How Much Does Small Business Health Insurance Cost?

Key Takeaways

● The costs of small business health insurance depend on several factors, including the number of employees, business location, industry, and choice of plan.
● Employee cost-sharing can make it more helpful for small business owners to offer health insurance to their employees.
● Group health insurance plans are typically a better option for individuals as they can share the insurance costs with their employers.
● Small businesses can explore purchasing health insurance through several avenues, including directly from providers, through a broker, or through a small business program

Small businesses have a lot to gain by offering health insurance to their employees, including fewer call-outs and improved morale. However, the increasing costs of group health insurance make it difficult for many small business owners to reasonably pay the costs for a strong health plan.

Understanding the costs of insurance for small businesses and recognizing all your potential options will give your business a chance to offer your employees a plan that meets their needs. When you find a health plan through an affordable provider like Redirect Health, you can offer a group health plan that fits both your employees’ needs and your budget.

How Does Small Business Health Insurance Work?
Small business health insurance works by grouping employees in a single pool. Both the employer and the employees as a group contribute to the health insurance plan. When an employee files a claim, the insurance company pays for an agreed portion of the necessary healthcare service expenses.

Small business health insurance is a type of group health insurance. Small businesses must meet specific criteria to have a small business health insurance plan, like having at least two employees. Some policies may require that a certain percentage of your employees join in on the plan.

Most small business insurance plans require employers to contribute a minimum of at least 50% of the costs for each employee. This 50% contribution also helps small businesses claim the federal small business healthcare tax credit. Plus, employees have an incentive to join the plan since the costs are subsidized by their employer.

Factors Influencing Health Insurance Costs

Because every business is unique, it’s difficult to determine health insurance costs without considering their individual circumstances.

Some of the factors that influence health insurance costs for small businesses include:

• Number of employees – Generally, the more employees you have, the more you pay. However, a higher number of employees means you pay less per employee. Companies with more employees may be able to find more competitive rates, given the expanded risk pool.
• Employee Risk – The potential level of employee risk can impact the cost of coverage, such as if employees have preexisting health conditions. Businesses with a younger share of employees also tend to pay less.
• Business location – As with individual health insurance, group insurance costs may be higher or lower depending on industry data about healthcare spending in your region.
• Industry – Because risk is a crucial factor in health insurance, small businesses should expect costs to vary depending on their industry and the level of risk it poses to employee health.
• Plan type – Your choice of plan will also affect the amount you pay. Keep in mind that plans with lower premiums also feature higher out-of-pocket costs when your employees do seek coverage and vice-versa.

What Is Employee Cost Sharing?

Employee cost sharing is a system where employees pay into the costs of the healthcare plan so the small business does not have to shoulder the full expense. Implementing employee cost-sharing can help businesses offer better healthcare plan options by reducing the amount they have to pay into it.

The most common cost-sharing practices include:

• Monthly premiums – Premiums are a set monthly cost that employees pay toward their healthcare coverage each month.
• Deductibles – A deductible is the amount that an employee must pay before their healthcare plan begins to cover medical expenses.
• Copays – Copays are established costs individuals pay when they receive a healthcare service. These can include payments for doctor visits or prescriptions.

By implementing these cost-sharing practices, small businesses can reduce the costs of health insurance so they’re able to maintain the ability to offer plans for their employees.

If your business does implement these practices, transparency is key. Your business should clearly communicate these costs when employees sign up for a plan and highlight the specific amounts they’re expected to pay so they’re not caught off-guard and feel confident joining the plan.

What Is the Average Cost of Small Business Insurance?

Although the costs of health insurance can vary widely, it helps to have a reference point for what your business can expect to pay. According to research done by the Kaiser Family Foundation (KFF), the average annual premium costs for employers in 2022 were $7,911 for single coverage and $22,463 for family coverage.

For small firms, the average annual individual premiums were slightly higher at $8,012 for individuals, but family premiums were lower at $22,186. In contrast, large firms paid an average of $7,873 and $22,564 respectively.

Of course, factors mentioned above, like the number of employees, employee health history, business location, and industry, will all impact the actual costs.

Difference Between Group Health Insurance Plans vs. Individual Plans

When an employer offers a health insurance plan, employees have the choice of either joining their employer’s plan or signing up for their own individual plan. Typically, group health insurance options are more cost-effective when more employees join, making it important to bring employees on board.

It’s helpful to understand the differences between group health insurance and individual insurance plans so that you and your employees can recognize the benefits of joining an employer plan over sticking to an individual plan.

The primary difference between the two is that in an individual plan, the costs of monthly premiums and the deductible fall solely on the individual. Meanwhile, in a group health plan, these costs are shared between the individual and the plan sponsor—in this case, the employer.

Other key differences include:

• You can sign up for a group health plan at any time of the year, while individual plans require an open enrollment period or a qualifying life event.
• Individuals have less flexibility in their plan choices since employers work to choose plans that fit the generalized needs of their employees.
• Group health insurance plans may have fewer price fluctuations due to the size of the risk pool.

Because of the benefits of a group health insurance plan, individuals are likely to choose joining their employer’s plan over joining their own. However, it’s important that an employer considers their employees’ needs when choosing a plan so that they’re more likely to sign up for their employer’s policy.

Where Can You Buy Small-Group Health Insurance?

Small-group health insurance is available through several avenues, and small businesses have several options for buying affordable group health insurance.

Some of the most common options include:

• Primary insurance providers – You can buy insurance directly from a provider in your state.
• Brokers – Brokers will offer you several options for health insurance plans and work with you to determine the best plan option for you.
• Small Business Health Options Program (SHOP) – SHOP is a federal insurance option for businesses with under 50 full-time employees. Depending on your state, you must often have a certain percentage of your employees participate to be eligible.
• A Professional Employer Organization (PEO) – A PEO is a company that can provide benefits to your employees on your behalf. This company becomes the co-employer of your employees and combines your employee pool with other small companies, allowing them to access more competitive insurance rates.
• Redirect Health – Redirect Health follows a unique model that allows us to provide quality coverage for small businesses and their employees at affordable rates. By purchasing a health plan through us, you can make accessing care for you and your employees affordable and convenient while gaining a solid network of support.

How Redirect Health Helps Small Businesses with Affordable Healthcare

The costs of insurance for small businesses can vary widely depending on the business and their needs. There are several factors to consider when searching for quality health coverage for your employees, including your industry, employee pool, and cost-sharing options.

At Redirect Health, we make accessing healthcare much simpler without the high costs. Our unique model provides an alternative to the costly small business plans offered by traditional health insurance. With Redirect Health, you can offer comprehensive healthcare plans with low monthly premiums to your employees.

Above all else, we provide around-the-clock member support, making it easy for employees to receive the support they need and for our members to access care when needed. Explore our plans for yourself to see all the benefits we offer small businesses.