For many small employers, offering a competitive health benefit to employees can be a real challenge. This is especially true when there are larger competitors in the industry offering higher salaries and even more robust benefits packages.
If this is the case for you, then you’re not alone. Research from the Kaiser Family Foundation (KFF) finds that the smaller the organization, the less likely employees are to receive employer-provided health benefits.
Luckily, when it comes to health insurance, there are options out there that have been specifically designed with small employers in mind. One of these is small group health insurance.
This article will explain everything you need to know about small group health insurance, including:
- Which small employers can qualify
- Steps for setting up a plan
- The overall cost for employers and employees
- How it compares to a qualified small employer health reimbursement arrangement (QSEHRA)
What is small group health insurance?
Small group health insurance is exactly what it sounds like—a medical insurance plan that small employers can collectively offer to all of their employees.
In order to qualify for a small group health insurance plan, you must:
- Have between 2 and 50 full-time employees
- Depending on the state, employers with one employee or as many as 100 may also qualify
- Pay a portion of your employees’ premium
- Ensure you meet minimum participation requirements set forth by the insurance company
- Most insurance companies require at least 75% of your employees to be enrolled in the policy
What does a small group health insurance plan cover?
Small group plans are compliant with the Affordable Care Act’s (ACA) requirement of health coverage. That means they must fit into one of the four metal levels of coverage (bronze, silver, gold, or platinum) and cover the ACA’s essential health benefits.
This includes ten major health benefits:
- Ambulatory services
- Including visits to doctors and other healthcare professionals and outpatient hospital care
- Emergency services
- Maternity and newborn care
- Services to treat mental health disorders and problems with substance abuse
- Prescription drugs
- Lab tests
- Preventive services
- Pediatric services for children, including dental and vision care
- Rehabilitative and “habilitative” services
Small group health plans won’t include any kind of coverage for vision or dental care for adults. If this is something your employees value, these are often offered as “benefit riders” that can be added on to your group plan for an additional fee.
How do I enroll in a small group health insurance plan?
There are a few different ways you can purchase a small group health insurance plan:
- Directly from an insurance company
- Through a broker or private exchange
- From the Small Business Health Option Program (SHOP)
If you have less than 25 employees, purchasing a plan through SHOP has a special perk. You may be able to qualify for the small business health care tax credit, which can help you pay for your contributions to health insurance premiums.
When can I enroll in a small group health insurance plan?
Unlike individual and family health insurance plans, there’s no set open enrollment period for group health insurance plans mandating when you need to enroll. That means you’re free to start a plan whenever you’re ready to sign up for one.
However, once you’ve enrolled in a plan, your premiums are generally locked in for a year. You’re welcome to add or drop employees and dependents at any time within that year, but your premium will stay the same until the plan year is up.
After that year, it will be time for you to either renew your current plan or shop for a new one. With the start of a new plan year comes renewed premium rates, and group health plans almost always see annual rate hikes from year to year—even if you don’t make any changes to the plan.
How much does a small group health insurance plan cost?
Just like with a large group health insurance plan, small employers are required to cover a certain portion of their employees’ group health insurance premium. However, the minimum employer contribution will differ from state to state and from one insurance company to the next.
Generally speaking, a small employer can usually expect a required contribution of at least 50% of their employees’ premium while your employees will cover the rest. If you choose, most plans will allow you to cover a higher percentage, and even cover a portion of the premium costs for an employee’s dependents.
To give you an idea of what that contribution might look like in dollars, a 2020 KFF survey found that the average group health insurance policy totaled $7,470 a year for single coverage, and $21,342 a year for family coverage.
It’s important to note that, as part of the ACA, the overall health of your employees no longer impacts group health insurance rates. So no matter how “high-risk” your employees are, or even if they have pre-existing conditions, your monthly premium won’t be affected.
Do I have to offer a small group health insurance plan?
Effective in 2014, the ACA created the employer mandate, requiring many employers to offer a minimum value of health coverage to their employees. However, this mandate only applies to employers with more than 50 employees, so if you qualify for a small group health plan, you aren’t legally required to offer a certain level of coverage.
However, even if it’s not legally required, employees generally expect health coverage from their employer. According to the Society for Human Resource Management, health insurance consistently ranks as the top most requested employee benefit.
The good news is, small group health insurance isn’t the only option for small employers. If a small group plan doesn’t seem like a good fit for your organization, there’s a more affordable and flexible health benefit you can offer your employees: a QSEHRA.
A QSEHRA is a health reimbursement arrangement specifically designed for employers with less than 50 full-time employees. With a QSEHRA, employers choose a healthcare allowance that employees can spend on qualifying medical expenses, including individual health insurance premiums.
Employees can purchase a plan that fits their health needs and employers have complete cost predictability without minimum or maximum participation requirements or yearly price increases.
Offering health benefits for the first time is an impressive milestone for any organization, but it’s not without its challenges. Investing the time to explore and understand your insurance options, including traditional group plans and unique reimbursement models, is essential for finding the right plan that meets your employees unique healthcare needs.