There is so much that goes into starting and growing a small business. One concern that many employers have is the health insurance plan. Getting insurance through a company is one of the most common ways a person can pay for medical care.
An estimated 156,199,800 people in the United States have employer-sponsored health insurance. Many people look for a job site that has coverage as one of the employee benefits. As a small business owner, you may decide that buying insurance for staff members is the right choice for you. You may come across various options on the market.
One of the options available is group health insurance. This type of plan is a suitable choice for many small businesses. Group coverage is an advantageous option for employers and employees. Continue reading to learn more about group health insurance plans.
What Constitutes a Small Business?
The United States Small Business Administration defines a small business either by the average number of employees or annual revenue. The standard of what constitutes a small business will vary from industry to industry.
For example, a manufacturing or mining company should not exceed 500 employees to keep the status of a small business. Companies in the wholesale trade industry cannot have more than 100 workers. However, businesses in the retail and service sector should not make more than $6 million in average annual revenue to stay small.
The definition of an official small business aims to protect a smaller company when in a larger competitive economy. Other qualifications the Small Business Administration observes are:
- If it is a for-profit company
- Whether the business is independently owned
- If the company is located and primarily operates in the United States
It is necessary for each business to check the size standards and calculate to see if they fall under the category of a small company. They may discover how they can take advantage of certain incentives, especially when it comes to health insurance plans.
Why Are Group Plans Important For Small Businesses?
Once you have started your business and hired some employees, the next thing you might be considering is health insurance. Along with a lot of other decisions, health insurance is a financial piece of the company’s growth plan. Over time, an owner might find themselves having to hire more employees to keep operations running smoothly. More workers mean an increased need for some type of benefits package.
A competitive benefit package is critical for the growth of any business. A health insurance plan is necessary for recruiting and keeping adept employees. People want to know they will get as much support from a business as they are putting into it.
Compensation is an influencing factor for younger generations. Studies have reported that 60% of Gen Z and 65% of Millennials said they would accept a lower starting pay in exchange for better benefits. Since the average Gen Z is in college, the two generations will soon make up the majority of the workforce.
Another reason why a small business may want to provide health insurance is that the law requires it. Under the Affordable Care Act, employers need to offer an insurance plan that is affordable and gives at least minimum value to full-time workers. Otherwise, the owner has to make an employer shared responsibility payment to the IRS.
However, not every business has to follow the provision. The mandate only applies to companies with at least 50 full-time employees.
The Difference Between Group Insurance and Individual Insurance
When you are looking over what type of health insurance to offer employees, you may wonder what will and will not work. You might come across two categories of options when looking over the various plans on the market. What is the difference between individual insurance and group insurance?
Individual insurance is a plan that an employee or their family purchases. They no longer have to pay a potential tax penalty and have more control over the policy they buy. However, the person could end up spending more. Small businesses can find legal ways for their workers to afford individual health insurance.
Another option is for an owner to buy group insurance. Group insurance covers everyone on the team and even their family members. It is divided into big and small group insurance. Companies pay either all or a portion of the price since they can split the expense with staff members. Workers get to enjoy a lower cost since the risk of health insurers gets spread across team members.
Group insurance starts soon after a person gets hired, and individual insurance takes some planning. Each option provides different benefits to workers and companies. It is important to look over each type to see which one works best for your small business.
A Health Reimbursement Arrangement
Another type of group insurance plan is a health reimbursement arrangement. A health reimbursement arrangement allows employers to cover medical expenses for their workers. As a small company owner, you can decide how much money you get to put into the plan. A staff member needs to incur medical expenses before requesting reimbursement.
Specifically, small business owners could get a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). QSEHRA is a subsidy plan for employers with less than 50 full-time employees. The group plan can offset health insurance coverage or pay medical expenses that a worker acquires.
How Group Health Insurance Plans Benefit Small Businesses
Small business owners may want to consider getting group coverage for their employees. The benefits do not extend only to staff members but management as well. There are multiple reasons why you might want to offer this option of health insurance as a small company owner.
Tax Incentives For Employers
One of the main advantages of group health insurance is the tax incentive. In general, business owners can deduct premiums from their federal business taxes each year. Small companies possibly can receive more benefits if they buy group coverage.
If you qualify as a small business, the Affordable Care Act could provide you a Small Business Health Care Tax Credit. The tax credit is worth up to 50% of the cost of premiums for two consecutive years. To get the tax credit, a business has to have less than 25 full-time equivalent workers. The average employee salary should be less than $50,000 as well.
In the end, group insurance plans are affordable for smaller businesses.
Promotes a Healthy Work Culture
A positive work environment can help a small business grow by attracting more applicants and reducing employee turnover rates. A group health insurance plan can bring you one step closer to achieving your goals. Most people do not want to face a company culture where they do not feel valued. The lack of a means to affordable medical care can contribute to that feeling.
Health coverage is an effective way to show team members that you value their well-being. When it is part of a benefits package, the workplace environment becomes healthy and can promote wellness initiatives. It is necessary to look over affordable group insurance options to strengthen your business.
The Cost of Premiums Remains Stable
Another benefit of group health insurance is the stable costs. Employer-sponsored coverage is the most common type in the United States. The prices of group insurance policies can be lower with the help of an insurance broker. Not only will small business owners get to save money, but they also can relax with the knowledge that the cost is relatively stable.
The rising expense of premiums is a reality for many individuals. However, companies do not have to pay more for the growing policy expenses. The average price for employer-sponsored health insurance is roughly $7,188 for single coverage and $20,576 for family coverage. The average premium for group health plans has increased 22% over the last five years.
Still, group health insurance remains an affordable option for small businesses. An insurance agent can help ensure that rates remain stable and predictable in the upcoming years.
How Healthcare Solutions Team Can Help
If you are looking for group healthcare solutions, then Healthcare Solutions Team has the plan for you. We offer benefit packages to all kinds of companies, including small businesses. Our seasoned agents can help you understand your network value. Explore competitive plans to support your employees better.
We are dedicated to providing personalized service to address the healthcare needs of all of your employees. You can enjoy more savings and better health outcomes. You can expect your rates to remain stable for the foreseeable future. Our agents can help you through the process of signing up for insurance.
Check out our blog to learn more about health insurance options for all types of businesses. If you have any questions, you can reach out, and we will respond within a day. Contact us to receive a quote.
Healthcare Solutions Team is a wholly owned subsidiary of the National General Insurance Group and the Allstate Insurance Company.