Group health insurance plans provide coverage to a group of participants, typically employees of the same company or members of an organization. This type of insurance is typically a great deal, since the risk is shared across multiple policyholders, meaning each member pays less than they would if they purchased an individual plan. You should seriously consider offering your employees a group health plan, even if you aren’t required to. After all, healthcare is one of the best benefits you can offer to your employees. In fact, surveys show that the number one benefit that employees are looking for in a job is group health insurance! And offering it is probably not as complicated or expensive as you might think.
How Group Insurance Works
There are 2 types of groups for group health insurance, employer-employee groups and affinity groups. Employer-employee groups are self-explanatory: the insured members of the group all work for the same company or nonprofit group. An affinity group means that the insured are members of a group but not employed by the group. This could mean they are in the same professional association or members of a fraternal organization.
Your company or group will have to buy group health insurance plans for your members or staff; individuals cannot purchase these plans on their own. Before you make your decision about purchasing, you should be aware that at least 70% of the group or business must participate.
When it comes to plans, they will look different for all groups in terms of rates and conditions, depending on insurer and plan type. But when it comes to how group plans work generally, depending on the type of plan, you will split the cost of premiums with your employees or members. Once you choose the plan you want to offer, employees and members can choose to enroll or opt out of the group coverage. Some plans can be offered in tiers, meaning the members can choose between multiple coverage and price point options instead of being limited to just one option. You can also select plans that allow for coverage of members’ families and dependents, as well.
Group plans tend to be much more affordable for your employees because the risks are shared between a bigger group of people, and more people pay into the premiums. Larger groups make it simpler for insurance companies to pay out large claims, allowing them to offer coverage at lower rates.
The Benefits of Group Insurance
Group health insurance has multiple benefits for both those who are covered by it, as well as the businesses and groups who offer it:
- Group insurance is cheaper – You’re not required to offer group health insurance if you employ fewer than 50 people, but remember that your employees still need to get health insurance somewhere to keep them healthy. Their best option will be group insurance, even if they pay the majority of the cost of their insurance, since group health insurance has lower monthly premiums than individual plans, and generally lower deductibles than Marketplace coverage.
- Tax benefits – In general, all health insurance-related costs incurred by an employer are fully deductible as regular business expenses under both state and federal tax laws. Additionally, if your small business has less than 25 full-time equivalent employees who make an average of $50,000 or less annually, you might qualify for a premium healthcare tax credit. But, you must pay at least half of your employee’s premiums to qualify. You can also arrange things so that your employees save on their taxes, as well. Your employees can make pre-tax contributions toward the cost of health insurance. This means you would deduct the premium price from their paycheck prior to state and federal taxes being taken out. As a result, the employee’s take-home pay would increase, and their taxable income would decrease.
- Employee recruitment and retention – There are a few reasons why offering group health insurance can lead to recruitment and retention of top talent. For one, as we mentioned earlier, healthcare is one of the most desired benefits, so if you offer it, you’re more likely to attract the best employees. In addition, the tax benefits listed above act as an incentive for top talent to remain at your company. Since offering health insurance helps you recruit and retain employees, you’ll spend much less time and money on hiring and training new employees.
Small Business Health Insurance Tax Credit
To expand on one of the benefits mentioned above, you may be eligible for a small business healthcare tax credit. Worth up to 50% (or 35% for non-profit organizations) of the premiums you pay for your employees.
Your credit amount is determined on a sliding scale, depending on the size of your business. A bigger healthcare tax credit is often available to smaller businesses. For instance, the highest tax credit would be available to a company with fewer than 10 employees with an average annual wage of under $26,000. And if your small business doesn’t owe taxes for your current year, you can carry the credit backward or forward to previous or future tax years.
Small businesses and nonprofit organizations can typically only qualify for the small business healthcare tax credit by signing up for a Small Business Health Options Program (SHOP) plan. All of the following requirements must be met in order to be eligible for a SHOP plan and the tax credit:
- You have less than 25 full-time or full-time equivalent (FTE) employees.
- Your employees’ average salary is $56,000 or less a year.
- You cover at least 50% of your full-time employees’ premiums.
- All of your full-time staff members have access to SHOP coverage. To be eligible for the tax credit, you are not required to offer coverage to dependents or employees who work fewer than 30 hours a week.
Overall, the healthcare tax credit could help small businesses in buying group health insurance at a lower cost, while still ensuring that their plan complies with ACA insurance standards.
If you choose to offer your staff a group health plan, and you meet the above requirements, you can apply for your tax credit using IRS Form 8941.
How Much Does Group Health Insurance Cost?
A variety of factors must be taken into consideration in the complicated process of calculating the price of group health insurance:
The cost of health insurance varies widely from place to place. Due to variations in the amount of insurers in your area, state and local regulations, as well as the local cost of living. This means that the price of group insurance can vary based on the state, county and even the city your business operates in.
Individual vs. Family Coverage
Insurance companies will most likely charge more for plans that cover spouses and children than they would for those that only cover employees. So your cost also depends on whether you’re buying a group plan that allows for dependents or not.
You also have to decide which metal tier, or tiers, you’ll be offering your employees. There are four options: Bronze, Silver, Gold, and Platinum. The tiers indicate how the costs are shared.
Bronze plans have the lowest monthly premiums but highest out-of-pocket costs. The plan will cover 60% of medical costs, and the employee will be responsible for the other 40%.
Silver plans have moderately priced premiums and moderate out-of-pocket expenses. The coverage is split 70% paid by the carrier and 30% paid by the employee.
Gold plans have higher premiums but much more affordable out-of-pocket expenses. The carrier covers 80% of the cost of medical care, and the employee pays just 20%.
Platinum plans have the most expensive premiums, but the lowest out-of-pocket expenses. Platinum plans cover 90% of covered medical services! That means the employee would only pay 10% of their bills.
Taking all of these factors into account, the average annual health insurance premium for small businesses is $7,813 for individual coverage and $21,804 for family coverage. This figure is based on a 2021 Kaiser Family Foundation study of small businesses, defined as companies with less than 199 employees. Also, according to the study, employer contributions averaged 83% for individual coverage and 63% for family coverage, respectively.
If you’re worried about the costs of offering group health insurance but want to offer your employees something (and you have fewer than 50 full-time employees), you can instead choose to offer supplemental insurance.
For example, many employers choose to offer dental insurance, even though the Affordable Care Act does not require it. Fortunately, dental insurance is much more affordable to offer than health insurance. While the exact monthly cost of a dental plan will vary depending on the carrier and coverage level. Group dental insurance policies typically only cost companies between $8.94 and $13.90 per employee each month.
Offering your employees vision insurance can also be an affordable perk. This type of plan usually covers annual eye exams. And might also provide some limited coverage or reimbursement for the cost of eyeglasses. An average small business will pay $5 to $10 per month for each employee covered by vision insurance or up to $20 per employee per month for a more comprehensive package.
How to Save on Group Health Insurance
The decision to offer group health insurance can feel overwhelming, especially because it will be an expense for your business. The good news is that there are ways to lower the price of group health insurance plans. Making offering health benefits more accessible.
Hire more employees
The more employees you have, the lower your premiums can be. More people in an insurance pool means more people paying into the premiums, and less risk for insurance companies.
Insurance plans all differ greatly, and each insurer offers different rates for all their group plans. That means you should compare both insurers and the plans they offer before choosing one. While doing this, it’s important to remember that the carrier that offers the lowest premiums isn’t always the best option. A low-cost health insurance company could have drawbacks. For instance, their plans might have very low premiums because they have a limited network of providers.
Not sure where to start looking for the right insurer for you? EZ.Insure can help! Our agent will find the best fit for your business by comparing all of your options for you.
Offer a Health Reimbursement Arrangement (HRA)
You can offset the rising cost of healthcare by offering a Health Reimbursement Account (HRA). HRAs are employer-sponsored group health plans. Through which employees can receive tax-free reimbursement for qualified medical expenses up to a predetermined annual limit. Unused funds might be carried over to be used in the following years. These accounts are owned and funded by the employer.
The good thing about HRAs is that they don’t need to be pre-funded, unlike traditional group health insurance plans. That means you’ll be better able to manage your cash flow. Since you’ll be making payments from your business’s funds as each medical expense arises. Another benefit? All of the reimbursements are tax-deductible.
How To Enroll
To get free quotes, or more information about group health insurance plans, give EZ a call! Our agents can help you find the best plan for your company and save you hundreds of dollars a year. Call 877-670-3531 to contact one of our highly trained agents. We can help answer any of your questions and get you started today!