What to Look for in a Good Group Health Insurance Plan
As a small business owner, shopping for group health insurance can feel overwhelming.
Run payroll and benefits with Gusto
Unlike large employers, you probably don’t have a team that can spend hours comparing plan after plan.
Fortunately, finding the right small group coverage isn’t as difficult as you think. Typically, you just need two W-2 employees to qualify for group health insurance. But to pick the group health insurance plan that works best for your business, you should be on the lookout for a few key characteristics.
In this article, we’ll show you how to choose health insurance as a small business owner, along with the main things you should look for in a good group plan.
Before you evaluate group health plans, collect the following information
This will make choosing health insurance much easier when you’re ready to actually buy.
From your employees
Before buying group health insurance, make sure the plan is flexible enough to cover your team’s health care needs.
To do that, you need to find out what your employees need. Consider sending an anonymous employee survey to ask them what’s most important. You could include questions like:
- Do you want to join a group health insurance plan or find coverage on your own?
- Do you plan to add a spouse or children to your coverage?
- What type of plan do you prefer (PPO, HMO, etc.)?
- Do you prefer to pay lower monthly premiums and more out of pocket? Or do you prefer to pay higher monthly premiums and less out of pocket?
- Do you prefer having a more extensive network, even if that may mean paying more for coverage?
Remember, the Health Insurance Portability and Accountability Act (HIPAA) bars you from asking employees about their personal health information. You also can’t tell carriers specific health information about an employee without their explicit consent. Keep your survey light and high-level.
From your business
Once you know how many employees want to join your group health plan, you’ll need to provide the insurer with the following pieces of documentation:
- Your business name, business address, and employer identification number (EIN)
- Your business entity registration with the Secretary of State
- The date your business was established
- Payroll records (including a quarterly tax and wage detail report)
- Your business’s industry code or standard industry classification (SIC)
- A list of employees (and their spouses and dependents) who plan to enroll in coverage, along with the following information for each person:
- Full name
- Date of birth
- Whether they use tobacco
- Whether they’re enrolled in other health insurance coverage
- ZIP code of their home address
Small group health insurance rates are calculated differently than large group health insurance. The number of employees joining, their demographic information, and your business location will help the insurance company calculate your premiums.
Now that we have that out of the way, let’s walk through what to look for when buying group health insurance.
3 things to look for in a good group health insurance plan
1. It complies with Affordable Care Act (ACA) requirements
If you have 50 or more full-time employees, you must offer health insurance to at least 95% of your full-time equivalent (FTE) employees.
The group health plan must also meet the following requirements:
- It must be a major medical plan. This means it covers the 10 essential benefits, has no lifetime or annual benefit maximums, and adheres to the consumer protections outlined in the Affordable Care Act (ACA). (All major medical plans sold after January 1, 2014, must meet these requirements.)
- It must qualify as affordable. In 2020, the lowest coverage option must have premiums that cost 9.78% or less of your employees’ overall income.
- It must provide minimum value. The employer must cover at least 60% of the expected total cost of services as part of the shared responsibility provision.
If you have 49 or fewer full-time employees, the employer mandate doesn’t apply, which means you aren’t required to offer health insurance. However, there are several reasons why you may want to provide it anyway.
2. It meets your employees’ needs and provides options
Here’s where your employee survey pays off. With those details, you’ll have a good idea of the coverage most people want and how much they’re willing to pay.
Now it’s time for the balancing act of finding a plan that offers the right coverage at the right price and enough flexibility. The four most common types of plans vary when it comes to each of these factors.
For reference, check out the chart below for a general idea of how these different plan types work:
|What is it?||Price of premium||Flexibility||Primary care doctor needed?||Referral needed?||Covers costs for out-of-network providers?|
|HMO||Health maintenance organization||Low||Low||Yes||Yes||No, except for emergency care|
|PPO||Preferred provider organization||High||Highest||No||No||Yes, but the plan will cover a smaller percentage of the costs|
|EPO||Exclusive-provider plan||Medium||High||For some plans||For some plans||No, except for emergency care|
|POS||Point-of-service plan||Medium||Medium||Yes||Yes||Yes, but the plan will cover a smaller percentage of the costs|
In addition to the type of plan, you’ll also need to determine which metal tier aligns with your group health insurance plan. Although there are some key differences between individual and small group health insurance, both use metallic tiers to categorize the percentage of coverage a plan offers.
In order of plans with the most coverage to least, they are: Platinum, Gold, Silver, and Bronze. Platinum plans have the highest monthly premiums, the most in-depth coverage, and the lowest out-of-pocket costs. Bronze plans offer the reverse: lowest monthly premiums, least in-depth coverage, and highest out-of-pocket costs.
Here’s a breakdown of the average medical cost each plan covers:
- Bronze: 60%
- Silver: 70%
- Gold: 80%
- Platinum: 90%
According to an eHealth Small Business Health Insurance report on 2018 trends, small businesses overwhelmingly chose Silver and Gold plans.
- Silver plans accounted for 50% of all small business plans
- Gold plans accounted for 28%
- Bronze plans accounted for 15%
- Platinum plans accounted for 7%
You can mix and match types of plans (HMO, PPO, etc.) with different metal levels. For example, you could choose a Kaiser Permanente Gold HMO plan or a UnitedHealthcare Silver PPO plan.
This can get tricky fast, so we recommend using a broker that can show you how to pick a health insurance plan that works for your business.
Don’t forget to ask for a summary of benefits and coverage (SBC) for each plan you review. This document summarizes all of the plan’s details and will help you determine what it covers and how much it costs.
If you decide to offer your employees a few different options, you’ll need to give them copies for each plan.
3. The premiums fit your budget (if you’re making employer contributions)
If you have fewer than 50 employees, you’re exempt from the ACA’s shared responsibility provision. This means you aren’t legally required to pay a certain percentage of your employee’s health insurance premiums.
Here are your options:
- Pay 100% of your employees’ premiums
- Pay a portion
- Require your employees to pay the full cost
Payroll companies that manage health insurance can help you with some of these logistics—including the types of group insurance plans that involve employees sharing the cost.
You’ll need to balance your employees’ coverage needs along with your budget to decide which option works best. If you enroll in coverage through the SHOP Marketplace, you may be eligible for a small business tax credit to help cover your premium costs.
Wondering what small businesses typically contribute to employee premiums? According to the Kaiser Family Foundation’s Employer Health Benefits 2019 Annual Survey:
- On average, small employers paid 84% of their employees’ single coverage premiums, and 60% of family coverage premiums.
- Thirty-one percent of covered employees at small firms are enrolled in a plan where the employer pays the entire premium.
- Ninety-seven percent of small employers who offered health insurance contributed at least half of the premiums.
With 55% of employees reporting that health insurance is their most important benefit, finding the right plan is essential if you want to reduce turnover and keep your employees healthy and happy.
Understanding how to pick health insurance will help you find a plan that fits your employees’ needs, your budget, and any ACA requirements.