Health Insurance for Small Business 2023:

Small Business Health Insurance Options
[Basic Overview]

There are a number of different group options available to small employers. Unfortunately, understanding the differences between them is easier than you think.

As an employer, there are five options to consider: (View Story)

OPTION ONE: Employees Obtain their Own Coverage

If your business has fewer than 50 employees, then you are not required to offer access to health insurance. But as many small business owners can tell you, it can be difficult to grow a young company without a competitive benefits package.

On the other hand, sometimes the smarter financial move is to not offer health benefits. For example, some low-income employees might qualify for an ACA subsidy on the individual market, making it the cheaper option. Or perhaps some of your employees are already covered by a spouse’s group plan. 

As you’ll find out in this guide, health insurance for small businesses is more affordable than you think. It also creates access to a number of valuable tax benefits for employer and employee alike.

OPTION TWO: Small Group Health Insurance

With small group health insurance, the employer chooses a policy plan and then pays a fixed premium for every enrolled employee. The employee pays their share from their paycheck, and is covered as long as they are employed.

It works just like a plan purchased on the individual market, only far more affordable in some cases.

Some group plans are also HSA-qualified. This means that you can offer an additional tax-free benefit in the form of a health savings account (HSA).

OPTION THREE: HRAs for Small Business

Health reimbursement arrangements, or HRAs, are a common benefit option for businesses with fewer than 50 employees. Small business HRAs let employers compensate their workers for their own individual health plans.

In most cases, reimbursements are used for plan premiums. However, they can also be used for eyeglasses, dental insurance, and other out-of-pocket costs. 

HRAs are popular with small companies because they are highly flexible. The employer can choose how much to contribute each month, without having to worry about unexpected fluctuations in cost.

HRAs are popular with employees because they allow the individual to choose a plan of their own, as opposed to being pigeonholed into a plan that isn’t a good fit.

OPTION FOUR: Health Sharing Plans for Employees

For businesses and employees alike, health sharing for employees can save a bundle on monthly premiums. In fact, the average health sharing plan is about half the cost of unsubsidized health insurance.

Health care sharing is not actually health insurance at all. Instead, it is a membership-based cost sharing program. In exchange for a monthly contribution, members can have their medical expenses shared according to a fixed-price reimbursement model.

But like any health care strategy, health sharing isn’t for everyone. These plans come with waiting periods for pre-existing conditions, and coverage is usually less comprehensive.

OPTION FIVE: Direct Primary Care

Direct Primary Care, or DPC, is an alternative healthcare model where patients or their employers pay a flat monthly or annual membership fee in exchange for unrestricted access to a primary care doctor.

When offered as an employee benefit, workers can see their primary care provider as often as needed for preventative care and maintenance of chronic conditions. Their PCP can refer them to specialists for more advanced care, as needed. There are no co-pays, co-insurance, or other out-of-pocket costs.

DPC works best in conjunction with a high-deductible health insurance plan or health sharing plan, each of which may help with costs for emergency or acute care or specialist care beyond the scope of the PCP’s practice.

Request a Group Quote for Your Company

HRAs for Small Business – A Flexible, Customized Benefit Option for the Small Employer

HRAs can come in a lot of different forms. The most popular HRAs, however, are designed to compensate an employee for their individual coverage premiums.

In either case, the benefit is totally tax-free and the amount is determined by the employer.

How does an HRA health plan work?

HRAs are one of the easiest benefits to get setup. To begin, the employer determines who will be eligible for the benefit, as well as how much that benefit will be. Then, it’s up to the employee to enroll in a health insurance plan and apply for HRA benefits.

The details vary a bit depending on which type of HRA you’re offering. But in general, they’re very simple to understand, purchase, and administer.

How HRAs for small businesses work in 4 easy steps:

The employee enrolls in a qualified health insurance plan.

HRAs require that the employee have their own health plan that meets minimum standards as defined in the Affordable Care Act. The employee is responsible for both choosing the plan and getting themselves enrolled

The employer reimburses the employee via paycheck.

Monthly HRA benefits are added to the employee’s regular paycheck without including it as gross income. Other benefits are paid out as they are approved by the company, as is the case with out-of-pocket costs.

Why HRAs are Popular with Small Business

For many employers, a group HRA is a good way to ensure that your company’s benefit program isn’t going to take up too much time, money, or energy.

With HRAs, it is the employee who is responsible for choosing a plan and getting themselves enrolled, not the employer. It also means that the employee can choose whichever plan is best for them. This is unlike group plans which only give you one or two options to choose from, if any.  

The Different types of HRA: QSEHRAs vs. ICHRAs

HRAs come in all shapes and sizes. One of the first things that you’ll encounter when shopping for small business HRAs is the terms “QSEHRA” and “ICHRA”. In essence, these are the same thing: A low-cost health benefit that requires the employee to purchase their own insurance.

The differences between QSEHRAs and ICHRAs is mostly about company size. For example, QSEHRAs are only available to companies with 50 or fewer employees. ICHRAs as a slightly newer form that is available to companies of all sizes, and as such tend to be slightly more advanced in terms of administration.

If you decide that you’re interested in getting an HRA for your business, you can read more about the difference between QSEHRAs and ICHRAs.

The Pros & Cons of HRAs for Small Business

HRA benefit offers can come in all shapes and sizes. But for the most part, they come with the same basic benefits and drawbacks:

First Steps: How do I set up a small business HRA?

Setting up a company HRA is very easy. Here is the process in three easy steps:

Decide how much you will be reimbursing your employees. This can be a flat rate limited to premium costs, or it can include out-of-pocket costs like deductibles or dental expenses. With HRAs, the company makes the rules.

Announce your company’s open enrollment period to your employees. They will have 60 days to sign up for a plan, and new employees can sign up when they are hired or after a pre-established waiting period.

Work with an HRA administrator to handle all reimbursements. HRA administrators not only save a lot of time, but will also keep your plan in compliance and provide you with detailed monthly accounting. 

Once your HRA offer is up and running, it can be a hands-off benefit system with hardly any maintenance required.

Small Business HRA: Frequently Asked Questions (F.A.Q.)

Q: What happens if I find a cheaper small group plan elsewhere?

Q: Can I just reimburse my employees for the cost of an individually-purchased plan?

Q: How much does group health insurance cost?

Q: Is my business required to provide health insurance?

KEY TAKEAWAY: HRAs for Small Businesses

Small business HRAs are the perfect option for the fast, young company that doesn’t have the time or resources to administrate a comprehensive group plan.

In addition, they provide the employees with the rare opportunity to choose how they want to manage their healthcare. This is opposed to the big, bloated group offerings that force everyone into a single plan.

Health Sharing Plans for Employees: A Health Insurance Alternative That’s Designed to Save Money

Health sharing can save you and your employees a lot of money. In fact, the monthly cost can be about half the cost of an unsubsidized plan. But that doesn’t mean that they are for everybody.

The Difference Between Health Sharing and Health Insurance

Healthcare cost sharing for employees is an alternative to health insurance, but it is not insurance. This allows health sharing to be more flexible, but it also lacks some of the basic protections of ACA health insurance.

For example, health sharing comes with no federal guarantee that your employees’ health costs will be covered. Health sharing organizations share member contributions with members who have medical cost needs, and there is no insurance company providing financial backing.

Health sharing plans also tend to have waiting periods on pre-existing conditions. If you have employees with pre-existing conditions or frequent medical needs, a small business group plan or an HRA might be a better option. Those come with guaranteed enrollment, so none of your employees can be denied coverage.

How to Qualify for Group Health Sharing:

Another difference between insurance and health sharing is what it takes to qualify. Traditionally, all health sharing plans were offered by Health Care Sharing Ministries (HCSM). These organizations require a statement of faith in the non-denominational Christian tradition.

Today, not all health sharing is faith based. Many plans will still require a statement of responsibility or an equivalent. Like the statement of faith, this is a signed document where the potential member can commit to a health-conscious lifestyle. Most discourage smoking and prohibit the use of any illegal substances.  

How do Health Sharing Plans work?

Even though health share plans are not technically insurance, many of them are designed to work in a very similar way. These plans have monthly payments (called contribution amounts), co-pays, and annual limits that work like deductibles.

For group plans, health sharing costs can be split between employer and employee in any way. They can also be paid directly from payroll, just like regular insurance.

How health sharing for employees works in 5 easy steps:

4. The employee provides the medical with their membership card, or submits bills for review after an expense is incurred.

Many health sharing plans work very similarly to health insurance, with a PPO network. Others allow you to see any provider, and then require that the member submit their medical receipts for approval. 

5. The health sharing organization determines how much of the cost will be shared.

After the receipts have been received, the health sharing organization decides how much of the cost will be shared. This takes into account any amount the member is responsible for (like a deductible) as well as whether or not the incurred costs are qualified according to the membership guidelines.

The Pros & Cons of Health Sharing Plans for Employees

Just like group insurance and HRAs, health sharing for small businesses can come in a lot of different forms. But it’s possible to boil it all down to a basic set of pros and cons:

First Steps: How do I set up a health sharing plan for my employees?

Make a list of your company’s standard medical needs. This means seeking out the answers to questions like:

How often do my employees seek medical care?

What kind of options would be popular?

Would my employees benefit more from lower premiums or more options?

Also determine the amount that the company can contribute towards health benefits. From there, your personal advisor can help you find a plan that checks all the boxes.

Group Health Sharing Plans: Frequently Asked Questions (F.A.Q.)

Q: Is health sharing available for small businesses?

Q: Can I still offer an HSA with a group health sharing plan?

Q: Are there any maximums for health sharing plans?

Q: Can an employee be dropped for excessive medical needs?

KEY TAKEAWAY: Group Health Sharing Plans for Employees

Health sharing plans can be one of the easiest ways to save money on employee benefits. It’s not as comprehensive as regular insurance, and waiting periods for pre-existing conditions make it less ideal for employees with more health needs.

Even so, it’s hard to find a better monthly deal on health benefits than with a health sharing plan.

Direct Primary Care for Small Businesses – Improving Care Access at No Cost to Employees

DPC is a simple membership-based health plan designed just for routine primary care health services. It provides employees with unlimited access to primary care doctors for routine and preventive health services and the maintenance of chronic conditions… at zero out-of-pocket costs to workers.  

Employers also save on direct health care expenditures. Better access to preventative care and maintenance of expensive chronic conditions like diabetes, heart disease, and hypertension also help reduce health care utilization costs while reducing absenteeism and improving productivity.

How does a direct primary care plan work?

Employers select a medical provider, and pay a flat monthly enrollment fee for each employee and family member in the plan. In return, employees and covered family members receive unlimited access to their primary care physician, who provides routine checkups, physicals, vaccinations, monitors and manages chronic conditions, and provides referrals to specialists as needed.

Think of it as similar to a gym membership: Once the monthly membership fee is paid, there are no further costs for either the company or employee for covered services. Employees can see their primary care doctors as often as they need to.

Direct primary care is not health insurance. Instead, it removes the expensive health insurance company from the equation. Doctors and clinics who work under the DPC model don’t need to maintain large billing departments to handle insurance payments. Their administrative overhead is massively reduced. And as a result, so are overall costs.

Direct primary care plans don’t cover everything. They are strictly for routine care, check-ups and physicals, preventive care, immunizations, and monitoring routine conditions to prevent major problems later.

Note: Not all DPC plans provide treatment for chronic conditions. Check with your plan provider for details – especially if you believe you have employees or family members who have one or more such conditions.

To protect against the unexpected costs of medical emergencies, acute conditions, and health events requiring more advanced care, employers and workers normally combine DPC plans with a traditional health insurance policy or a health sharing plan as described above.

However, because direct primary care covers the basic routine and preventative services, employers can choose lower-cost high-deductible health insurance plans (HDHPs) or a low-cost non-insurance alternative such as a health sharing plan. This generates significant savings compared to traditional major medical insurance approaches for employers and workers alike.

Why DPCs are Popular with Small Businesses

Even with insurance, some patients and families avoid going to the doctor because of costs. Traditional insurance approaches still leave families with copays, co-insurance, and deductibles, depending on the situation.

As a result, families may avoid going to their doctor for needed care and preventative services. But over time, the lack of care and failure to diagnose and manage health problems early on eventually leads to massive direct and indirect health expenditures later on.

Thousands of small businesses are discovering that by offering a DPC option to employees at no cost to them, their workers are less likely to avoid seeing their doctors, getting the tests they need, and getting help in monitoring and managing chronic conditions… before they have to go to the hospital.

Workers also find that they have better access to their primary care physicians and can spend more face time with their doctors. This is because the reduced overhead means doctors can reduce their patient load, and spend more time with each individual patient who needs it.

Employees receive better care – with no deductibles, copays, or coinsurance charges. Going to the doctor is free for them. 

 Companies enjoy significant cost savings. The $80-$120 per month they spend per employee or family member in DPC benefits more than pays for itself as employees use high-deductible health plans + HSAs, health sharing plans, and health reimbursement arrangements rather than more expensive traditional low-deductible insurance models.

Over time, improved access to care also pays off in reduced health care utilization, reduced absenteeism, improved retention, and better productivity. 

The Pros and Cons of DPC for Small Businesses

DPC plans come with many variations. But they generally all offer the same advantages and drawbacks for small business employers: 

First Steps: How Do I Set Up Direct Primary Care for my Employees?

Setting up a direct primary care plan as an employee benefit is very easy: 

1. Decide whether you will offer family members access to DPC benefits (most do), and what specific classes of employees will qualify for the benefit.

    

2. Work with your HSA for America representative to select a plan with providers convenient to your area, or the areas where your employees live. 

3. Prepare a roster of employees who will be eligible for the benefit. 

4. Arrange training or a briefing on how direct primary care works and how it benefits workers and their families.

5. Have employees enroll online

6. Pay membership fees to DPC plans directly or via payroll deduction

7.Onboard new employees and family members as necessary. 

Direct Primary Care – Frequently Asked Questions

Q: Is direct primary care a form of insurance?

Q: Is DPC the same as “concierge medicine?”

Q: What services do DPC doctors commonly provide?

Q: What’s not included in DPC plans?

Q: Do DPC patients need insurance?

Key Takeaways – Direct Primary Care for Small Businesses

Direct primary care is a great fit for small businesses that want to reduce their healthcare-related expenditures while not sacrificing the medical care that their employees and their families deserve.

These plans provide a much more positive healthcare experience than the traditional insurance-based model.

DPC plans should be offered in combination with a health sharing plan or high-deductible health plan (HDHP) and health savings account combination.

Employers need to work with health benefit vendors to educate patients on how to use their direct primary care benefit, and how to combine it with other forms of protection. 

How to Choose the Best Health Benefit for your Small Business

Choosing a health insurance option for your employees can seem like a daunting task. Before you begin, ask yourself the following questions:

• What options is your company eligible to offer?
• How much are you willing to spend on health benefits?
• How much time do you have to manage and administer benefits?
• Which benefit option would be of highest value to your employees?

STEP THREE: Consider your Employees’ Coverage Needs

It’s always a good idea to talk to your employees about their health needs before purchasing a plan. Try to get a feel for how often they use their coverage, and whether or not the benefit you’re thinking about would help them pay for their healthcare.

STEP FOUR: Talk to Your Personal Advisor about Small Group Insurance

Unlike traditional insurance, employee health benefits do not need to be “one-size-fits-all”. With HRAs, HSAs, and health sharing, it’s possible to create a flexible benefits package that encourages the employee to take ownership of their health decisions.

In addition, it’s possible to build different combinations of these benefits for added convenience. For example, pairing a health sharing plan with an employee HSA is a great way to offer balanced coverage without spending too much.