Arizona Small Business Health Insurance


Arizona Small Business Health Insurance

Arizona small business owners face unique challenges when it comes to providing affordable health insurance options – particularly those with fewer than 30 employees.

The cost of offering health insurance can be overwhelming, and Arizona’s small businesses often struggle to find viable solutions.

This page is specifically written specifically to provide guidance to Arizona small business owners and HR directors of businesses with 30 employees or fewer. We’ll discuss the high and rising costs of providing traditional medical insurance to employees.

We’ll also discuss some ways Arizona small business owners can help keep these costs under control, as well as some alternative strategies, tools, and resources that can help you reduce costs, improve your health benefit offerings, and help your business become more competitive.

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The High Cost of Traditional Arizona Small Business Health Insurance

Despite the passage of the Affordable Care Act more than a decade ago, the cost of providing traditional health insurance coverage to Arizona employees continues to escalate.

The annual cost of providing health insurance for workers rose by 6.5% between 2022 and 2023, to more than $13,800 per employee, according to Aon. And they may rise by even more next year, since 2022 inflation wasn’t fully captured in 2023 rates, according to experts.

And according to research from the Kaiser Family Foundation, the cost of providing a health insurance plan for Arizona workers and their families costs  an average of $21,381 in 2021, the latest year for which KFF data is available. On average, Arizona workers contributed $6,174 that year towards health insurance premiums – plus their deductibles, copays, and coinsurance.

Employers paid an average of $15,207 for family coverage that year, though costs have risen even higher since then.

These inexorably increasing health insurance costs are putting a major squeeze on workers as well as their employers: A recent Mercer survey found surveyed workers faced challenges in being able to afford the healthcare they need – even with employer-provided insurance.

Traditional Small Business Health Insurance in Arizona

Traditional insurance plans are typically run by for-profit corporations that seek to maximize profits for Wall Street and their stockholders. Few are mutual companies, jointly owned by their policyholders and run for their customers’ benefit exclusively.

Additionally, health insurance premiums are forced upward by federal and state mandates that require these traditional health insurance plans to include many benefits that employees may not want or need. These include things like coverage for drug and alcohol addictions treatment, treatment for morbid obesity, inpatient mental health care, and coverage for abortions.

Despite the cost, traditional workplace health insurance approaches have a number of advantages, as well as a few important disadvantages. 

Advantages of Traditional Group Health Insurance

  • Attractive to Employees. Many employees value the benefit of employer-sponsored health insurance. It can help attract and retain high-quality employees.
  • Tax Benefits. Premiums are tax deductible to the employer as a compensation expense, while they are non-taxable to the employee. 
  • Guaranteed issue. The carrier must accept all applications from group members made when the employee was first eligible for the benefit, as well as those who applied during the plan’s open enrollment period thereafter. Your employees cannot be turned down, regardless of medical history. 

Disadvantages of Traditional Group Health Insurance

  • Administrative Burden. Managing group health insurance plans can be time-consuming. There’s paperwork to handle and employee questions to answer.
  • Limited Control. Employers have less control over the specifics of the coverage. This lack of control can be frustrating if the insurance company’s decisions do not align with the employer’s preferences.
  • Cost. Traditional group health insurance typically costs 40% to 100% more than a comparable quality health sharing plan (discussed below).

Arizona Small Businesses Are Exempt from the ACA Group Health Insurance Requirement

While offering a competitive health benefits package is a must for attracting and retaining quality workers, small employers have an advantage over larger employers: companies with fewer than 50 full-time employees are exempt from the Affordable Care Act’s group insurance requirements.

While larger employers who do not provide an ACA-qualified health insurance benefit to their workers must pay a penalty per covered worker, smaller employers are exempt from this penalty.

So if you’re a smaller employer, you have much more freedom to pursue alternative health benefit strategies other than overpriced, bloated ACA-qualified traditional health insurance plans. And you don’t have to worry about paying the ACA penalty.

This opens up a number of viable and cost-saving strategies that are especially cost-effective for Arizona companies with fewer than 30 employees.

Introducing Health Sharing Plans: A Cost-Effective Alternative for Arizona Small Business Health Insurance

Health Sharing Plans have gained tremendous popularity as an affordable alternative to traditional health insurance for businesses in Arizona.

Health sharing operates on the principle of voluntary expense sharing among like-minded individuals, facilitated by non-profit organizations known as “health sharing ministry organizations.”

The primary advantage of healthsharing for small business owners is cost: Monthly healthsharing costs are typically about 20% to 50% less than the cost of traditional health insurance premiums.

Switching from traditional group health insurance to a health sharing-centered plan enables employers to immediately save a significant amount of money compared to the monthly cost of maintaining a formal traditional group health insurance plan.

In Arizona, many faith-based communities have embraced Health Sharing Plans, contributing to their growing popularity. However, not all healthsharing organizations are faith-based. Some of these organizations are non-denominational or completely secular and open to people of all faith backgrounds and traditions.

The common denominator is typically that health share plan members commit to living healthy lifestyles and abstain from health-damaging behaviors like drug use, excessive alcohol consumption, and to maintain a healthy weight.

This helps health sharing organizations maintain a much healthier risk pool, and keeps costs down for all members.You and your employers don’t have to be in perfect health to join. But these plans are most cost-effective for those generally in good health and with no significant pre-existing conditions.

Healthsharing Has No Narrow Care Networks

Unlike HMO and PPO health insurance plans, most health sharing plans do not impose restrictions on in-network providers.

This means your employees have much more freedom to choose their own doctors, clinics, hospitals, and other providers.

This is a major advantage that healthsharing plans have over most employer-sponsored traditional insurance plans.

However, unlike traditional health insurance plans, healthsharing plans are not subject to guaranteed issue requirements. Applicants undergo medical underwriting, and the healthsharing plan will generally impose waiting periods on sharing expenses for treating pre-existing conditions.For this reason, healthsharing may not be a great solution for all your employees. Despite the tremendous cost savings available under medical cost sharing programs, some employees may be better off with a traditional health insurance plan than with a healthsharing plan.

The HSA for America Healthshare Plan Comparison Guide for 2024

Combining Healthsharing and Traditional Small Business Health Insurance Plans in Arizona

When it comes to traditional group health insurance, employers have to navigate some complexities.

Group health insurance plans typically require a minimum participation rate from your eligible employees. This means that at least 70 percent of your eligible workers must sign on with the plan.

There might be employees who opt out either due to the costs they would have to bear or because they have access to a better plan through their spouse, the VA, or Medicare.

This participation rate requirement may influence your decision to offer a health sharing plan alongside a conventional health insurance option.

If both options are available, but too many people choose the lower premium health sharing option, you might not meet the 70% participation criterion.

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Don’t Go It Alone!

You’re not alone.

Small Business Health insurance in Arizona and the other related alternative strategies discussed on this page are complex. Most business owners need some assistance in understanding all their different options, and in weighing the pros and cons of each.

Feel free to reach out to us for assistance in navigating these and other design and compliance issues related to benefits. That’s what our Personal Benefit Managers are here for!

Our PBMs are among the most highly-trained and experienced employee benefit experts in the country. Many of them are experienced founders and business owners in their own right who have been in your shoes themselves.

Consultations are always free. And many Arizona business owners have been surprised at how much money they can save by implementing their HSA for America PBM’s recommendations.

For a free consultation and analysis, contact a Personal Benefits Manager.

Harnessing the Power of Health Reimbursement Arrangements (HRAs)

For many small businesses in Arizona, utilizing a Health Reimbursement Arrangement is much more cost effective than purchasing a group health insurance policy to cover employees and their families.

HRAs are employer-paid benefits that provide tax-free reimbursement for individual health insurance costs, offering employees the flexibility to choose their preferred plans. These reimbursements can cover various medical expenses not covered by the primary health plan, such as deductibles, co-pays, prescriptions, and durable medical equipment.

HRAs have several advantages:

  • They are 100% tax-deductible for employers, and tax-free for employees
  • Unlike flexible spending accounts (FSAs), HRAs allow covered employees to rollover their benefit from year to year. There is no “use it or lose it” provision.

Introducing Health Sharing Plans: A Cost-Effective Alternative for Arizona Small Businesses 

A QSEHRA (pronounced “cue Sarah”) is a special type of HRA designed specifically for businesses with fewer than 50 employees and that do not provide health insurance.

Instead of health insurance, the employer establishes their own QSEHRA, and uses it to reimburse employees for their own healthcare-related expenses.

This has the advantage of preserving lower-and middle-income employees’ eligibility for means-tested premium tax credit subsidies under the Affordable Care Act.

Employees have much more freedom to choose their own plan, and are not subjected to the “one-size-fits-all” approach of employer-sponsored group insurance.

Money employers allocate to the HRA remains tax-deductible, and benefits disbursed to employees to pay for qualified health expenses is tax-free to the employee.

This not only reduces income taxes for both parties, but also reduces payroll taxes, as well, compared to not having an HRA at all.

Many Arizona employers are finding it much more cost-effective to drop their existing group  health insurance plans – and all the overhead that goes with them – and offer a QSEHRA instead, migrating all employees to the new system.

As of tax year 2023, businesses with fewer than 50 employees can contribute up to $5,850 for individual employees to a QSEHRA, and up to $11,800 for employees with a family.

For many working-class and middle-class employees who qualify for a subsidy under the Affordable Care Act due to their income, this is more than enough, when combined with the ACA subsidy to cover their share of their health insurance premiums, and leave some funding  for help with deductibles and co–pays. 

 

QSEHRA Advantages for Arizona Small Businesses

Adopting a QSEHRA in lieu of a traditional group health insurance plan offers several advantages to small employers.

Here are some of the  key advantages:

  • Cost control.  With a QSEHRA, employers have more control over their healthcare costs. Unlike traditional group health insurance, where premiums are often fixed and can increase significantly from year to year, employers can determine the contribution amount for the QSEHRA. This allows them to set a budget that aligns with their financial capabilities.
  • Flexibility. QSEHRAs offer more flexibility in plan design. Employers can customize the reimbursement amounts based on factors like family status or age, allowing them to tailor benefits to their employees’ specific needs. This flexibility can be particularly beneficial for small businesses with a diverse workforce.
  • Employee choice. Unlike traditional group health insurance plans where the employer selects a single plan for all employees, QSEHRAs allow employees to choose their own individual health insurance plans. Employees have the freedom to select a plan that best suits their needs and preferences.
  • Tax advantages. QSEHRA contributions made by employers are tax-deductible, and the reimbursements received by employees for qualified medical expenses are tax-free. This provides tax advantages for both the employer and the employees, helping to maximize savings.
  • Portability. With a QSEHRA, employee health insurance plans are portable. This means employees can take their benefits with them if they change jobs. Since QSEHRAs are not tied to employment, employees can maintain their coverage even if they switch employers. This can be an attractive feature for employees who value continuity of coverage and want to maintain control over their healthcare benefits.
  • Simplified administration. Compared to traditional group health insurance plans, QSEHRAs often have simpler administrative requirements. There are no premium calculations, enrollment processes, or ongoing plan management tasks typically associated with group health insurance. This can save time and administrative resources for small businesses.

Exploring Direct Primary Care (DPC) Plans

Arizona small businesses are increasingly turning to offering Direct Primary Care (DPC) memberships for their employees.

DPC is an alternative healthcare model wherein patients pay a flat membership fee to enjoy unrestricted access to a primary care doctor. With monthly membership costs as low as $80, DPC provides an attractive and viable approach for individuals to prioritize their health without the burden of copays or coinsurance.

Arizona’s House Bill 2454, passed in 2020, protects DPC agreements from being regulated as insurance, providing a favorable environment for their growth. This law makes DPC an even more appealing option for small businesses in the state.

    How Direct Primary Care Works

    The process of enrolling in a Direct Primary Care plan typically involves the following steps:

    • The patient or their employer selects a Direct Primary Care physician in their vicinity and signs up for a membership.
    • A fixed monthly fee, usually ranging from $75 to $110, is directly paid to the DPC facility.
    • The patient gains unlimited access to routine primary, preventive, and chronic care services.
    • Co-pays, co-insurance, and deductibles are eliminated, enabling workers to seek necessary care promptly without the risk of delayed or more expensive medical interventions later on.
    • To cover services beyond what DPC offers, patients can choose supplemental plans such as high deductible health plans, health sharing plans, or accident insurance. Since routine care is already included in the DPC membership, patients can opt for cost-effective coverage options.

    Leveraging Health Savings Accounts (HSAs)

    Health Savings Accounts (HSAs) present another effective strategy for small businesses in Arizona to save on healthcare expenses while providing tax advantages to employees.HSAs enable individuals to set aside pre-tax funds, either contributed by the employee or supplemented by employer contributions, to cover future medical expenses. These accounts offer tax-free growth and tax-free withdrawals for qualified healthcare expenditures.

    In Arizona, contributions to HSAs are deductible from state income tax as well as from federal taxes. This makes HSAs even more effective for Arizonans, and provides an additional incentive for businesses and their employees to utilize these accounts. Health Savings Accounts are a potent tool for workers to accumulate money for future healthcare expenses while also enjoying tax benefits.

    Contributions to HSAs are made with pre-tax dollars, either by the employee, or with employer contributions as well.

    Funds in these accounts grow tax-free as long as they remain in the account.

    Withdrawals (distributions) are tax-free, provided the money is spent on eligible healthcare expenses.

    However, the IRS assesses a 20% penalty if workers draw from HSA accounts without a corresponding qualified medical expense before they turn 65.

        HSAs as retirement supplemental vehicles

        But if the worker maintains good health and doesn’t need the money for healthcare, the funds become available penalty-free at age 65 to supplement the worker’s retirement income, or for any other purpose. They simply pay income taxes for non-medical withdrawals –  just like they do with a traditional IRA, SIMPLE IRA, SEP, or 401(k) plan.

        To qualify for new contributions to health savings accounts, your workers must be enrolled in a qualified high deductible health plan.

        These plans are typically traditional insurance offerings available at a significantly reduced premium compared to similar plans with lower deductibles.

          Who Is Eligible for a Health Savings Account?

          To qualify for HSA contributions, employees must enroll in a qualified high deductible health plan (HDHP).

          These plans typically offer reduced premiums compared to lower-deductible alternatives. Notably, some health sharing plans have incorporated an HSA component, allowing members to benefit from both cost savings and tax advantages.

          If employees or employers use the money saved on premiums and direct these funds pre-tax into a health savings account, it won’t take long before they have accumulated a year or two’s worth of deductibles in a health savings account, compounding tax-free until it’s needed.

            HSA Contribution Limits

            The HSA contribution limits for 2023 are $3,850 for individual coverage and $7,750 for families. Those aged 55 and older can contribute an additional $1,000 as a catch-up contribution.

            Effective January 1st, 2024,  the maximum allowable pre-tax contributions increase substantially, $4,150 for self-only coverage and $8,300 for family coverage.

            Either the employer or the employee can make pre-tax contributions to the worker’s health savings account. Contributions vest immediately to the employee.

            The combined employer and employee contributions to the HSA may not exceed the limit for that year. Otherwise, penalties may apply. 

              The Small Business Health Care Tax Credit

              One upside to initiating a traditional group health insurance plan for smaller employers is the availability of the Small Business Health Care Tax Credit.

              If your business employs 25 or fewer individuals, it may be eligible for a tax credit that covers up to 50% of the business’s contributions to the plan.

              This tax credit can certainly soften the financial impact.

              You might be eligible for this credit if:

              • You have fewer than 25 full-time equivalent (FTE) employees
              • The average salary of your employees is approximately $56,000 per year or less
              • You cover at least 50% of your full-time employees’ premium costs
              • You offer SHOP coverage to all of your full-time employees. (Note: You are not required to offer this to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.)

              Combining Health Benefit Strategies for Optimal Results

              Many employers find that providing multiple programs in combination helps them control healthcare costs while providing workers with comprehensive protection.

              For example, combining a low-cost health sharing plan that includes catastrophic events with a DPC plan for routine primary care can be more cost-effective than traditional group health insurance.

              Alternatively, allowing employees to choose between joining a health sharing plan or obtaining an individual health insurance plan while making HSA contributions for those who opt for an HSA-qualified plan can offer flexibility and savings.

              How Much Can You Save? Request a Free, No-Obligation Consultation on Plan Design and Implementation

                Take Action Now!

                Don’t let another valuable employee leave your company due to inadequate health benefits. By exploring the solutions outlined in this guide, you can provide competitive and affordable healthcare benefits for your employees and their families. Each business is unique, and our experienced Personal Benefits Managers are here to help you design a plan tailored to your business’s specific needs.

                Arizona also offers several resources to aid small businesses in their quest for affordable healthcare. These include organizations like the Arizona Small Business Association (ASBA) ,which provides useful information and resources on health insurance options for small businesses in Arizona. The Arizona Commerce Authority (ACA) also offers a Small Business Services section on their website, which is another great resource for Arizona-specific information.

                By taking advantage of these alternative health access strategies, you can save your company money and improve competitiveness – while still providing the benefits package and overall compensation you need to recruit and retain the best talent available in Arizona – and anywhere else, for those with remote workers. 

                To get started, Click Here to request a group quote for your small business. Alternatively, you can call us directly at 800-913-0172 and select your state to be connected with a Personal Benefits Manager who specializes in Arizona. Remember, consultations with us are always free, and we are committed to finding the best healthcare solutions for your small business in Arizona.

                Here are some additional blogs on the topic: Health Insurance Plans for Small Businesses with 2 to 10 Employees – 2024 Guide | Healthsharing for Small Businesses: What Business Owners Need to Know

                Here are some additional pages related to this article: Direct Primary Care (DPC) | Health Sharing Plans for Small Businesses

                  Frequently Asked Questions

                  About Arizona Small Business Health Insurance

                  Small Business Health Insurance Arizona faq Icon

                  Can health insurance companies require preauthorization in Arizona?

                  Yes, but not for emergency care. Health insurance carriers can only require pre-authorization for care once the patient is stabilized.

                  Arizona faq Icon

                  What are my health insurance options if I’m self-employed in Arizona?

                  If you’re self-employed and you have no employees other than yourself, you can enroll in an ACA-qualified Arizona Health Insurance Exchange program by calling a Personal Benefits Manager at HSA for America.

                  Depending on your income and family size, you may be able to qualify for a health insurance subsidy to help make health insurance for yourself and your family more affordable.

                  You can also consider a high-deductible health plan (HDHP), which would allow you to make tax-deductible contributions to a health savings account (HSA), one of the most powerful-advantaged savings vehicles in the tax code.

                  You can also choose a health sharing plan, which you can combine with a direct primary care plan for even more protection and savings.

                  Self-employed Arizonans with no statutory employees other than themselves cannot purchase a SHOP plan.

                  However, if you’re self-employed, and you have one or more full-time employees (excepting your spouse, a business partner, or a family member), you may be eligible for a SHOP plan.

                   

                  Small Business Health Insurance Arizona faq Icon

                  Am I required to offer health insurance to my employees?

                  No… as long as you only have 49 employees or fewer.

                  Under the Affordable Care Act, only businesses with 50 or more full-time employees are required to offer health insurance. HSA for America specializes in helping businesses with 1 – 49 employees find more affordable ways to offer health benefits to their employees.

                   

                  Arizona faq Icon

                  Can HSAs be used with healthsharing plans?

                  But there is at least one plan that employs a health sharing approach to reduce premiums while still allowing members to contribute to HSAs: The HSA SECURE healthsharing plan.

                  Contact us for more information!

                  Arizona faq Icon

                  Does Arizona mandate that insurance companies provide any additional benefits beyond the ten minimum essential coverages defined in the Patient Protection and Affordable Care Act?

                  Yes. In addition to the federally-required minimum essential coverages (MEC) in the Affordable Care Act, all Arizona insurance carriers licensed to sell in Arizona must provide the following benefits: 

                  • Bone marrow transplants 
                  • Morbid obesity treatment 
                  • Clinical cancer trials 
                  • TMJ disorder treatments 
                  • Off-label prescription drug coverage for life-threatening conditions

                  Arizona faq Icon

                  Does insurance cover maternity benefits in Arizona?

                  Yes.

                  All Affordable Care Act-qualified health insurance plans cover maternity benefits and medical care for newborn children, as do all Medicaid plans. This is true even for pregnancies that begin prior to enrolling in the plan. However, coverage levels within different plans vary.

                  Most health sharing plans provide maternity benefits, as well. However, most will only cover pregnancies that begin after the mother enrolls in the plan. Some healthshare plans may require that the patient be married. You should check your healthshare plan guidelines for specifics.

                  Arizona faq Icon

                  Can I offer healthshare memberships to my employees in Arizona?

                  Yes, you can. However, healthsharing does not have the same tax treatment as a traditional employer-sponsored health insurance plan. Amounts you contribute to paying for your employee’s healthsharing membership directly are taxable as ordinary income to the employee.

                  This is in contrast to traditional health insurance plans. With traditional health insurance, the money you pay in premiums as their employer is tax free to the employee. 

                   

                  Combining Different Programs

                  To get started, simply Click Here and book an appointment.

                  Or if you prefer, call us directly at 800-913-0172, choose your state, and you’ll be connected to a Personal Benefits Manager that handles that state.

                  Consultations are always free of charge.

                     

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                    Disclaimer: All information on this website is relayed to the best of the Company's ability, but does not guarantee accuracy. Information may be out of date. The content provided on this site is intended for informational purposes only and does not guarantee price or coverage. This site is not intended as, and does not constitute, accounting, legal, tax, and/or other professional advice. Determination of actual price is subject to Carriers.