Whether you’re a company of two or 2,002, there’s a health insurance plan available for you and your employees. But it’s not as simple as just going with a group plan. Insurance companies offer different types of plans depending on the size of the insured group, and the larger the company, the better the deal it can negotiate.
If your company has more than 50 employees, you are required by law (with a few exceptions) to offer your employees health coverage that meets a basic standard of coverage. This basic standard differs between states, so you should check with your local regulations to make sure you’re following the law.
Employer Health Insurance
Companies with fewer than 51 employees (aka micro-companies) aren’t required by law to offer health insurance. But there is often a tax credit available if you do. In order to be eligible for the tax credit, you have to buy coverage from the Small Business Health Options Program (SHOP), which you can do through a SHOP-registered insurance broker or agent or on your own through a private insurance company. But first, you need to decide what kind of coverage you want.
Step 1: Decide on the Type of Coverage You’re Going to Offer
All companies want to keep their costs down. So before you do anything, you’ll have to decide how much you want to contribute toward your employees’ health plans. You’ll have to decide whether you’ll cover dependents and whether you want to offer dental and vision as well. Here are some things to consider while you’re doing that:
- Even if you’re a micro-company, your health plans must comply with your state’s definition of minimum care.
- In most states, a minimum of 70% of your employees must enroll in a health plan in order for you to offer this benefit. The minimum participation percentage varies by state, but if you’re in a state that does require a certain level of participation, you’ll want to make sure the plan is affordable enough for the majority of your employees.
Step 2: Research Your Options
If you’re a large employer, this is the step when you’ll want to hire an insurance broker. A good insurance broker will have expertise to help you navigate the myriad of plans available to large employers and can potentially help you negotiate a deal on premiums. To find the right broker, get recommendations from colleagues in similar industries and have your HR reach out to local carriers to see who they recommend.
If you’re a micro-company and want to research options yourself, go to Healthcare.gov. You’ll see that plans are categorized using the rating system: Bronze, Silver, Gold, and Platinum. These ratings don’t indicate the level of care you and your employees will receive, but the cost of premiums and out-of-pocket costs. Generally speaking, Bronze health plans have the cheapest premiums but the highest out-of-pocket costs and Platinum plans have the most expensive premiums but the lowest out-of-pocket costs.
If you want to offer multiple plans, you will have to pick one category, (e.g. Silver), and offer multiple plans within that category. In some states, you can choose one insurance company and allow your employees to choose a plan from whichever category they want.
On Healthcare.gov you can also get an estimate of your Small Business Health Care Tax Credit.
Step 3: Sign up
Large employers will sign up through their insurance brokers and micro-companies will need to go through a SHOP-registered insurance broker or agent, or buy SHOP coverage through a private insurance company.
No matter how or where you purchase your employer health insurance, you can bet it will be an important cost and benefits decision for you and your employers. Balancing increased healthcare costs while keeping your employer benefits stable, is always a challenge. If you need help with that process, you can review and compare our comprehensive health insurance guide. Good luck!
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.