Small Group Strategy #1: Do Nothing – Leave Your Employees to Fend for Themselves
If you have fewer than 50 employees, you’re not required by law to provide any coverage, so why should you bother?
Well, I just touched on one of the most important reasons. If you don’t do something, your current and potential employees may not hang around very long. They’ll find an employer who cares enough to offer at least something in the way of healthcare coverage.
Why does access to healthcare matter so much to employees and job hunters today? There are many reasons, but the most important include:
- Costs – Access to medical care has never been more costly. All it takes is one unexpected illness and you could find yourself facing tens or even hundreds of thousands of dollars in hospital and doctor bills. Going without health insurance just isn’t an option any longer.
- Access – While the Affordable Care Act did a lot of good for a lot of people (mandatory coverage for preexisting conditions comes to mind), it didn’t necessarily completely level the playing field. Buying health insurance through the exchange can be incredibly costly. Most people prefer to work with their employer to obtain health insurance to ensure that they get the coverage they need for a rate they can afford.
- Complexity – Obtaining health insurance is more complicated than ever before, particularly for those trying to do it on their own. By offering a plan of some sort, whether that’s through small group insurance, a small group health sharing plan, or an HRA, you help your employees tame the chaos in their lives and build both goodwill and loyalty, leading to a better brand image, as well as improved talent retention.
So, as you can see, doing nothing isn’t really an option. The good news is that even very small, cash-strapped companies can afford to offer something in the way of healthcare coverage. Your three real options are small group health insurance plans, small group health sharing plans, and health reimbursement arrangements, but they’re not the same. I’ll help you understand all three and what each offers your business (and your employees).
Small Group Strategy #2: Small Group Health Insurance Plans
So, now that we’ve done away with the myth that doing nothing is a viable option, let’s explore your first real choice – small group health insurance plans. What are they? How do they work? Why consider going this route?
Small group health insurance plans are available from quite a few carriers in Texas. They’re offered to groups of two to 100 employees, as well, so very small businesses can benefit, but companies with over 100 employees will have to consider something else.
Group health insurance remains the most popular way for small businesses to offer health benefits to their employees. And, if your business has fewer than 25 employees, you might be eligible for a small business tax credit, potentially saving you up to 50% of your total contributions here.
How do these plans work? First, you’ll need to compare your options and then choose a carrier. Once you have a carrier, you’ll need to pick a policy plan. Based on that plan, you’ll pay a fixed premium for every enrolled employee within the plan (your employees may elect not to join the plan, particularly those who are covered by a spouse’s plan with better coverage).
Each employee will pay their share of the premium from their paycheck. They will be covered by the plan as long as they are enrolled and employed. If they choose to leave the plan, they lose coverage. If they leave employment with your business, they also lose their coverage.
Small group health insurance plans work just like those purchased on the individual market. The benefit here is the ability to offer cost-effective coverage in most cases. You may also find that your small group plan is qualified for an HSA – health savings account – which can allow employees to use their healthcare plan as an additional savings vehicle, similar to a 401(k) or IRA.
Most groups require participation of at least 70% of your workforce, during most of the year.
There is an open enrollment period that runs from 11/15 through 12/15 every year allows groups of any size to get the coverage they need, even if you don’t have the 70% participation rate required.
You are also able to set your waiting period before a new employee can enroll in the plan. Most employers choose to go with a 30-day period, but you can customize the duration to meet your specific needs.
You may also have an open enrollment period that allows employees to sign up for a new plan, and those periods usually last a week. You’re free to set up your duration, though.
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The Pros and Cons of Small Group Health Insurance Plans
While there’s a lot to love about small group health insurance plans for Texas small businesses, there are a few drawbacks, too. Let’s check out the pros and cons.
- Tax-deductible contributions (employer and employee)
- The ability to reduce employee turnover and build a stronger brand
- If you have fewer than 25 employees, you could save even more with a tax credit.
- You can set up an HSA for your employees with these insurance plans.
- You can buy into a plan whenever it works for you, rather than having to deal with enrollment periods like those found on the individual market.
- Sometimes individual plans will be more affordable, particularly for low-income employees who qualify for an incentive on the exchange.
- Your employees will have fewer (or no) choices when it comes to customizing their healthcare coverage.
So, there you have it. Small group health insurance plans are the most popular option for small businesses in Texas, and they can offer quite a few benefits. However, they’re not perfect and they’re not the right solution for all situations. Now let’s explore HRAs and what you need to know about them.
Small Group Strategy #3: Health Reimbursement Arrangement (HRA)
HRAs enable you to reimburse your employees for the cost of their individual health insurance, tax-free.
In this situation, you let your employees choose the plan that works best for them (an individual plan purchased on their own) and then you reimburse them for a portion of the costs of that plan. Most employers choose to use that reimbursement to cover their plan premiums, but there are other options, including using them for dental insurance, covering out-of-pocket costs, vision insurance, and more.
The primary benefit of an HRA is that it can be incredibly flexible. Whereas small group health insurance plans lock employees into a very rigid structure with little ability to customize their care, HRAs offer the opposite. Employees can choose a plan that offers precisely the coverage they want and need, and each employee can customize their health insurance.
That flexibility carries over to the employer, too. For instance, as a Texas small business owner, you get to decide how much to contribute each month and you don’t have to be concerned about unexpected cost fluctuations.
Both employers and employees appreciate HRAs for what they do best – allow individuals to customize their coverage while saving money and preventing them from being locked into a rigid plan that doesn’t meet their needs.
The Pros and Cons of Health Reimbursement Arrangements
As with small group health insurance plans, HRAs also have their pros and cons. Let’s look at how they stack up.
- You (the employer) get to choose how much you contribute and there are no minimums that need to be met.
- You (the employer) get to set the rules that govern your HRA, ensuring maximum flexibility for your business and your employees.
- Your employees get to customize their plan, ensuring that they can find something that fits their individual needs, instead of being forced into a one-size-fits-all plan.
- Employees are required to have individual coverage.
- In most cases, employees receiving a reimbursement from an HRA do not qualify for government subsidies provided by the Affordable Care Act.
In the end, HRAs offer flexibility and individuality. They empower both employers and employees, too. However, they’re not necessarily the right solution for all small businesses in Texas. Now, let’s cover your final option – small group health sharing plans.
Small Group Strategy #4: Small Group Health Sharing Plan
Now it’s time to discuss what might be the most interesting of the three options for small businesses in Texas seeking ways to offer health insurance to their employees: small group health sharing plans.
Before we dive into the specifics of health sharing plans for small businesses, it might be helpful to explain the basics, since healthshares are available for consumers and businesses alike. So, what’s a health sharing plan?
It’s exactly what it sounds like – a group that comes together to share the costs of medical care for members. It’s a cost-sharing program, not health insurance. You can think of them like co-ops, and they’re increasingly popular with people across the US as healthcare costs continue to rise and the complexity involved with insurance increases.
You’ll also find that many of these plans are based around the idea of people of the same religious faith helping one another out. These so-called health care sharing ministries (HCSMs) usually reserve membership for those who share their specific faith and may not share the costs of procedures that don’t align with their faith or medical care for conditions sustained in activities not condoned by their faith.
With that being said, the healthshare model has become so popular that non-faith-based options are springing up. These provide the same cost-sharing benefits found with HCSMs, but they do not limit membership to a specific body of believers (or to any particular belief in the first place), nor do they place religious-based prohibitions on procedures or treatments.
How do health sharing plans work, though? In exchange for a monthly contribution, health share plan members can have their medical expenses shared across the group and paid for a fixed-price reimbursement model.
Is a health sharing plan the right choice for your business? If there are not a lot of serious pre-existing conditions (that could have waiting periods before sharing begins), it could be a very affordable way to provide excellent benefits to your employees.
The Pros and Cons of Health Sharing Plans for Employees
Like small group plans and HRAs, health sharing plans come with some pros and cons.
- Health sharing can be one of the most affordable solutions for small businesses and their employees.
- Health sharing is only available to small employers.
- Health sharing plans are not comprehensive, and some employees may find that they need supplemental options.
- Health sharing plans are not well-suited for those with significant medical needs, chronic health conditions, and the like.
- Health sharing contributions are not tax-deductible, nor do they go toward the deductible of a catastrophic health plan.
Compare Pricing on the Best Healthshare Plans Available
We help small businesses who don’t currently offer benefits find very affordable ways to do so. We also help businesses with high group health insurance premiums find ways to lower their costs while still keeping their employees happy.
Schedule a phone conversation with one of our Personal Benefits Managers to discuss your options as a small business owner. If you are considering an HSA or a healthshare plan, you can click here to get a quote on individual plans.
Here are some additional articles on small group health insurance programs: The Most Effective Healthcare Strategies for Small Businesses With Less Than 50 Employees | 6 Best Small Business Health Insurance or Healthshare Plans in Ohio
Here are some additional pages related to this article: Health Insurance for Small Business Owners: A 2024 comprehensive guide to getting health insurance for small business owners | How to set up a Small Business HSA [2024 Update]
Hi! I’m Misty Berryman, and I’m one of your Personal Benefits Managers. I like working with HSA for America because we’re creating solutions to healthcare problems. Our focus on money-saving alternatives like HSA plans and health sharing programs, and the variety of health share programs we offer, are what set us apart. Read more about me on my Bio page.