Finding affordable health insurance isn’t just a problem for individuals anymore. Affordable health insurance for small businesses is also a difficult thing to obtain for many companies.
Securing insurance for your small business is one of the most intimidating tasks when running a business. Most employers want their employees to have access to health coverage, but it can be difficult to understand the rules, timelines, and paperwork needed to be in compliance.
Luckily, there are plenty of options to choose from if you know where to look. A few alternatives when considering health coverage for your small business include the following:
Traditional Group Health Insurance
For a business seeking affordable health insurance, this option is one most employees are familiar with. A company chooses a group health insurance plan for its employees and potential dependents. This is typically done through an insurance broker or SHOP (Small Business Health Options).
Small businesses offering traditional group health insurance typically pay a fixed premium, with a portion of it passed down to employees. Employees are then responsible for copays and meeting deductibles for whatever services they need.
Group Coverage ARAs
The less expensive option, ARAs don’t offer as much coverage as other choices but reduce this loss through a reimbursement arrangement.
A company usually offers a tax-free, monthly allowance to employees in addition to the group policy. Employees then decide what health services to pay for, and the company reimburses them up to the allowed maximum.
Another attractive advantage of group coverage ARAs is the absence of payroll taxes for the company and its employees as well as income tax for employees.
Association Health Plans (AHP)
Another cost-cutting alternative, AHPs allow a small business owner to partner with other small businesses to either purchase large group health insurance coverage or self-insure.
Once put in place, AHPs operate much in the same way that traditional group insurance coverage does. The main differences are that AHPs don’t need to cover essential health benefits, and what an AHP actually covers can differ from one geographic location to another.
Self-Funded Health Insurance
Small businesses may see self-funded coverage as an appealing choice for avoiding the costly premiums associated with group health coverage.
Instead of paying a fixed premium, businesses pay out of pocket for each individual employee as health needs emerge. This means the company assumes the financial risk of providing health coverage for its employees.
While this can be the most cost-effective plan, it can also be the most risky for small businesses. Self-funded health insurance coverage is more often utilized by larger businesses with hundreds of employees compared to the average smaller startup.
The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
Similar to HRAs (health reimbursement arrangements), QSEHRAs offer the ability for small businesses with fewer than 50 employees to offer a monthly allowance of tax-free money. Employees are then able to choose which services to utilize and be reimbursed for.
However, unlike regular HRAs, reimbursements can be free of income tax only if the employee is covered through minimum essential coverage (MEC).
QSEHRAs are often the more inviting option for a company looking to personalize their health coverage purchases to fit the needs of their business. It also appeals to employees in unique situations, such as those who live in different states or those who are already covered under their spouse’s policy.
Affordable Coverage Pays Off
Acquiring affordable health insurance for small businesses continues to be a challenge for many business owners. Fortunately, the available options are continuing to grow, meaning more companies will be able to offer low-cost health insurance coverage, reduce employee turnover, and gain a competitive advantage in the marketplace.
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