As the employment market in Texas has continued to tighten for employers and become overly competitive for top talent, smaller businesses that have not traditionally offered health benefits are reconsidering their position. If this is you, it may feel overwhelming when you begin to unravel all of the medical plan options that are available today. The marketplace for small to medium business health insurance plans is evolving constantly and you are likely finding health insurance companies that you've never heard of before offering options that seem confusing. Our job at Insurance For Texans is to make the process of finding options beyond just traditional Blue Cross Blue Shield plans easier to understand, with companies that you can trust, and health insurance rates that you can stomach. But before we do that, let's establish some basic information about group health insurance plans. Especially for small and medium sized businesses in Texas.
What is a Group Health Plan?
A group health plan is a type of health insurance plan that provides coverage to the employees of a small business. These plans are designed to provide health insurance coverage to a group of individuals, rather than individuals purchasing insurance on their own. Group health plans often offer a wide variety of plan options, including different levels of coverage, benefit plans, and premium costs. They can include coverage for medical expenses, prescription drugs, dental coverage, preventive care, and more. Group health plans can offer tax advantages for both the employer and the employee and are an important tool for small businesses to provide affordable and comprehensive health insurance coverage to their eligible employees in an ever increasingly competitive hiring environment.
Benefits for Small Businesses
Group health plans offer numerous advantages for small businesses, not the least of which is providing health coverage to employees and their families. According to recent statistics, the percentage of small businesses that offer group health insurance varies based on the number of employees. For businesses with fewer than 50 employees, approximately 50% offer group health coverage. This percentage rises to about 95% for businesses with 50-99 employees and nearly 99% for businesses with 100 or more employees.
Small businesses have various options for obtaining group health insurance. They can choose to explore private market options, where they can select from a wide variety of plans offered by insurance companies. Additionally, small businesses can explore the Small Business Health Options Program (SHOP), which is a government program designed to assist employers in providing health coverage to their employees. While SHOP offers a range of plan options in Texas, they are restricted to ACA Exchange based policies which come with some limitations.
By offering group health plans, small businesses can attract and retain top talent, enhance employee satisfaction, and improve overall productivity. Providing health coverage demonstrates an employer's commitment to employee well-being and can contribute to a positive work culture. Whether through private market options or SHOP, small businesses can find the right plan to meet the needs of their workforce.
Types of Group Health Plans
Group health plans are available in various types to meet the specific needs of small businesses. These plans offer comprehensive health coverage to employees and their families, providing them with access to medical services and preventive care. The most common types of group health plans include Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and High Deductible Health Plans (HDHPs) paired with Health Savings Accounts (HSAs).
HMOs typically require employees to choose a primary care physician and receive referrals for specialist care. These plans offer a network of healthcare providers who work together to deliver coordinated and cost-effective care through their established network of health insurance providers. PPOs, on the other hand, provide employees with more flexibility in choosing their healthcare providers. They offer a network of preferred providers but also allow employees to seek care outside the network, although at a higher cost. HDHPs are designed to have lower monthly premiums through higher deductibles. Employees can pair these plans with HSAs to save money for medical expenses and enjoy potential tax advantages.
Small businesses can evaluate their workforce's healthcare needs and budget to determine the most suitable type of group health plan for their employees. This decision should consider factors such as the network of healthcare providers, cost-sharing arrangements, and the level of employee choice in selecting healthcare providers. By offering the right type of group health plan, small businesses can ensure their employees have access to affordable and comprehensive healthcare coverage.
Preferred Provider Organizations (PPOs)
Preferred Provider Organizations (PPOs) are the most popular type of group health plan that offers flexibility and convenience to small businesses and their employees. With a PPO, employees have the freedom to choose their healthcare providers from a wide network of doctors and hospitals.
One of the key benefits of PPOs is the ability to access a broad network of healthcare providers. This means that employees have a greater choice when it comes to selecting doctors, specialists, and hospitals for their medical needs. They can visit any provider within the network without needing a referral, allowing for greater autonomy and flexibility in healthcare decisions.
Some of the top providers for small business health insurance include well-known companies like Blue Cross Blue Shield, United Healthcare, and Cigna. There are also less well known companies that are also reputable and provide the same level of coverage at more affordable employee premiums. These providers offer comprehensive PPO plans that cater to the unique needs of small businesses. By partnering with any of these providers, small businesses can ensure that their employees have access to quality healthcare and a broad network of providers.
Health Maintenance Organizations (HMOs)
Health Maintenance Organizations (HMOs) are a less popular type of group health plan due to their focus on primary care physicians to coordinate and manage their members' healthcare needs that must remain in their defined network.
One key feature of HMOs is the emphasis on primary care physicians. Members of an HMO must choose a primary care physician who serves as their main healthcare provider. This physician serves as the primary point of contact for all healthcare needs and coordinates any required specialist care. This approach ensures that healthcare is managed efficiently and comprehensively.
A perceived drawback of HMOs is the referral requirement for seeing specialists. In an HMO, members typically need a referral from their primary care physician to see a specialist. This referral helps ensure that members receive appropriate care and that healthcare expenses are optimized. A non-traditional HMO is called an EPO where a referral is not needed to see that specialist. These are less frequent now.
HMOs also emphasize coordination of care amongst providers. By integrating various aspects of healthcare and facilitating communication between providers, HMOs can enable a more efficient experience for their members. This coordinated approach can result in better continuity of care, reduced duplicate tests or treatments, and improved health outcomes.
High Deductible Health Plans (HDHP)
A unique plan type that is attractive to a healthier, younger employee group is a High Deductible Health Plan that can be paired with a Health Savings Account (HSA). These plans can work with either an HMO or PPO type of plan to give you an additional option to consider. To truly qualify as a HDHP to be paired with an HSA, there are specifics of the plan that must conform to guidelines set by the IRS.
These plans are unique in that the initial health care costs covered under the plan must be paid at a cash rate by your employee for everyone covered in their family outside of the preventive services that must be provided without costs under the Affordable Care Act. This means that your visit to the urgent care clinic or sick visit to your doctor is going to be full price until you hit the deductible amount on the plan. This provision can be a turnoff to some people as they have become accustomed to having copays for everything from a doctor's visit to prescription drug coverage.
The other side of that cash pay coin is that employee premiums are typically substantially lower than a "normal" HMO or PPO plan. Those savings can be stashed in a Health Savings Account to accumulate over time as well as earn interest while sitting in the account. Along with the ability to grow over time, they also reduce the taxable wages of the employee when the contribution goes into the account. This double bonus becomes even more advantageous if the money is subsequently used for qualified health expenses later as the money is not taxable at that point. This saves quite a bit of money in the long run for the employee on many fronts for those that understand how to leverage them.
This style of plan construction can be really appealing to those who "never go to the doctor unless they are dying". The growth potential of the money for your younger, healthier population is incredibly powerful when compared to more traditional style plans of group health insurance.
Qualifications for Group Health Plans
Now that we've established the type of basic concepts of the type of plans available, it's important to understand the qualifications and requirements for enrolling in a group health plan. In order to be eligible for a group health plan, a small business must typically meet certain criteria, such as having a certain number of employees. Additionally, there may be requirements regarding the percentage of eligible employees that must enroll in the plan. By meeting these qualifications, small businesses can gain access to the many benefits that group health plans have to offer. From cost savings to a broad range of coverage, group health plans can provide valuable support for both businesses and their employees.
Number of Employees Needed
In general, most insurance companies require a minimum of two employees not in the same household to qualify for a group health plan in Texas. However, some states have implemented their own regulations that may require a higher minimum number of employees, such as five or more. The good news is that we have many medical insurance plans that will allow you to have the minimum two employees for plans in Texas. One really cool feature that most don't think about is that independent contractors can also make up that second "employee" for you to qualify for a group benefit plan if you're trying to bridge that gap.
Member Eligibility Requirements
Member eligibility requirements for group health plans vary depending on the insurance provider and the specific plan. Generally, to be eligible for coverage, employees must meet certain criteria.
One common requirement is the minimum number of hours worked per week or month. This can vary but is typically around 30 hours. Full-time employees who meet this requirement are generally eligible for coverage. However, remember that some companies will allow for independent contractors to qualify for coverage as well as long as it is offered to all of them.
In addition to hours worked, the length of employment may be a factor. Some plans require employees to have been with the company for a certain period of time, such as 90 days or six months, before becoming eligible for coverage. This is often referred to as a waiting period or probationary period.
It's important for small businesses to carefully review the eligibility requirements for different group health plans to ensure they align with their employees' needs and circumstances. By understanding and meeting these member eligibility requirements, small businesses can provide valuable health coverage options to their employees, helping to attract and retain top talent.
Costs of Group Health Plans
When considering group health plans for their small business, one of the most important factors for employers is the costs associated with providing coverage to their employees. Group health plans come with various expenses that need to be taken into account. This includes the monthly premiums that employers and employees may have to pay, as well as out-of-pocket costs such as deductibles, copayments, and coinsurance. The premium costs can vary based on factors such as the type of plan chosen, the level of coverage provided, and the size of the business. In addition to these direct costs, there may also be administrative fees and taxes associated with maintaining the coverage. It's essential for small business owners to carefully evaluate the different cost aspects of group health plans and assess how it fits within their budget and the financial feasibility for both the company and its employees. Seeking advice from independent insurance agents and your CPA can be valuable in understanding the overall costs and identifying the most suitable plan options.
Estimating Premium Costs & Coverage Levels
Small businesses often face the challenge of providing affordable group health insurance plans to their employees. In order to estimate premium costs and coverage levels, several factors come into play. One key factor is location, as healthcare costs can vary significantly based on geographical region.
Another factor that influences the cost of group health insurance is the type of provider network chosen. Health Maintenance Organization (HMO) plans typically have lower premiums compared to Preferred Provider Organization (PPO) plans. HMOs have a restricted network of doctors and specialists, while PPOs offer more flexibility with a broader network.
On average, small business owners can expect to pay around $7,000 to $15,000 per year for group health insurance. However, it's important to note that these costs can vary based on factors such as the number of employees, their age, and the specific coverage options chosen.
When it comes to employee contributions, a common practice is for small businesses to share the cost of premiums with their employees. On average, employees typically contribute around 18% to 33% of the total premium cost. You need to provide at least 50% of the costs of the plan to qualify for a group plan. It's essential for small businesses to evaluate these factors carefully in order to provide adequate coverage while managing costs effectively.
Monthly Premiums, Deductibles & Maximum Out-of-Pocket Expenses
When you are looking at all of your benefit plan options for health insurance, whether it is a SHOP Plan or a private health plan, you need to make sure that both you and your employee understand some key line items about their plan costs and out of pocket costs
Monthly premiums refer to the amount of money that the employer and employees pay each month to maintain coverage under the health plan. These premiums can vary based on factors such as the number of employees, their age, and the specific coverage options chosen. Employers and employees typically share the cost of monthly premiums, with each party contributing a certain percentage.
Deductibles, on the other hand, are the amount of money that employees must pay out of pocket before their health insurance coverage kicks in. For example, if an employee has a $1,000 deductible, they will need to pay the first $1,000 of their medical expenses before the insurance starts covering the remaining costs. But for many self-funded plans, the out of pocket costs for an employee don't end there.
Maximum out-of-pocket refers to the maximum amount that individuals or families are required to pay for covered healthcare services under a group health plan for small businesses for a plan year. These expenses are designed to protect individuals from catastrophic healthcare costs. The maximum out-of-pocket expenses for group health plans can vary depending on the specific plan and insurance company. Typically, it includes deductibles, copayments, and coinsurance, but will not include monthly premiums.
There are limitations to the maximum out-of-pocket expenses, such as certain services or treatments not being included, or the use of out-of-network providers. It's important for small businesses to review their specific plan documents to understand what costs are covered and any limitations that may apply.
Tax Advantages for Small Business Owners
Small business owners who offer group health plans can take advantage of several tax benefits that can help reduce the overall costs of providing health coverage to their employees. One key tax advantage is that the employer's contributions towards group health plans are typically tax-deductible. This means that small business owners can deduct these expenses from their taxable income, thereby reducing their overall tax liability.
Additionally, small businesses may be eligible for certain tax credits, such as the Small Business Health Care Tax Credit. This credit can offset a portion of the premium costs paid by the employer for providing health insurance coverage to their employees.
Another tax advantage is the ability to offer tax-advantaged accounts, such as Health Savings Accounts (HSAs) paired with High Deductible Health Plans, Health Reimbursement Arrangements (HRAs), or Flexible Spending Accounts (FSAs). These accounts allow employees to set aside pre-tax dollars to pay for qualified medical expenses. By utilizing these accounts, small business owners can reduce their payroll taxes while still providing valuable health coverage to their employees.
Overall, taking advantage of these tax benefits can significantly reduce the financial burden of offering health coverage to both employees and small business owners. By lowering their tax liability and utilizing tax-advantaged accounts, small businesses can effectively manage and reduce their overall costs in providing comprehensive health coverage to their employees.
How To Get Started?
If you're ready to get started evaluating your options for health insurance policies for your employees, Insurance For Texans is here to help. Our independent insurance agents have many health insurance options available for both primary plans and additional insurance plans that can help provide options for care. Since we work with many different health insurance companies, we work for you and your employees rather than a specific company. This allows us to help you evaluate your business health insurance options and make the best choice to create an affordable health insurance option for your employees.
Call us at 469.789.0220 or click the button below to get started discovering your options.