If you own a small business, your choices for health insurance can seem confusing. The Affordable Care Act requires companies with 50 or more employees to offer insurance. Even if you have fewer employees, though, offering coverage can help you attract better employees and protect their health over time. Understanding your options can help you choose the right option for yourself and your business.
Group Insurance Plan
Many businesses opt for a traditional group health insurance policy. These tend to provide more complete coverage for your employees. Beyond this, they are attractive to many because they offer the kinds of plans with which you are likely familiar, so there is less to learn or explain. On the other hand, as medical costs continue to rise in this country, group plans reflect those changes in their premiums. You gain health insurance predictability, but the cost can become overwhelming for a small business to maintain.
High Deductible Health Plan
One option to help control costs is to work with a high deductible health plan. These are essentially disaster plans that have higher deductibles, but cover costs beyond the deductible in the event of a very large claim or a deluge of medical costs in the same year. They also usually provide 100% coverage for routine medical costs in network. This keeps your costs down, and as long as nothing serious happens, helps keep your employees’ out-of-pocket costs down as well. On the other hand, a serious medical event can run your employees’ costs up quickly before they reach their health insurance deductible.
Health Reimbursement Accounts and Health Savings Accounts
A way to balance out the high deductible is to offer your employees a health reimbursement account (HRA) or a health savings account to supplement the health insurance plan. These are similar tools that let your employees save money pre-tax for medical costs. The funds go into an account that they can access for eligible costs, including dental, vision, or medical costs not fully covered by health insurance. The main difference between the two is the owner of the account; an HRA belongs to the business, and you pay out for claims. An HSA, in contrast, belongs to the employee, and any money in that account will go with him or her if he leaves your company.
Finally, you have the option of self-insuring your small business. Rather than pay premiums and management fees to an insurer, you establish a fund and pay out claims for your employees’ health claims. This can potentially save you a great deal on health insurance up front. The potential downside is that you assume the risk of any major health issues for your employees. A large claim for an employee who needs a great deal of medical assistance can end up costing you much more.
Health insurance options for small business owners can seem complicated. Depending on your employees and your own willingness to take on risk, the right approach for you may be different from that of your peer companies. Take the time to understand your health insurance options so you can offer a competitive plan for your business.