Small business health insurance in Minnesota

Minnesota small business health insurance information

A CNBC study ranks Minnesota as the sixth-best state for businesses in 2024. However, only a little more than half of employees in the North Star State receive employer-sponsored health coverage. This is likely due to cost. Larger business owners have various options, while smaller employers with limited resources may find it challenging to find plans that fit their budgets.

Understanding small business health insurance in Minnesota is important for making well-informed decisions. This guide will give you an overview of the health insurance options available for small businesses in Minnesota, as well as other alternatives that might help you save time and money.

Topics covered in this guide include:

1. Overview of small business health insurance in Minnesota
2. Importance of small business health insurance
3. Small business health insurance in Minnesota
4. Average cost of health insurance in Minnesota
5. What plans are available on the individual market in Minnesota?
6. COBRA in Minnesota
7. How PeopleKeep can help

Small business health insurance options in Minnesota

Unlike larger companies, small businesses face unique challenges with health insurance coverage. Understanding the different options available can help them choose what’s best for their employees and budget.

Here are a few ways small businesses can provide health coverage to their employees:

• Traditional group health insurance
• Health reimbursement arrangements (HRAs)
• Health stipends
• Ancillary benefits, like vision and dental plans, health savings accounts (HSAs), and flexible spending accounts (FSAs)

Group health insurance plans in Minnesota

Traditional group plans have been a common choice for organizations of various sizes for many years. The employer and employees usually split the cost of the plan, with the employer paying a larger share of the monthly premiums. An employer may also choose to make coverage available to spouses and dependents.

In Minnesota, group plans can come in one of the following forms:

• Preferred provider organization plans (PPOs): PPOs are the most common type of plan. They offer policyholders access to a network of preferred healthcare providers. Members can receive care from outside networks, but it comes at an extra cost.
• Health maintenance organization plans (HMOs): An HMO plan offers a wide range of healthcare services through specific provider networks. Members must select a primary care physician (PCP). Their PCP manages healthcare needs and gives referrals to specialists when necessary.
• Exclusive provider organization plans (EPOs): EPOs combine elements of both HMOs and PPOs. Members have access to healthcare services from a specific network of providers and can see specialists without needing a referral. An EPO doesn't cover care from out-of-network providers.
• Point of service plans (POSs): In-network doctor visits are cheaper with a POS plan, but out-of-network care is also covered. Members need a referral from a primary care physician to see a specialist, just like with an HMO.

The ideal plan for you and your employees depends on your preferences and budget.

Employers with a large enough group of employees can typically access lower group health insurance premiums because risk is distributed among all members of their group. You usually need about 70% of your employees to sign up to meet participation requirements.

Employers and employees share the cost of premiums. According to KFF, employers usually cover 83% of premiums for self-only plans. They cover 72% for family insurance premiums.

If the standard group health plan costs too much for your organization, you may prefer a high deductible health plan (HDHP). These health plans come at a more affordable price since they offer lower monthly costs for both employers and employees. But, they come with higher deductibles that employees have to pay before the insurance company starts to help with their expenses.

While HDHPs offer cost savings, the higher deductible might lead to increased costs for your employees. In this case, you can offer a group coverage HRA (GCHRA), also known as an integrated HRA, alongside an HDHP. With a GCHRA, you can reimburse your employees for their out-of-pocket costs, such as deductibles, tax-free. A GCHRA eases employee stress and saves money for everyone.

The Small Business Health Options Program (SHOP) marketplaces offer small group health insurance plans that may also help you save money. Minnesota employers with fewer than 50 FTEs can access SHOP plans through a broker or from an insurance company directly. Minnesota doesn’t have a public SHOP exchange for small businesses. If you have fewer than 25 employees who earn less than $50,000 annually, you may qualify for the Small Business Health Care Tax Credit.

The following companies will offer small group health plans in Minnesota in 2025, according to HealthCare.gov’s rate review website.

Taking advantage of individual health insurance with an HRA

Employers can save money by forgoing a traditional group health plan. Instead, they can use HRAs to reimburse employees for their medical expenses and individual health plan premiums.

Some examples of qualified medical expenses that can be reimbursed with an HRA include:

• Monthly premiums for health, vision, and dental plans
• Preventive care
• Emergency care
• Chiropractic care
• Mental health counseling
• Prescription drugs
• Over-the-counter medication

Two HRAs allow you to reimburse employees for their health insurance premiums:

• The qualified small employer HRA (QSEHRA): Congress created the QSEHRA in 2016 so organizations with fewer than 50 FTEs could provide tax-free reimbursement for eligible health expenses and insurance premiums. The IRS sets a maximum limit on employer contributions. It's updated annually to account for inflation. The QSEHRA is a great choice for small businesses and nonprofits that want to offer a first-time benefit or lower their premium costs.
• The individual coverage HRA (ICHRA): The ICHRA is for employers of all sizes. It's similar to a QSEHRA but offers more flexibility and customization choices. You can offer your eligible employees more money than you could with a QSEHRA since there’s no annual cap on contribution amounts. You can also differ allowances and eligibility with 11 employee classes, such as full-time and seasonal workers. Additionally, the ICHRA is a budget-friendly option for larger companies that need to meet the employer mandate.

Offering an HRA is particularly advantageous in Minnesota since individual health plan premiums tend to be lower than small group premiums in nearly all counties across the state. Reimbursing employees for their individual health premiums will save you money over a group plan.

Ideon shows the premium differences between small group and individual plans in Minnesota's three largest counties:

What plans are available on the individual market in Minnesota?

Individuals and families in Minnesota use the state’s own health insurance marketplace called MNsure. Five health insurance companies will offer plans for 2025, with availability differing across the state.

Minnesota's open enrollment period is from November 1 to January 15 each year. Individuals and families with marketplace plans might qualify for federal premium tax credits. These are commonly referred to as premium subsidies.

During 2024 open enrollment, nearly 80 thousand individuals in Minnesota who enrolled in health plans from the marketplace received premium subsidies. The IRS typically uses federal poverty guidelines to assess eligibility for tax credits. But the Inflation Reduction Act removed the upper income limit through 2025. That means anyone can access these credits if their premiums exceed 8.5% of their household income.

If someone misses the open enrollment period, they won't be able to enroll in a health plan unless they experience a qualifying life event that triggers a special enrollment period (SEP).

How PeopleKeep can help

If you want to provide flexible and personalized health benefits for your employees in Minnesota, PeopleKeep can help. Our HRA administration platform allows organizations of any size to quickly set up and manage their benefits.

PeopleKeep helps employers offer HRAs that fit their specific needs and budget. Employees can pick the healthcare options that work best for them. An HRA is a cost-effective way for employers to ensure employees receive the coverage they need.

Our team reviews reimbursement requests from your employees to ensure they follow ACA, ERISA, and IRS regulations. PeopleKeep simplifies benefits administration, helping employers save time and resources so they can focus on other areas of their business.

After adding employees to their QSEHRA or ICHRA benefit, they can shop for their own health insurance policies right from their PeopleKeep dashboard. Our in-house enrollment support team is available to help them navigate the complexities of enrolling in a policy so they can make the most of their new benefit.