the option to provide a monthly contribution to the employees’ H.S.A., which is tax deductible for the business. By law, the employers’ contribution must be fifty percent of the total premium cost for the group.
Many High Deductible Health Plans or H.D.H.P. offer telehealth services at a reasonable co-pay rate, which is valuable for reducing primary care and even urgent care costs for many common ailments that do not require a specialist or emergency services. Employees also gain the advantage of paying HMO or EPO rates instead of the full price for their medical expenses up until they reach their deductible or total out-of-pocket costs for the year.
2. I.C.H.R.A.’s
An Individual Coverage Health Reimbursement Account is a mouthful, which is why we use the acronym most of the time. This plan is a viable ACA-compliant alternative to providing group health insurance and it has several advantages, especially for small businesses. An I.C.H.R.A. allows your business to reimburse your employees for their individual health insurance plans. There is no minimum amount that an employer has to contribute to the reimbursement account if the company has less than fifty full-time equivalent employees. There is also no minimum employee participation percentage required for small businesses. Most major carriers require that at least seventy-five percent of qualifying employees participate in the group plan. Employers also have the option to divide their workforce into several categories and reimburse each category for differing amounts. Here is a partial list.
- Full-Time Employees
- Part-Time Employees
- Seasonal Employees
- Employees are covered by a collective bargaining agreement.
- Salaried Employees
- Non-Salaried Employees
- Non-Resident aliens with no US-based income
The drawback of an I.C.H.R.A. from an employer and employee perspective is that individual health insurance plans do not offer PPO networks. Employees are limited to HMO and EPO networks on individual plans. However, employees can choose from any plan on the individual market in their zip code and simply check the providers in the network of the plan to ensure their preferred providers are in-network on whichever health insurance plan they choose.
3. Self-Funded Plans
Self-funded plans are well known in the corporate world and are the predominant group health insurance plan implemented by large employers. Currently, ninety-one percent of large employers are on self-funded plans. Conversely, only 11% of small businesses are currently on self-funded plans. In recent years more carriers are offering self-funded health insurance plans to employers with as few as three people in some states.
A self-funded plan puts the employer’s monthly premium for the group into three buckets.
- Benefit Administration
- Stop-Loss Insurance
- Self-Funded Account
The self-funded account is designed to cover the employees’ medical expenses once they go above the deductible on the plan. The stop-loss insurance covers any of the employees’ medical expenses that are above what is set aside in the self-funded account to protect the company from any additional costs beyond the monthly premium for the group. The benefits administration portion covers the cost of administration. The insurance company manages the entire plan, including the self-funded account and its disbursements.
The advantage for the small business owner is that in years when employee health insurance claims are low, the self-funded portion is refunded to the business. It can also be rolled over, which reduces the premium cost for the following year. This allows small businesses to provide excellent benefits, including a PPO network and could receive back business capital.
4. Minimum Essential Coverage
Also known as M.E.C. this unique offering is an option that provides low co-pays for primary care, specialist, and urgent care visits and has all of the other minimum essential coverages that are outlined by the affordable care act, including preventative care. This type of insurance has no deductible or total out-of-pocket costs associated with it and it is very affordable. However, it does not provide any catastrophic protection. It’s designed to cover the minimum requirements only. If you have a young staff of part-time employees that either have no health insurance or are on a Bronze or catastrophic-only plans; this plan could be an excellent way to lower their annual medical costs and increase your employees’ job satisfaction.
5. Small Business Tax Credits
For small businesses with employees that average less than fifty-six thousand dollars in income per year, you may qualify for a government program that will provide business tax credits to reduce the cost of offering small group health insurance to your employees. For detailed information about this federal program, please visit the I.R.S. website.
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