Small, medium businesses (SMB) health insurance is a critical piece of protection and an essential component of any small business. Not only is it required by law in some cases, but it also provides safety, security, and peace of mind to both employers and employees alike.
Unfortunately, small business health insurance can often be a daunting and confusing endeavor. This is because small businesses often lack the large budgets of their counterparts. This leaves them with fewer options to choose from.
Furthermore, state governments have considerable control over health insurance plans. For example, states have control of their health insurance marketplaces. They have regulations in place for state-run Medicaid, employee plans, and individual health insurance. Many states also have control over licensing, antitrust laws, insurer regulations, and more.
But providing SMB health insurance doesn’t have to be a pain. Redirect Health offers an innovative SMB health insurance solution that helps SMBs provide quality, affordable coverage for their employees with minimal effort.
Am I Required to Provide Small Business Health Insurance for My Employees?
Many times, small business owners are uncertain of their legal obligations to provide health insurance. The Affordable Care Act (ACA) requires employers with 50 or more full-time equivalent employees to offer group health insurance with essential benefits or face paying a hefty penalty.
However, the ACA never specifies that small business owners must provide group health insurance. According to the requirements, businesses with less than 50 full-time equivalent employees fall under the small business category.
Of course, requirements can change at any time. So, it’s best to try to keep your fingers on the pulse and to stay up to date with any information regarding small business health insurance.
Applicable Large Employer
To find out whether your business is considered small or large, you must determine if it qualifies as an applicable large employer (ALE)
An ALE is a large employer that has at least 50 full-time and full-time equivalent employees. The ACA categorizes anyone working at least 30 hours a week or 130 hours per month as a full-time equivalent employee.
Calculating Full-Time and Full-Time Equivalent Employees
For most businesses, calculating whether you have full-time or part-time employees is rather simple. For full-time employees, you simply count up all the employees that work at least 30 hours a week or 130 hours a month.
The number of full-time equivalent employees is calculated by totaling the number of hours worked by part-time employees in a given month and dividing that by 120.
If the total is 50 or more after calculations, your business is no longer a small business but is considered to be an ALE. That means your business must follow the ACA requirements and offer health insurance or pay a hefty penalty.
The ACA also looks at your business on a calendar year basis. This means that even though your business was an ALE last year, it may not be this year if you happen to lose a few employees.
However, an eligible large employer will be considered an ALE the following calendar year if, on a monthly average, it has at least 50 full-time equivalent employees.
A business typically doesn’t qualify as an ALE in two scenarios:
- The business employed fewer than 50 full-time and full-time equivalent employees on a monthly average
- The business employed over 50 full-time and full-time equivalent employees, but it was a seasonal workforce, and they were employed for no more than 120 days
Small business owners should also be aware that certain states and localities may have varying regulations in place. These regulations may require small business owners with a certain number of employees to provide health insurance coverage.
Small business owners should always check with their local authorities to ensure complete compliance.
Types of Plans
The two main types of SMB health insurance are group health insurance and self-funded plans.
Small Business Group Health Insurance Plans
Small business group health insurance is a type of health insurance plan offered to small businesses with fewer than 50 full-time and full-time equivalent employees.
Group health insurance provides coverage for a business’ employees, their spouses, and any dependents who qualify. These plans are often sold by insurance carriers and come in many forms, like PPOs and HMOs.
Generally speaking, small business owners will pay a fixed amount for the coverage, regardless of how many employees are on the plan.
- Offers comprehensive coverage that meets standards and is ACA compliant
- Employees can contribute to their own premiums and choose from various levels of coverage
- May be eligible for tax credits, depending on the size of the business
- Can lead to higher employee retention and satisfaction due to health insurance security
- Easier enrollment
- Tax deductions
- Reduced premiums
- Can be much more expensive than self-funded plans
- Typically a limit on how much coverage an employee can enroll in
- Small businesses may not be eligible for certain tax credits due to the size of their business
Small Business Self-Funded Health Insurance Plans
A small business self-funded health insurance plan is a type of health insurance that allows employers to pay for their employee’s medical expenses out of pocket.
This type of health insurance plan can be beneficial for small businesses with fewer than 50 full-time and full-time equivalent employees. This is because it’s typically more cost-effective than a group health insurance plan.
With self-funded plans, the employer sets aside enough money for administrative fees, medical expenses, and stop-loss insurance. The employer holds the responsibility for managing these funds.
There’s a reason why many small businesses choose the SMB self-funded health insurance option and continue to do so. Some of these reasons include the following:
- Option for a customizable plan instead of a one-size-fits-all policy
- Increased control over plan reserves, increasing the amount of interest earned
- Improved cash flow due to not needing to pre-pay for health coverage
- Not subject to conflicting state regulations because self-funded plans are regulated under ERISA
- Not subject to state health insurance premium taxes
But is it right for you?
The answer? It depends.
Not all self-funded health plans will be the best option for every small business. That’s because, with these plans, the business assumes the risk of paying for the costs associated with healthcare claims.
This means the business must have the sufficient cash flow to meet this potentially unpredictable obligation.
However, small businesses that choose this route can certainly protect themselves, especially against unpredictable and catastrophic claim costs with stop-loss insurance.
Stop-loss insurance is the perfect companion to self-funded health plans for small business owners that don’t want 100 percent liability for the losses associated with self-funded health plans.
With stop-loss insurance, insurance companies become liable for losses that exceed deductibles.
- Generally, less expensive than group health insurance plans
- Generally, less expensive than group health insurance plans
- Plans can be tailored to their employees’ needs
- The business has increased control over costs and coverage levels
- Cost-effective alternative
- Flexible plans
- Can lead to higher employee satisfaction
- Potentially receive back money at the end of the calendar year
- Stop-loss insurance
- Exempt from some taxes and fees
- Exempt from certain regulations
- Employers take on the full financial risk of their employees’ medical expenses
- Limited or no access to tax credits or incentives
- Increased administrative burden on the employer
- Employees may not have access to as many coverage options as they would with a group plan
Small Business Health Care Tax Credit
Small businesses can qualify for the Small Business Health Care Tax Credit as long as all of the following apply:
- Enrolled in a Small Business Health Options Program (SHOP)
- Offers SHOP coverage to all full-time employees, excluding employees working fewer than 30 hours per week and their dependents
- The average employee salary is equivalent to $56,000 per year or less
- The business has fewer than 25 full-time equivalent employees
If your business is even smaller and has 10 or fewer employees who are paid an average of $27,000 or less, it may be eligible for a larger tax credit. The general rule of thumb is that the smaller the business is, the bigger the credit.
Where to Buy Group Health Insurance for Small Business
Small business owners looking for SMB group health insurance can turn to a variety of places. Most business owners start their search with insurance brokers, who specialize in helping businesses find the right SMB health insurance plan.
Insurance brokers can assess a business’ needs and provide quotes directly from multiple carriers.
Small business owners can also buy group health plans through the federally backed and run SHOP marketplace.
When the marketplace was first initiated, it was the go-to place for small businesses, but the increasing costs and inflexibility make it a limited option for many businesses today.
Like insurance brokers, SHOP provides small businesses with the opportunity to compare and contrast plans from varying carriers. The ease of comparing several plans at once to find the one that best fits their budget and needs is what made it such a popular starting point.
The SHOP Marketplace also offers SMBs the opportunity to take advantage of tax credits, which can be used to offset the cost of SMB health insurance.
Association Health Plans
An association health plan is when small businesses join hands with other small businesses to buy a large group health insurance plan. This is beneficial because it allows small businesses to access health insurance savings typically associated with large group coverage.
The savings with association plans can be immense. The savings from large group health plans typically range between 8 and 18 percent. SMBs part of an association health plan can:
- Leverage its size in negotiations for more favorable rates
- Use large group health plan flexibility to explore plan designs that may help reduce costs
Qualified Small Employer Health Reimbursement Arrangement
The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a popular choice among small businesses.
QSEHRA offers qualified small businesses to provide non-taxed reimbursement of specific healthcare expenses to employees.
Some examples of specific healthcare expenses include insurance premiums and coinsurance. However, in order to be eligible to be reimbursed, the employee must maintain the minimum essential coverage and an individual Marketplace plan.
Other QSEHRA qualifiers include:
- Having fewer than 50 full-time and full-time equivalent employees
- Providing the same QSEHRA arrangement with the same terms to all qualified full-time employees
- Not offering another group health plan like an FSA or SHOP coverage
Directly From an Insurance Company
Small businesses can also purchase SMB group health insurance directly from an insurance company. The process is simple and straightforward:
- Contact the insurance company
- Provide the necessary information
- Receive quotes
- Activate SMB group health plan
The primary benefit of going through an insurance company to purchase SMB health insurance is that it eliminates the need for brokers or the bureaucracy of SHOP.
Business owners can go straight to the source and get SMB group health plans tailored to their specific needs and budget.
In addition, when SMBs purchase group plans directly, they may be eligible for other incentives like discounts and additional savings on other plans.
Redirect Health is a cost-effective SMB health insurance solution that provides SMBs with access to discounted plans, saving them a considerable amount compared to traditional SMB health insurance premiums.
Redirect Health’s SMB health insurance plans provide comprehensive coverage, including access to over 700,000+ providers, primary care physicians, and urgent care facilities.
Overall, health insurance plans from Redirect Health can help small businesses provide their employees with quality healthcare coverage without breaking the bank.
With SMB health insurance plans from Redirect Health, employers get access to great coverage at an affordable price.
By working with a broker or opting for SMB health insurance from Redirect Health, small business owners can find the perfect SMB health insurance solution for their company.
When to Sign Up for Group Health Insurance
If you find the perfect small business health insurance, you’ll be happy to hear that there’s no open enrollment period for a group health insurance plan. Business owners can sign up anytime during the year as long as they qualify.
This is incredible news because that means that small businesses and their employees don’t have to wait for the open enrollment period to receive coverage.
Where to Buy a Self-Funded Health Insurance Plan
Like group health plans, small business owners can purchase SMB self-funded health insurance through a broker and directly from an insurance company.
When small business owners turn to an insurance broker for SMB self-funded health insurance, they’ll receive benefits like personalized advice and guidance on the best plans and specific health coverage that meets their needs.
A quality insurance broker will also take the time to help SMB owners find the plan that best fits their budget and maximizes their coverage.
At the end of the day, the insurance broker you go with should always provide above and beyond the necessary information needed to make informed decisions.
Directly From an Insurance Company
When SMB owners turn to an insurance company, they have direct access to a range of plans that best fit their needs. Insurance companies understand the unique needs of SMBs and offer plans that are specifically tailored to meet those needs.
When small business owners purchase SMB self-funded health insurance directly from an insurance company, they eliminate the need for brokers and also don’t have to worry about the bureaucracy of SHOP.
However, the downside is that you only see what one company offers, and you must take the time to shop around to determine which plan is best.
Choosing a Plan
When you’re out in the marketplace searching for a small business group or self-funded health insurance, you must first determine your needs.
Some helpful questions to ask and other considerations include:
- How much cash flow do you have? Consider how much cost-sharing makes sense for your small business.
- Who will be covered under the plan? Take the time to consider the needs of your employees and their dependents to ensure the plan you choose suits their medical and financial needs.
- Which benefits should you prioritize? Although employers are not allowed to ask about an employee’s medical history, it’s vital that employers ask which benefits employees benefit from the most. This helps maximize costs and potentially helps keep on talent for much longer.
- Financial costs. Consider how much you and your employees will be able to pay for monthly premiums, coinsurance, deductibles, and copayments.
- Network. If you have a preferred provider, ensure they’re in-network with your new health plan.
- Add-ons. Be sure to ask about any additional add-ons like vision and dental care to ensure full coverage for everyone under the policy.
- Coverage. Other coverages to consider include prescription drugs, labs, vaccines, immunizations, mental health, and imaging.
What’s the Best Insurance for Small Businesses?
Redirect Health is the best SMB self-funded healthcare solution for small businesses. Redirect Health offers an innovative approach to SMB health insurance that’s tailored to fit their unique needs while also staying within their budget.
With Redirect Health, SMBs get access to a wide range of benefits and services without worrying about the bureaucracy that comes with SHOP and the high costs associated with insurance. They also have stop loss services included in their product, so you don’t have to shop around for other providers.
Redirect Health goes above and beyond by offering plans with:
- $0 copays for labs, mental health, in-office and virtual primary care, urgent care visits, annual physicals, and x-rays with appointments
- 12 free chiropractic visits per year
- Minimal copays for prescription drugs and imaging
- Same-day access to primary care services
- 24/7/365 Care navigation with our Care Team is made up of healthcare experts and medical providers always will be there to help you
- Affordable inpatient and outpatient hospital care
- A dedicated team that provides a transparent and straightforward approach to your SMB health insurance
- And more
Redirect Health has SMBs covered with our affordable plan options. With an innovative approach and comprehensive coverage, SMBs can rest easy knowing that their employees are taken care of.
If you’re a small business owner looking for quality SMB health insurance coverage, don’t wait any longer. Give us a call today and let Redirect health take SMB health insurance off your plate!