Insurance

Health insurance offerings: what’s right for your business?

Owners of small businesses increasingly recognize that benefits packages are important tools for recruitment and employee retention. This has been magnified in recent months. As recently as August, the U.S. Department of Labor reported that there are about 8.7 million people looking for work. Meanwhile, job placement site Indeed estimated in July there are about 10 million job vacancies.

Next to wages, health insurance may be the most important part of an employment package. Fortunately for small business owners, options abound. With a little planning and research, health insurance can offer an attractive incentive to potential employees.

Some basics

As a small business owner interested in offering health insurance, there are a few key things to keep in mind.

• To be eligible for a small business health insurance plan, you must have at least one person on your payroll. This means that, counting yourself, the minimum size of your group is two people. In Minnesota, small group coverage can include up to 49 people. 
• Laws require small business owners to pay at least 50 percent of the monthly health insurance premiums for employees.
• You are guaranteed coverage. You and your employees and dependents cannot be denied coverage because of pre-existing medical conditions.

Shopping for coverage

Shopping for coverage is simple. The simplest way to shop for coverage is to work with a health insurance broker or agent. These experts can help you sort through the options outlined below. And the good news is they don’t charge you for their services since their fees are paid by health insurers. Also, you can always work directly with a health insurer. Most health insurers have information about plans available to small groups on their websites, along with contact information or a way to request that someone contact you.

Health plan options

Health insurance comes in a range of options. These options are designed to help you find a plan that meets your financial needs and goals for providing coverage. 

• Funding. Health insurance can be funded through one of two mechanisms. Fully insured means you pay a premium to a health insurer and they cover the cost of care for your employees, minus any out-of-pocket costs. Another option is to self-insure. This means you cover the cost of care for your employees and pay a health insurer a fee to administer the plan. Fully insured plans cost more up front while self-insured plans carry more financial risks because the cost of care is unknown. Some carriers now offer a hybrid option called level funding that combines attractive features of both fully insured and self-insured options. Level funded plans allow you to pay a set premium amount and potentially receive surplus dollars at the end of the year dependent upon your claims performance. Not all employers will qualify for a level funded plan.
• Consumer-directed plans: These plans combine a high deductible medical plan with a health savings account or health reimbursement account to help offset employees’ out-of-pocket costs. The employer contributes a set amount to each employees’ accounts and they manage their health care costs. 
• Out-of-pocket costs: Costs include premiums (the amount you pay for insurance each month) and out-of-pocket costs. Out-of-pocket costs include copays or coinsurance and reflect how much you have to pay each time you see a doctor or get a prescription drug. Generally, plans with higher premiums have lower out-of-pocket costs. Small group plans offer a range of premium and out-of-pocket arrangements.
• Network: You can choose from an open network that will give you broad access to the largest system of health care providers. Or, as in the case of Medica’s narrower network products, which are called Accountable Care Organizations (ACOs), providers are affiliated with a small number of hospitals and clinics that generally are located in a specific geographic area. An ACO can often save 10 percent to 20 percent in premium dollars vs. offering the same benefits on an Open Access network. 

Providing health insurance for your employees is a tremendous recruiting tool. With a little planning and forethought, you can find coverage that suits your business needs and goals.