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If your small business has fewer than 50 employees, federal law doesn’t require you to provide health insurance. However, for many small businesses, offering health insurance is crucial for attracting new talent and retaining current employees. Studies consistently show that access to employer-sponsored health benefits boosts job satisfaction and helps businesses stay competitive.
Understanding how to shop for health insurance small business owners and managers can rely on is essential, but it can be challenging. Running a small to mid-sized company often leaves little time to navigate the complexities of health insurance options.
For businesses with more than 50 full-time employees, the Affordable Care Act mandates the provision of health insurance, and the IRS enforces this by requiring proof of compliance annually.
Let’s assume for the purposes of this post that you’ve decided to provide your employees with health benefits. No single plan works for every small business, so how do you go about choosing health insurance that both meets your employees’ needs and fits your budget?
When considering how to shop for health insurance small business owners need to address, the first question that usually arises is: How much will this cost?
Monthly premiums are a significant factor, and they can vary based on company size, geographic location, coverage type (employees only or including dependents), employee demographics, and the scope of benefits.
You have several options when deciding how to manage costs:
Many small businesses opt to cover a percentage of employee premiums rather than the full amount. According to the Kaiser Family Foundation’s 2023 Employer Health Benefits Survey, small businesses contribute, on average, 83% of the premium for single coverage and 71% for family coverage.
Alternatively, you may set a dollar limit per employee.
This fixed monthly amount is applied specifically to health insurance premiums. It works best with composite rate plans, where premiums are based on the average risk profile of your group.
However, if your plan uses age-related rates, older employees will pay higher premiums, which could lead to inequities.
Instead of restricting contributions to health insurance premiums, you provide a flat amount that employees can use across a variety of benefits, such as health, dental, or vision insurance.
This option allows employees to personalize their benefits package, increasing satisfaction by giving them the flexibility to choose what fits their needs best.
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There’s no simple answer to the question of how to shop for health insurance small business owners can rely on. Small businesses often have unique needs compared to larger companies, and cost-effectiveness is a top priority.
Once you’ve established your benefits budget, you can start exploring tailored options from providers that suit your business. Doing a little research upfront can save you significant time, money and frustration in the long run.
If you need help choosing health insurance, here are several search options to consider:
Local insurance agents or small business health insurance brokers can help you navigate the available plans, carriers, and requirements in your state.
While they can provide valuable expertise, be aware that they typically charge commissions on top of your premiums.
Make sure to factor in these potential costs when evaluating if a local agent is the right fit for your business.
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Some insurance companies work directly with customers, while others require you to go through agents or brokers.
If you have the expertise to evaluate different plans, reaching out to insurance companies directly can be a cost-effective option.
However, make sure the company works directly with customers and offers plans that meet your needs.
The government’s Small Business Health Options Program (SHOP) marketplace is designed for small employers with between one and 50 employees.
SHOP plans are Affordable Care Act-compliant, but the range of plan options may be limited, and the customer service may not be as personalized as you’d get from other providers.
Some national trade associations negotiate group purchasing plans, which allow their members to access health insurance at competitive rates.
If your company belongs to a trade association, you may be able to secure discounted health insurance as part of your membership.
By “co-employing” your staff, a PEO pools employees from many small businesses into a single group for PEO health insurance and employee benefits purposes. This approach spreads out risk for insurance providers, gives the PEO greater buying and negotiating power and typically grants smaller organizations access to a broader range of benefits than they could afford on their own.
Working with a PEO may reduce your employer contribution costs and, because PEOs often help with more than just health insurance, you’ll save valuable time needed to run your business (while the PEO takes care of payroll and HR issues).
Once you’ve narrowed down your list of potential providers – whether by type or individual company – it’s time to take the next step. Contact the providers you’re considering and work together to outline your small business insurance needs. This should be a collaborative process.
Providers may suggest options you haven’t considered, which could expand the benefits you offer your employees without increasing costs. While it’s important to clarify your must-haves, stay open to additional services or ideas the provider might offer as part of the package.
When choosing health insurance for your small business, make sure to ask about the following key factors:
Find out what kind of ongoing support you’ll receive for managing your health insurance plan. A PEO, for example, can handle claims questions, disputes, billing, COBRA, ACA compliance, and other insurance-related issues on your behalf.
Ask whether you’ll have a dedicated account representative to assist with your health insurance plan and provide consistent support.
Inquire about any account management fees you’ll be expected to pay, so you can factor these into your budget.
Understand whether the provider will help you manage open enrollment and ongoing enrollment for new hires.
Consider how much choice your employees will have in terms of coverage options, which can directly impact employee satisfaction.
Determine what technology tools will be available, such as online portals where employees can track costs, manage payments, and handle other aspects of their healthcare coverage.
Once you feel confident that a provider understands your company’s needs and budget, request rate quotes. However, don’t base your decision on cost alone.
Choose a provider you can trust—one that communicates complex topics clearly, is responsive to your needs, has locally-based representatives, and is a good cultural fit for your organization in addition to being competitively priced.
RELATED: 5 Proven Strategies to Reduce Small Business Health Insurance Costs >>
Axcet HR Solutions is a certified Professional Employer Organization (PEO) that can help you sort through the complicated process of choosing health insurance. We offer affordable group plan pricing for employee benefits, including:
When it comes to the question of how to shop for health insurance, small business clients trust us to lead the way. Our team of experienced employee benefits experts have been helping companies find the perfect offerings for them since 1988. Ready to learn more about how we can help? Schedule a consultation with our experts today to learn more.
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