This guide is for small business owners who are trying to determine which of the four primary health insurance options is best for their business. The first step is to consider what you and your employees want out of health insurance.
Before we dive into the details on this topic, if you are looking for the best health benefits package for your employees, we suggest you check out Gusto. Gusto will look at hundreds of health plans and offer you the best choices for your budget and your employees. Visit Gusto and schedule a free demo.
9 Questions to Ask Before Providing Health Insurance
1. Would your employees view health benefits as valuable?
If your employees are already getting health insurance through their spouse, then they may not value health insurance benefits. Many group plans also require that the majority of your employees participate in the plan. If a large number of your employees opt out because they are covered by a spouse, group health insurance may not be an option.
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2. How much can you and your employees afford to pay each month for premiums?
According to kff.org’s most recent data (2013) the average cost per enrolled employee for group health coverage is $5884 per year. However, most businesses share the cost of healthcare with their employees. On average, the employer picks up 80% ( about $4700) of the premium costs, and the employee the remaining 20% (about $1200). According to a recent Wall Street Journal article the average cost of individual health insurance (not including subsidies) under Obamacare is $3288 per year. This means that there can be significant cost savings when your employees purchase individual policies vs. enroll in a group plan. This is also why we recommend exploring increasing compensation instead of offering a group plan. You can learn more about this here.
Depending on your location, The Obamacare Small Business Marketplace (known as SHOP) might also be an affordable option. You can read our guide on SHOP here and check out sample rates for your area here.
3. How many of my employees qualify for a subsidy?
If your employees make less than 400% of the federal poverty line ($45,960 in 2014 for individuals without a family), they may qualify for government subsidies on health insurance plans offered through the individual Obamacare marketplaces. However, individuals that have access to a group health insurance plan through their employer, are ineligible for subsidies. Before offering a group health plan, make sure that you are not cutting off the subsidy option for employees that want it. Your employees can use the calculator below to determine whether or not they are eligible for subsidies.
4. Do you want to offer a specific plan to your employees, or let them choose for themselves?
Allowing employees to choose for themselves gives them greater flexibility and generally costs less on average than offering group health insurance. This is why we recommend all employers consider offering increased compensation, instead of offering group health insurance. You can learn more about this here.
5. Would my employees appreciate a different benefit?
Higher pay, increased 401k contributions, life insurance, wellness program, gas stipend, and catered lunches are all examples of things that some employees may appreciate more than health benefits.
6. Would you and your employees prefer to have a high deductible plan with low monthly premiums, or a plan with higher monthly premiums but lower deductible?
One way to significantly reduce health insurance costs is to offer a high deductible health plan. This means that your employees pay the first x number of dollars (generally between $1000 and $2000) in health care costs directly. This is a popular option among small businesses. According to a recent Kff.org report, small businesses (2 to 99 employees) are almost 4 times more likely than large firms to have a plan with deductibles above $2,000.
7. In scenarios where you or your employees have a large medical bill, what is the maximum amount that they can afford to pay out-of-pocket?
If your employees cannot afford to pay the out of pocket costs associated with their health care, then this defeats the purpose of offering health insurance.
8. How often do you and your employees plan on going for Doctor’s visits (i.e. does anyone currently need ongoing care for chronic conditions)?
If you have employees that need to visit the doctor on a regular basis for a chronic condition, you want to make sure that they are going to be able to afford the out of pocket costs they will be responsible for under different scenarios.
9. Does a significant portion of your company currently have the same Doctor/health care provider?
If so then you will want to make sure that the doctor/healthcare provider is covered under the health benefits you decide to offer. If not, would you and your employees switch doctors if it meant saving money by switching to a different plan that their current Doctor/healthcare provider doesn’t accept? The answers to the above questions will arm you with the information you need to choose the right benefits plan for your company’s unique situation.
Looking for the best health benefits package for your employees? Gusto will look at hundreds of health plans and offer you the best choices for your budget and your employees. Click here to visit Gusto and schedule a free demo.
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