Best Health Insurance Options for Employees of a Small Business
Small businesses (less than 50 full-time employees) are not required to provide health insurance under the law. However, employees may view this as a competitive advantage when looking for employment. Many employers are starting to offer alternatives to health insurance to attract top talent, especially as hiring continues to get more and more competitive.
Mira is an alternative to health insurance for both employer-sponsored and individual benefits that provide quality care for only $25 per month. Every member gets access to basic care needs such as primary, behavioral, and urgent care visits - even save up to 80 percent on prescriptions. You can sign up and get covered today whether you’re an individual needing coverage or an employer looking to cover her employees.
Best Health Insurance for Small Business Employees
Even though small businesses are not required to offer health insurance benefits if there are less than 50 employees, health coverage is still a huge competitive advantage in the U.S. Some small businesses will offer health benefits, if not a full medical plan, in order to incentivize growth of their company and to retain current employees. Offering these benefits also offers certain tax advantages to the businesses.
Small businesses are often not able to afford large corporate plans that larger companies buy and therefore it is important to understand what options are available that may be better suited for small businesses and startups.
Here are some of the most common options that employers can take advantage of to provide coverage to their employees:
- Group Health Insurance
- Association Health Plans
- Health Reimbursements Arrangements (HRAs)
- Health Savings Accounts (HSAs)
- Individual Employee Plans
Now let’s take a look at each option in more detail.
1. Group Health Insurance
Group health insurance is one of the most common insurances for businesses to offer. However, these plans are often tailored to larger businesses because they can be expensive. Group health plans are often referred to as employer-sponsored insurance as these plans are purchased by the employer and offered to the employees.
Group plans are not available to be purchased as an individual employee and require 70% participation by the group members to remain active, for most insurance carriers to work with the business. High adoption is very important to these plans being successful, which makes it no secret that the majority of Americans still get their insurance through this method.
One avenue to find group health coverage for small businesses is through the Small Business Health Options Program (SHOP). The SHOP is a federally or state-sponsored program that offers affordable health insurance options to small businesses with fewer than 50 full-time employees in most states. The exceptions being where you can get covered with fewer than 100 employees in Colorado, California, New York, and Vermont. SHOP is offered year-round with no open enrollment period.
The cost of these programs to the company varies from state to state. Employers can find plans by state that work for them along with prices at the federal SHOP website. All health insurance plans offered through the SHOP meet the Minimum Essential Coverage requirements through the ACA and meet minimum value requirements.
Small businesses with fewer than 25 full-time employees, and with average salaries under $50,000, are also eligible for the Small Business Tax Credit. This does not include company owners and family members.
Through this tax credit, employers are required to pay for 50% of the insurance premium, and the rest is covered under the Small Business Tax Credit. The tax credit is temporary and intended to aid the company and promote economic growth.
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2. Association Health Plans
Association health plans are similar group health plans but are purchased by an association of employers or self-employed individuals. Association medical insurance is a form of large group health insurance in which the large group is formed by smaller businesses.
With association health plans, the association is often able to receive a better cost from the insurance broker because of the group size. Associations often also consider self-insuring practices or purchasing less-expensive medical insurance where a smaller percentage of the premium is spent on administrative and broker costs.
Association health plans are becoming more popular because the groups within the association are able to avoid the higher costs and limited plans associated with SHOP and other ACA market plans.
3. Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) and are both group-sponsored plans that offer insurance savings benefits to its members. These programs are offered along with deductible-based medical insurance plans and are meant to offer more control to the coverage offered to the members of the group. Keep in mind, though, that these are not stand-alone insurance plans but additional ways to pay for expensive health coverage.
HSAs are only available if the members are enrolled in a high-deductible health plan (HDHP). The deductible amount varies each fiscal year and is determined by the Department of the Treasury each year.
HSAs are employee-controlled and are considered tax-advantaged accounts that can be used to pay for health care expenses determined by the IRS. This can include COBRA payments and long-term medical care. Some other benefits of having an HSA may include:
- Asset accumulation
- Long-term medical savings
- Retirement care savings
- Tax-free health care expenses
- Lower company expenses
- Contribution by the employee and/or employer
- Carryover of funds to other plans
- Interest and investment earnings
4. Health Reimbursement Arrangements (HRAs)
Health Reimbursement Arrangements (HRAs) are a way for employers to provide tax-advantaged cashback to employees when the employee enrolls in an eligible health care plan themselves. These plans can be contributed only by the employer and not the individual employee, but the employee is the one who benefits so that they can get access to funds to pay for their health plan premiums.
The sponsoring employer will reimburse approved medical expenses, though many just refund the cost of premiums up to a certain amount of money that the employee qualifies for. HRA plans are non-transferable between companies. Other benefits of having an HRA may include:
- Not funded by the employee
- Additional tax benefits
- Transferable to a Retiree Reimbursement Account (RRA)
- Can be used to retain employees because non-transferable
5. Individual Employee Plans
Individual medical insurance plans are always an option for small businesses but are generally unpopular because of the relatively high expense. Buying plans for individual employees provide the benefit of customizing the level of coverage to the employee and their level within the organization.
Individual plans can be purchased through the individual exchange to obtain plans for themselves and their families. Some small businesses give employees an allowance to purchase their own plans through this program.
Individual applicants can apply for premium tax credits and cost-sharing reductions, making these individual plans more affordable and accessible for employees of small businesses. Without the tax credits, these plans can be even more expensive than the group health insurance option for your employees.
Alternative to Health Insurance for Employees
Alternatively, small business owners can purchase an individual health benefit membership for their employees. These plans do not qualify as full insurance under minimum essential coverage, but these may be a more affordable option since small businesses (fewer than 50 full-time employees) are not required to provide medical insurance.
Mira provides a cost-effective health benefit membership that employers can now purchase for their employees. Mira’s membership provides affordable access to virtual primary care, telebehavioral health, urgent care visits, lab testing, as well as 80 percent off prescription prices. Any number of employees can be enrolled, whether they are part-time, full-time, or contracted workers. The customer service team can even find you find the most affordable healthcare for services not covered under the plan at a location nearest you.
Mira offers three different plans and payment options for the employer to choose various copayment plans for their employees. Any number of employees can be enrolled, and the employee is still eligible to retain their Mira coverage even after termination of their employment - a more affordable option over COBRA. With Mira’s new employer portal, managing your employee's health benefits has never been easier. Take this quiz to see if Mira is right for your business!
Frequently Asked Questions (FAQs): Small Business Health Insurance for Employees
Insurance options can still often be confusing! It is difficult to know what you will be paying as an employee, or if your employment status even qualifies you for insurance. Let’s look at some of the most commonly asked questions about health insurance offered to employees.
Is my employer required to offer me health insurance?
If your company consists of 50 or more full-time employees, your employer is not required to offer any medical benefits. Even so, some small businesses will offer some sort of health benefits to attract and retain employees to their company.
How expensive is health insurance for a small business employee?
Costs for individual medical insurance plans usually range from $200-500 per month for an individual and are usually additive when adding family members or other dependents. Applying tax credits can decrease this cost even further, depending on what type of health plan you get.
Are part-time employees eligible for small business insurance?
Employers are not required to provide any benefits to their part-time (1099) employees, but this does not mean that health benefits are not available to this group of workers.
Employers can utilize a federal program called the Individual Coverage Health Reimbursement Arrangement (ICHRA), to offer their part-time employees a monthly tax-free allowance for the employees to purchase an individual health insurance plan. Additionally, health benefit memberships provide an alternative form of medical coverage that is affordable to both the employer and employee while providing basic medical coverage.
Employees of small businesses are valued and experience the same medical needs as employees of larger companies and corporations. That is why it is important as an employee to understand the medical insurance and health benefits available to you and your employer. However, sometimes full medical coverage is not affordable or practical for startups.
That is why a health benefit membership through Mira can provide both an affordable and practical solution and give employees of small businesses health benefits for only $25 per month. Sign up individually today or ask your employer to consider employer-sponsored benefits using our new employer portal!