For small business owners, the costs of providing health insurance for you and your employees can vary depending on multiple factors, but it’s almost always a significant expense. Regardless, health insurance is still a benefit many small business owners strive to offer their employees, helping them to attract and retain top talent.
Even as far back as 2012, healthcare costs were a big concern for small business owners and their employees. The Affordable Care Act helped open the insurance marketplace up to small businesses, offering more options to smaller teams, but higher health costs prompted some owners to sell their small business. How can a small organization provide health insurance plans if no affordable options are available?
Of course, small businesses with fewer than 50 employees are not required to provide health insurance coverage by the Affordable Care Act. However, that doesn’t mean those companies can’t still benefit, as health insurance can help create a healthier workplace, offer peace of mind to workers, and give a small business a needed competitive advantage.
How does small business health insurance work, and what does it cost? If you’re worried about the cost of healthcare for your small business, read on to learn how to ease your small business healthcare worries.
How Does Health Insurance Work?
How does health insurance work? While health benefits vary based on the plan and insurance company, most health insurance providers follow the same basic concept. Individuals can choose their own plans through the health insurance marketplace, or a company offering health insurance can choose to offer a group health plan.
In the latter case, the company pays a portion of the insurance premium, while the remainder is deducted from each employee’s paycheck. According to an NBGH survey, employers covered nearly 70% of the cost of health insurance premiums in 2020, while employees paid 30% on average.
The plan will have a policy that dictates all the details of what healthcare costs are covered and how much is paid. When a covered person receives healthcare, the medical provider will bill the health insurance company for its determined coverage amount, while the patient is responsible for paying any deductibles, copays and noncovered costs. Most health insurance companies will offer higher premiums for lower co-sharing costs and vice versa.
Small Business Health Insurance Costs
How much does small business health insurance cost? Determining the cost of small business health insurance is a complicated process that accounts for multiple factors. Why doesn’t everyone pay the same? To understand small business group health insurance plan costs, be mindful of the following considerations.
Because of differences in competition, state and local rules, as well as the local cost of living, health insurance costs vary greatly from one location to the next.
Health insurance companies understand that average healthcare costs increase as people age, and therefore they charge higher premiums for older people. In fact, premiums for older adults can be as much as three times higher than those for younger patients.
Insurance companies can charge tobacco users as much as 50% more than those who do not use tobacco because of the higher health risks associated with the behavior.
Individual vs. Family Coverage
Insurers also can charge more for plans that cover a spouse and dependents than they charge to cover an employee or small business owner only. At the same time, a person with multiple dependents will likely pay less per dependent than it costs to cover a single spouse or child.
Health insurance is available in five plan categories, which determine how costs are shared. For example, bronze plans typically boast lower monthly premiums and higher out-of-pocket costs when care is received. Platinum plans, on the other hand, will have the lowest out-of-pocket costs but the highest premiums.
Average Small Business Employee Health Insurance Cost
Employee premiums and group health insurance costs can vary greatly based on factors like location and employee’s age, but even group health insurance premiums have an average. According to a 2021 report from the Kaiser Family Foundation, the average annual health insurance premium for small firms – with a small firm being defined as a company with 199 or fewer employees – was $7,813 for single coverage and $21,804 for family coverage. Employers contributed an average of 83% of the single coverage costs, while they paid 63% of the family coverage premiums.
Under the Affordable Care Act, however, if an employer with fewer than 25 employees and average wages of $52,000 or less covers at least half of their employees’ health insurance premiums, it may be eligible for tax credits to help lower the cost of small business health insurance.
Average Cost of Dental Insurance
Dental insurance might not be required under the Affordable Care Act, but many employees still view it as a valuable benefit. Fortunately, dental insurance costs far less to offer than health coverage. In fact, group dental insurance plans cost employers between $8.94 and $13.90 per month, although the exact monthly cost is dependent on carrier and coverage level.
Average Cost of Vision Insurance
Vision insurance can be an affordable benefit for small business owners to offer their employees. These policies typically cover an annual eye exam, and they might offer limited coverage or reimbursement toward the purchase of eyeglasses. While the benefit is a basic one, it’s a valuable perk for employees. The average vision insurance package costs a small business between $5 and $10 per month for each covered employee. A more comprehensive package can cost as much as $20 per employee per month.
Average Cost of Health Savings Accounts
Savings may be available on small business health insurance costs through a health savings account. Available to those who enroll in a high deductible health plan – which generally comes with a lower premium – an HSA is a tax-advantaged account created for or by individuals to save for qualified medical expenses. Money can be deposited into this account by the individual or by their employer as a part of the company’s health benefits.
While the amount can vary, it’s important to remember that a high deductible health insurance plan doesn’t start paying benefits until an individual has spent at least $1,400 of their own funds on qualified healthcare costs, or a family has paid at least $2,800 in a covered year.
How to Save Money on Health Insurance Premiums
Small business health insurance costs can add up quickly, so it’s easy for a small business owner to grow overwhelmed by the decision to offer health insurance. Fortunately, there are ways to reduce the cost of group health insurance plans, making health benefits more affordable.
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This content was originally published here.