Exploring The Average Cost Of Small Business Health Insurance
For many business owners, health insurance is an investment in their workers’ long-term health. However, private health insurance costs can be an expensive liability and may affect the business’s earnings. Entrepreneurs need to figure out what the prices are regarding their employee health coverage. Just like individual health coverage, employee coverage should offer the broadest base of benefits for the lowest cost. Group health insurance plans are the norm for small businesses. In this article, we’ll look at the costs of small business health insurance and how business owners can get the best value for money when it comes to their small group health plans.
Averaging the Cost of Small Group Health Insurance
Small businesses typically rely on small group health insurance plans to cover their employees. It’s beneficial for companies to offer health insurance because it’s currently the most crucial benefit that potential workers look for when seeking employment. In 2019, small firms paid an average of $602 per month for individual coverage and $1,715 monthly for family coverage for their employees. These figures consider the amount of money on average paid into HMO, PPO, POS, and HDHP plans together. When the entire cost of these plans is totaled up, it can be a significant drain on both worker and employer resources.
Through 2020, it’s expected that employer-based health insurance is likely to see an increase by up to 6.5%. The actual cost to an employer varies, but they are likely to shoulder the heavier burden regardless of the type of plan offered. Some estimates put employers as covering up to 70% of health insurance costs for their employees. Depending on the type of insurance coverage that the employer opts for, the value of the premiums and deductibles you require to pay as the employer will vary.
Cost-Sharing on Small Business Health Insurance
Cost-sharing arrangements vary in specific cases. There are usually agreements related to how costs are broken up and who pays what percent of them. There are two significant categories of expenses that are shared between employees and employers:
- Premiums: Insurance companies tend to expect employers to cover at least half of the premium cost employees are responsible for. The employee then covers the rest via a payroll deduction, ensuring that the insurer is always paid.
- Service Payment: This cost-sharing estimate covers everything that the individual would have to cover as out-of-pocket costs such as copays, coinsurance, and deductibles.
For small business insurance, you may need to look at the out-of-pocket maximums since the service payments count towards fulfilling that requirement. If you manage to get to the maximum out-of-pocket costs that a particular plan offers you, the insurer must cover 100% of the cost of healthcare over the rest of the year.
Understanding Out-of-Pocket Maximums
When you pay for insurance as a business, just like individual or ACA type insurance, the company will only cover some of the small business health insurance costs per employee. All the rest of the payment will count towards your out-of-pocket maximums. Premiums don’t fall into your out-of-pocket maximum and are considered a separate fee. Your copayment, coinsurance, and deductibles are all part of your out-of-pocket costs and will count towards reaching your yearly maximum incurred costs.
Copayment happens as a mandatory fixed cost once you seek services. Typically, if you have an HMO plan, the copayments are due to contractual agreements with suppliers. PPO and POS plans may also have copayments for various factors. Copays are usually limited to in-network providers, and if you leave the recommended suppliers for your health service, you may be required to pay more as an up-front cost.
Deductibles are the initial cost of kickstarting your insurance. When you enter a medical facility, you’re required to pay up to your deductible before the insurance takes over, covering a percentage of the costs. Typically, as the employer, you’ll be responsible for most of these costs, and the deductible will be added to the amount you pay that counts to the out-of-pocket maximum. Until you meet or surpass the deductible, you and the employee are responsible for the complete payment of the deductible.
Coinsurance happens after you meet your deductible. As noted before, insurance only covers a percentage of the overall healthcare cost. You and the employee are responsible for paying for the rest of that cost until you pay off the bill or reach the out-of-pocket maximum. Once your service payments reach the out-of-pocket maximum, the insurance company will cover all of the remaining costs you incur.
Factors Affecting your Health Insurance Costs
As an employer, you should be aware of the significant factors that affect your employee health insurance cost. Four critical factors affect what you pay for health insurance. These are:
- The location of your business
- The age of your employees
- How much you’re willing to accept out-of-pocket costs
- How you find coverage
Generally, if you opt for a lower premium, you’ll pay less every month, but have to deal with a lot higher out-of-pocket costs and a much higher maximum. The reverse is also true. If you pay high premiums, you won’t have that many out-of-pocket costs, and your maximums will also be far less.
If you’re looking to limit the amount you spend on health insurance without sacrificing the coverage you get, there are a few options that you may have available to you, including:
- Contracting directly with doctors and hospitals
- Changing your plan to an HDHP, with HRA or HSA coverage
- Using a third-party provider to help boost your buying power
- Using the SHOP marketplace to get a qualified health insurance package that grants you tax credits
Use Our Small Business Health Insurance Cost Calculator
Your employees’ health should be among your top concerns. Finding a group plan that suits you and them sounds like a challenging task, but you don’t have to spend too much time poring over different websites with the right tools. Let My Private Health Insurance assist you with our utility that allows you to compare plans directly. Don’t miss out. Visit us today!