Health insurance can be overwhelming, especially for small business owners like many of those in the shed industry.
But the benefits can outweigh the challenges, especially when you learn more about offering health insurance for your employees.
During the webinar, “Health Insurance 101 for Small Business Owners and Startups,” presented by SCORE, a provider of mentorship to small businesses, industry experts shared important terminology (see the sidebar on page 84), types of coverage, and the positives related to offering health insurance to employees.
(Note: This article is for informational purposes only. Contact your preferred insurance advisor about your specific questions.)
BENEFITS OF OFFERING HEALTH INSURANCE
While offering health insurance to employees can be challenging for small business owners, doing so offers benefits to both the employees and the business.
“Studies have found that employee satisfaction goes up when they have access to healthcare that gives them peace of mind, maybe for some more financial stability as well,” shares Holly Stewart, a small group sales executive for Aetna based in Houston. “The staff is about 13 percent more productive and happier when they have access to a health insurance plan.”
Then there are the tax benefits.
“The cost of the employee or an employer’s premium can be removed from wages before tax,” she says. “I would call that a pre-tax amount. So, this can be a perk for the member (employee) as well as the company itself. Be sure you speak with your accountant about that. There are tax advantages and potentially tax credits for your group.”
Another benefit of offering health insurance as part of an employee benefits package is that it is a way to attract good talent.
“If an employee has to choose between two different companies they may work for, they may be at this point looking at the benefit options because salary and benefits are the top two factors that employees look at when looking for a new position,” explains Stewart.
“It’s a good way to attract and retain high talent, because 70 percent of workers are willing to switch jobs for better benefits.
“It’s kind of a way of caring for your employees and making sure they have financial and a healthy peace of mind as well.”
COVERAGE OPTIONS, CONSIDERATIONS
There are various types of coverage available, including fully insured and self-insured plans. Each has its own set of risks and costs, so it’s important to evaluate which option best fits your business needs.
With a fully insured coverage option, the insurance carrier is at full risk with claims, says Stewart.
“There’s no exposure to the plan sponsor. It’s going to be a fixed premium each month,” she points out. “The benefits could be mandated by the state. Different states require different benefits, so they could have state mandates included.
“And you have predictable expenses each year. The cost is going to be the same each month. Now, year over year it can change when you have a renewal, but all year long you’ll have a fixed amount so it’s predictable and ‘budgetable.’”
The self-insured option is usually for larger groups where the plan sponsor is “on the hook” for the claim risk, shares Stewart. There are fixed monthly administrative fees plus claims costs, and the benefits are not subject to state mandates.
“There’s more complex banking in this because of the claims dollars that are having to be paid potentially by the plan sponsor,” she says. “And the monthly cost can vary, unlike the first and the third option.”
The third coverage option is level-funded. This is kind of a blend between the insurance carrier and the plan sponsor as far as who is paying for the claim, shares Stewart. There is a fixed monthly premium on level funded, so it is still a predictable and “budgetable” expense.
The last option is the ACA (Affordable Care Act) or individual marketplace, where the insurance carrier is paying for the claims. It’s a fixed monthly premium. There’s typically no underwriting in these types of plans, and they are subject to state mandates.
These benefits are guaranteed issue because they’re not underwritten. Coverage must be extended, as long as you meet their underwriting guidelines.
“It’s generally for what we call small groups with 50 or fewer employees,” Stewart says.
What are the business requirements for purchasing group health insurance?
The business must have at least two full-time employees. Some insurance carriers will allow husband/wife groups; some will not. Also, some states require a minimum of five to 10 employees.
The business must pay a portion of all employees’ health insurance premiums. Most businesses cover 80 to 100 percent of employee premiums and 75 to 90 percent of dependents’ premiums.
“Obviously, the more the employer is going to contribute to the employees’ cost, the higher likelihood that your employee is going to enroll,” Stewart says.
The business must meet its state’s and health insurance company’s minimum participation requirements. Often, insurance carriers require at least 40 percent of employees to be enrolled in their health insurance plans.
Finally, group health insurance can be purchased any month of the year, but most companies choose a January 1 or December 1 policy start date.
“Many policies are written in January, but working with small groups, every month we have groups buying policies,” Stewart shares. “We tend to see a spike in July or December, but all year long, we are writing policies. Don’t think you have to start your benefits in January because you can write them all year long.”
There are four other factors to consider when choosing health insurance for your business.
First are the network of providers and the location of the employees. The health insurance plan you choose directly impacts access to and the cost of care. Ensuring plan networks are local to you and your employees will provide everyone with the most value.
Next are the needs of your employees. As a business owner, you know your employees’ needs best. Make sure to choose a health insurance provider that covers the diverse needs of your staff (e.g., pre-existing medical conditions, family coverage, dental and vision coverage, etc.).
“It’s kind of nice to survey your employees to see what they’re looking for and cover it if you’re shopping in the market,” says Stewart.
The age of your employees is a factor as well. If your employees are younger, they may not need a comprehensive health insurance plan. It’s assumed younger people are healthier. If your employees skew older, they may have more health problems and need an all-inclusive plan.
“You can offer, depending on the carrier, more than one plan,” Stewart points out. “You may have a high-deductible health plan that has a lower premium that’s more affordable for someone who may not use their policy as much as someone who may have chronic health conditions where they see the doctor frequently. They may be looking for a lower cost co-pay for a specialist versus someone who tells me and doesn’t ever use the plan and just wants more of a catastrophic coverage.”
Finally, your budget is a key determinant of what insurance to select. How much insurance premium will you cover on behalf of employees? And dependents? Make sure to shop around to find an insurance provider that best fits your budget.
“Again, offering more than one plan gives your employees kind of an investment and a buy-in as they shop for their coverage. They kind of have more skin in the game and feel more heard and seen if you’re able to offer more than one plan,” reiterates Stewart.
What are members talking about most related to health insurance?
- Mental Health—78 percent of employees believe their employer is responsible for ensuring employees are mentally healthy and emotionally well.
- Wellness—Folks are seeking out health care plans that span beyond the doctor’s office to promote a healthy lifestyle and lower overall medical costs.
- Telehealth—Making sure your health plan offers telehealth services has become a must-have for employees.
- Digital Access—Employees being able to access care and information digitally is a win for both them and you. It fosters convenience, transparency, and productivity.
INSURANCE LANDSCAPE
The major health insurance carriers are Cigna, Aetna, Blue Cross Blue Shield, and UnitedHealthcare.
“These are established companies; they’ve been around for a long time,” shares Craig DeRosa, a small group sales executive manager for Aetna based in New Jersey. “They offer health insurance nationally, and they have other health insurance offerings besides just medical, which include dental, vision, and pharmacies. Some might even include life insurance, disability insurance—a complete offering there.”
Besides these four carriers, DeRosa says newer companies like Bavvy, Nice, Oscar, Sana, and Gravie are “up and coming” insurance providers.
“Some might be regional,” he says. “They might be state-specific. They might be market-specific. They might deal in the marketplace, ACA, only. They might deal in the individual market. But these are some other options for you folks as employers.
“They’re high-tech companies. They’re very tech-forward but still offer the same financial savings that you would see with an established carrier.”
Lastly, there are exclusive companies. These companies have exclusivity clauses that allow them to cater to specific demographics of people, such as specific states, those with veteran status, and specific sectors of employment. Your type of business will determine if you’re eligible to learn more about these companies.
“They offer the same services as the major insurance carriers, same as the local or newer to the market insurance carriers, but again, you’re getting the same services, the same benefits,” DeRosa says.
Insurance brokers can be invaluable in navigating the complex healthcare landscape. They can help you understand your options, provide insights into different plans, and assist you in making informed decisions.
“A broker is a licensed insurance professional who acts as your advocate,” DeRosa says. “They act on your behalf. They work with several different health insurance companies, and they act, for all intents and purposes, as an intermediary between you folks as the employer and the insurance company.
“They help you find plans that best suit the needs of you and your employees, and help you work with your budget. They’ll help you enroll the members in those chosen plans with the various carriers and, of course, answer questions along the way in regard to process and how the claims work, how the networks work, and how member services interact, and so forth.”
How do the brokers interact with insurance companies and plan sponsors?
“Their role is to do all the work for you, meaning they’ll go out and contact all of the major players in your marketplace,” says DeRosa. “They will compile quotes from all the companies, and they’ll be able, of course, to show you plans side by side with prices and premiums side by side. This is an invaluable process to go through with, especially when you’re dealing with a small group.”
Where does a small business owner, like a shed builder, find a broker?
“It can be as simple as a Google search,” shares DeRosa. “Typing in your industry or location. Maybe find a brokerage that specializes in your industry.
“Of course, referrals. If you are in a group like SCORE and other entrepreneurial organizations, you just ask other business owners who they might use. Then there are professional associations. You can just Google them, go to their website, enter your state, and they’ll give you all of the recommended licensed insurance brokers in your area.
“Lastly, there are state and government resources. State and government websites would also have a link to licensed and approved insurance professionals.”
Understanding health insurance is critical for small business owners. By educating yourself about key terminology, the benefits of offering health insurance, and navigating the marketplace, you can make informed decisions that benefit your employees and your shed industry business.
HEALTHCARE INSURANCE TERMINOLOGY
The following are key terms that shed business owners should be aware of when shopping for healthcare insurance.
BUSINESS OWNER FOCUSED TERMS
Plan Sponsor: The owner of the group policy or the business. For example, “Tom’s Shed Shop” is the plan sponsor on behalf of all the builders, sales folks, etc.
Contribution: The amount small business owners contribute to the group’s plan. For example, if your group’s monthly plan cost is $300, the plan sponsor pays a percentage of that cost.
Participation: Participation is the number of benefit-eligible employees from the group who must enroll.
Total Monthly Cost: The amount an employer pays every month. For a fully insured plan, this is often called the premium and includes anticipated claims and administrative costs. For a level-funded plan, this includes projected medical costs for the current year, administrative fees, stop loss premiums, and an amount to fund medical costs if the employer doesn’t renew.
Administrative Fees: In both a level-funded and self-insured plan, this is the amount charged to administer your plan beyond the claims funding and stop loss coverage.
Individual Medical Questionnaire (IMQ): IMQs are forms your employees fill out about their health history, including current medical treatments/medications. They help the underwriting team give you accurate medical rates.
MEMBER (EMPLOYEE) FOCUSED TERMS
Deductible: A deductible is how much a member has to pay each year for certain services before the plan begins to pay. Deductibles vary by plan and apply to certain medical and pharmacy services.
Coinsurance: After a member has met their deductible, coinsurance is the percentage of cost the member will pay for services.
Copayment: The amount the member will pay each time for certain types of medical care. Copays can vary depending on the kind of health care service and the plan.
Health Savings Account (HSA): A health savings account (HSA) is a tax-advantaged account for money set aside to pay for qualified medical expenses. These are funds that can be used for any medical expense. A member, their employer, or others can contribute, and the money in the account rolls over every year.
Out-of-Pocket Max: This is the money a member could pay each year toward costs, including the deductible and any copays or coinsurance. Once met, the health plan will pay for the rest of the eligible healthcare costs.
Network: Doctors, hospitals, laboratories, clinics, and other facilities that have negotiated preferred rates for their members.
Out of Network: A provider or facility not in-network, causing the member to likely pay more than in-network. (Except for emergency care provided for an emergency medical condition).
Broad or National Networks: This type of network covers care in most service areas.
Local Networks: This type of network only covers a set local area.
Source: Holly Stewart, Small Group Sales Executive, Aetna
