You value your dedicated team and want to offer health benefits that meets your employees needs without costing a fortune. And you have questions about average costs, requirements, what options are available and how to make the best choice for you – here’s everything you need to know to get started with small group health insurance plans.
Small Group Health Insurance Plans 101
What’s the average cost of small group health insurance plans?
At this point in your health insurance investigation, you’ve likely determined that providing health insurance as a small business can be quite expensive – and it seems like the upward trend will continue.
According to the Kaiser Family Foundation's (KFF) annual survey, the average annual health insurance premium for a small business (between 3-199 employees) was:
- $7,813 for single coverage, of which employers contributed $6,485.
- $21,804 for family coverage, of which employers contributed $13,737.
The same KFF study found that average premiums for family coverage increased 22% within the past five years and 47% within the past ten years. Think about that – premiums for family coverage increased by nearly half in just 10 years!
Providing health insurance to employees can be a significant and unattainable expense for small businesses.
Fortunately, there are other small business health insurance options available so you don’t have to be pigeonholed into traditional small group health insurance plans.
→ Check out our health benefits for small business post for more information!
Insurance is expensive and you’re probably wondering if you even have to offer a healthcare benefit.
The answer – it depends.
It depends on the size of your business and whether or not you want to make your business more appealing to potential employees.
The Affordable Care Act states employers with 50 or more full-time employees must provide minimum essential coverage to employees. If you have fewer than 50 full-time employees, you’re not legally required to provide health insurance, but it might be in your best interest to offer some kind of health care benefit.
Here’s where it gets complicated.
As a small business owner, you may not fit into a pre-selected group many traditional insurance plans have set. You may have fewer than 50 full-time employees, or your workforce is comprised of employees in different states, or perhaps even a combination of full-time and part-time.
This works great for your business but can make it difficult to find a group health insurance plan that works for everyone.
Small business group health insurance options
Let’s review some of the most popular group health insurance options. For a deep dive into options for health benefits for your small business, check out our comprehensive small business health insurance guide.
Small group insurance – you pick a plan to offer your employees.
- Pros: well-known, solid product options, tax-free.
- Cons: required participation rates, unpredictable premium increases, fluctuating yearly costs, won’t work if employees live in different states, true costs of care hidden from employees, little plan flexibility
Self-funded – rather than pay a predetermined premium for a small group health plan, you’d pay for claims directly out of pocket.
- Pros: can be more customizable to your workforce, and more affordable per employee compared to traditional small group insurance plans.
- Cons: large on-hand funds needed to pay claims, your risk is much higher since your business is responsible for paying the actual claim which can be very expensive, time-consuming, and problematic for employee privacy, complicated management, fewer consumer protections
HRAs – employers reimburse employees for insurance premiums and qualified medical expenses with pre-tax funds.
- Pros: allows small businesses the opportunity to provide health benefits without messing with insurance, reimbursements are tax-free, the employer keeps unused funds, the employee insurance not tied to the employer, more plan options, no participation rates, and fast and easy setup.
- Cons: HRAs are not as widely known (but are becoming more popular, good thing you stumbled upon this blog!)
Did you notice – that’s a lot of pros in the HRA list.
More about HRAs for small businesses
If your interest is piqued by the thought of offering benefits without the insurance hassle, you’re on to something! So let’s dive into the mechanics of an HRA a bit more.
→ Compare and contrast group plans vs HRAs.
How exactly does an HRA work?
Your employee pays for their health care expenses or health insurance plan, and you reimburse them. It’s a simple arrangement that gives your employee control of their healthcare costs, insurance plan, and where they decide to get care. It also allows you to offer benefits that fit their needs and your budget.
First, you design the plan with an experienced partner like Take Command and set the reimbursement limit.
Your employee purchases their qualified healthcare plan and submits any claims for reimbursement.
You reimburse them.
→ Learn more about how HRAs work
What are my HRA options?
When you work with an experienced HRA partner like Take Command, you’ll benefit from a trusted partner to help you pick the best HRA for your business. In addition, we’ll also take care of administrative tasks. Take Command offers two HRA plans that work great for small businesses.
QSEHRA: a qualified small employee HRA allows small employers (businesses with less than 50 FTEs) to set aside a fixed amount of money each month (up to $5,300 for individuals and $10,700 for families in 2021) that employees can use to purchase individual health insurance or use on medical expenses, tax-free.
ICHRA: the individual coverage HRA has all the same benefits as QSEHRA, but with no maximum contribution limits and no company size limit. In addition to the flexibility of varying rates based on age and family size like QSEHRA, the hallmark feature of ICHRA is that benefits can be scaled across different classes of employees. An ICHRA can also be integrated with a group plan, which is another distinction.
Bonus! According to the Kaiser Family Foundation survey, many companies don’t offer health benefits to part-time or temporary workers. With ICHRAs added benefit of employee classes, you can!
How do you make a choice that’s best for you?
Ask yourself what’s most important to you and what you value the most.
Do you value independence and flexibility? Then perhaps a traditional group health insurance plan isn’t right for you. These group plans can be rigid, offer little plan flexibility, require minimum participation rates, have unpredictable rate increases, and don’t work well for the post pandemic mixed workforce.
An HRA gives employees ownership over health care choices, while you as the employer can feel good about giving them the option to pick what works best for them and paying them back.
In addition, An HRA may be the best way to control costs year over year. With an HRA, the employer sets the amount they will contribute. There are no surprise premium hikes and a reduced chance that your employees will be overcharged.
Consider your team.
Do you have part-time employees, remote workers, or employees who are already on their spouses health insurance plan? The makeup of your team can help you pick the HRA plan that’s best for everyone.
Do you have fewer than 50 full-time employees? Are some of your employees on their spouse’s health insurance plan? Then a qualified small employer HRA (QSEHRA) would be great for you.
This is an excellent option for a small business ready to make their first health benefit offering or frustrated by limited options with group plans.
Have questions about small group health insurance plans?
Our team of experts is at the ready to help you make the best choice. Chat with us at the bottom right hand of your screen or email us at firstname.lastname@example.org. We'd be happy to help.
→ For more inspiration, read up on small business health insurance ideas.
I wrote this blog because I care about ideas (big and little) that can help fix our healthcare system. I used to work on projects for Kaiser Permanente and the Parkland Health & Hospital System so I've seen the system inside and out. It's so important that consumers keep up with industry shifts and changing health insurance regulations. I'm also Take Command Health's Content Editor and a busy mom. Learn more about me and connect with me on our about us page. Thanks!