Wondering if your small business should offer more than one plan type for group health insurance? While all companies have unique medical needs and different employee coverage preferences, a majority of small businesses who offer health coverage decide to offer only one type of group health plan. However, a small business can still choose to offer more than one plan option to its workforce.
Continue reading to find out factors to consider when deciding on how many plan types you could offer.
Importance of health insurance for small businesses
There are several reasons why it’s important to offer health care to your employees as a small business owner. You can improve employee productivity and retention because their health will remain a priority. Additionally. you can usually offer them lower premiums when participating in group plans.
Employees who have health insurance coverage will also feel taken care of and will honor your business more. Having small business health insurance helps you as well. You can take advantage of the tax breaks and credits not always provided for employees versus people like you who own a company.
Finding a small business health insurance plan that meets the needs of your full-time employees isn’t easy. We understand this. That’s why eHealth offers small business resources to help you with this decision based on your location.
Types of health insurance plans for small businesses
Deciding what full-time employee health insurance coverage is not a decision you should take lightly. Consider these types of health insurance for small businesses before you make your final choice.
Group Health Insurance
Group health insurance is a valuable benefit offered by employers to their employees, providing coverage for medical expenses and healthcare services. This type of insurance plan typically covers a group of people, such as employees of a company or members of an organization, and offers a range of benefits at competitive rates. Group health insurance plans often include coverage for essential healthcare services, such as doctor visits, hospital stays, prescription medications, and preventive care. Additionally, group plans may offer access to a network of healthcare providers, allowing members to receive care from preferred doctors and hospitals. By pooling resources and spreading the risk across a larger group, group health insurance helps to lower costs and provide comprehensive coverage for employees and their families.
Preferred Provider Organization (PPO) Plans
PPO types of small business health insurance plans allow your employees to select the care providers they want. Selected from the list of preferred providers may reduce their medical expenses, but they’re not necessarily limited to healthcare services offered within the plan network.
PPO plans offer your workers freedom of choice. However, they also may have to take more of a self-service initiative when researching care options. They also may have more co-pays and deductible requirements than non-PPO employee health insurance holders.
Health Insurance Organization (HMO) Plans
The HMO network provides a vast assortment of healthcare options. However, your workers will need to select a primary care physician who is contracted with the HMO. However, it does allow for specialist care.
HMO plans may cost your employees less money. These healthcare plans may encourage your workers to build a working relationship with a doctor they can trust over time. However, your payroll department might also deal with hassles, such as required referrals for routine care.
An HMO plan also may feel limiting if one of your workers doesn’t like any of the doctors in the network. It’s not easy to receive care from someone you don’t get along with who’s also in charge of your health.
High-Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs)
High-Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs) offer a unique approach to healthcare coverage, combining a high-deductible insurance plan with a tax-advantaged savings account. With an HDHP, individuals typically pay lower premiums but have higher deductibles, meaning they must cover more out-of-pocket expenses before insurance coverage kicks in. However, the advantage lies in pairing the HDHP with an HSA, which allows individuals to set aside pre-tax dollars to cover qualified medical expenses. This tax-free savings account can be used to pay for medical costs not covered by insurance, including deductibles, copayments, and certain other healthcare expenses. While HDHPs with HSAs offer potential cost savings and flexibility, individuals should carefully consider their healthcare needs and financial situation before choosing this type of plan.
Exclusive Provider Organization (EPO) Plans
Exclusive Provider Organization (EPO) Plans, on the other hand, offer a balance between cost and choice by providing coverage exclusively through a network of healthcare providers. EPO plans do not typically require referrals to see specialists within the network, offering more flexibility than Health Maintenance Organization (HMO) plans but less than Preferred Provider Organization (PPO) plans. With an EPO plan, individuals enjoy comprehensive coverage for in-network services and may have limited coverage for out-of-network care, usually only in emergency situations. This type of plan can be advantageous for those who prefer the cost savings associated with staying in-network while still having the flexibility to choose healthcare providers without the need for referrals. However, individuals should carefully review the network of providers available under the EPO plan to ensure they have access to the care they need.
Indemnity plans
Some indemnity health insurance plans may supply even more freedom for your employees than PPOs. Your workers can choose the healthcare service providers they want at any medical facility.
On the other hand, employees may have to pay for services in advance and request reimbursement, but not all of your workers might have that kind of funding. There also may be some funding limitations within the first 12 months, such as disqualification of pre-existing conditions.
Choosing how many types of health insurance to offer
Although a small business with less than 50 full-time equivalent employees is not required to offer group health insurance coverage to its workers, a small business owner can still decide to offer at least one health plan option to his or her employees. Depending on their preferences, small employers might also consider offering more than one group plan type to their workers.
Here are some key factors to consider when deciding how many plan types to offer:
Consideration of workforce needs
Some employees might prefer not having to see a primary care physician (PCP) for specialist referrals, so they might find a PPO plan to be convenient. Younger and relatively healthy employees who may not need to visit the doctor as often might prefer an HMO plan with low premiums, while older employers who need to see the doctor more frequently or get prescriptions might instead opt for a lower deductible plan.
When considering healthcare plans for your workforce, it’s essential to take into account the diverse needs and preferences of your employees. While some may appreciate the flexibility of PPO plans, allowing them to seek specialist care without needing a primary care physician referral, others may prioritize cost savings and opt for an HMO plan with lower premiums. Additionally, factors such as age, health status, and frequency of medical visits should be considered. Younger, healthier employees may find HMO plans more suitable, as they typically require lower premiums but may have limited provider networks. Conversely, older employees or those with chronic health conditions may benefit from plans with lower deductibles to better manage healthcare costs. It’s crucial to engage with your workforce to understand their specific needs and preferences, ensuring that the chosen healthcare plan aligns with their requirements while also meeting the organization’s budgetary constraints.
Budgetary constraints
Both affordability and flexibility tend to be a major considerations when choosing a small business health insurance plan. For instance, an HMO plan tends to have lower premiums than a PPO plan; however, a PPO plan typically provides greater flexibility in terms of obtaining medical services outside of your network. A POS plan generally requires a PCP (like an HMO) while also allowing a wider range of health care providers (like a PPO).
Geographic location
If most of your employees live and work in the same geographical area, they might appreciate the convenience using nearby networks or local providers, and may benefit from the managed care system of an HMO plan or network-centric services of an EPO plan. Alternatively, if your workers commute throughout a larger, more spread-out region, they might find value in the network flexibility of a PPO or POS plan.
Legal and regulatory considerations
When selecting healthcare plans for your workforce, it’s essential to consider legal and regulatory factors that may impact your decision-making process. Compliance with state and federal laws, such as the Affordable Care Act (ACA), is crucial to avoid penalties and ensure employee rights are protected. Additionally, certain industries may have specific regulations governing healthcare benefits, such as those in the healthcare or financial sectors. Employers must also be mindful of laws regarding discrimination and equal access to healthcare benefits for all employees. Furthermore, staying informed about changes in healthcare legislation and regulations is vital to adapt your benefits offerings accordingly and maintain compliance. Consulting with legal advisors or healthcare compliance experts can help navigate these complex legal and regulatory considerations effectively.
Employee preferences and engagement
Considering employee preferences is paramount when selecting healthcare plans for your workforce. Understanding their needs and preferences can lead to higher satisfaction and engagement with the chosen benefits. Some employees may prioritize flexibility and freedom of choice, preferring plans that offer a wide network of providers or out-of-network coverage options. Others may prioritize low out-of-pocket costs, preferring plans with lower deductibles and copayments. Additionally, considering the demographics and health needs of your workforce can help tailor benefits offerings to better suit their preferences. Engaging employees in the decision-making process through surveys, focus groups, or one-on-one discussions can provide valuable insights into their healthcare priorities and help create a benefits package that meets their needs while fostering a sense of ownership and engagement.
Knowing how much each plan type pays for covered medical services can help your small business decide what number of health insurance options would best serve the needs of your employees. When deciding on health coverage, be sure to talk with your group to find out what they want out of a plan.
Frequently asked questions
How many small businesses offer multiple health insurance plan types?
According to the Kaiser Family Foundation 2023 Employer Health Benefits Survey, while it’s common for most large companies (those with 200 or more employees) to provide health benefits to some of their workforce, smaller businesses (with 3-199 employees) are notably less inclined to do so. According to data from 2023, approximately 53% of all companies offered health benefits, a figure consistent with the previous year’s percentage (51%).
Source: KFF Employer Health Benefits Survey, 2023
What is the most popular small business health plan type?
According to an KFF survey, PPOs remain the most common plan type. In 2023, 47% of covered workers are enrolled in a PPO, 29% in a high-deductible plan with a savings option (HDHP/SO), 13% in an HMO, 10% in a POS plan, and 1% in a conventional (also known as an indemnity) plan.
Ultimately, some small businesses may find that one plan type is the most effective way to provide health insurance to all of their workers, while other businesses may decide that offering more than one type of health plan lets them better address the variety of medical services their employees require.
Where to shop for small business health insurance
You can find affordable group health insurance plans through eHealth. As one of the largest private health exchanges for small business, we make shopping for group health insurance simple and easy. You can conveniently compare plan types from multiple insurance companies all in one place though our website, and can get unbiased expert advice from our licensed health insurance agents. Visit eHealth.com today to learn more about finding the right health insurance for your small business.
This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.