Health insurance is a standard benefit that many full-time employees expect from their employers. However, for many businesses, this often means devising the best way to offer this benefit while keeping costs as low as possible.
Reports have indicated that 2018 employer health insurance costs are up 5% from 2017, so it’s crucial to find a plan that not only works for your employees, but for your business’s long-term health as well.
If you’re looking to provide health insurance to your employees, or you want to change your existing offering, it’s important to understand the various plans and costs associated with the process.
[Read: The ABC’s of Small Business Health Insurance Acronyms]
How much can you expect to pay?
Health care costs vary widely depending on business size, insurance availability and what type of plans you want to provide your employees. As a small business, it’s important to consider what plans and options are available to you. For example, there are consumer-directed health plans, direct contracting options, telehealth plans, along with a host of other plans that are ideal for smaller businesses.
You may read reports of increasingly expensive health care costs, but thanks to innovations in technology and provider plans, there are more cost-cutting options for small businesses than ever before. It’s important to note, however, that larger businesses are preparing for minor cost increases year over year. According to the Society for Human Resources Management, big businesses are preparing for another 5% increase in 2019, a trend that’s consistent with the last few years’ increases.
Types of health insurance costs
Regardless of what plan structure you opt for, health care costs can be divided into two buckets: employee costs and shared costs between the employee and the employer. Examples of employee costs include deductibles, copayments and coinsurance. For employers, shared costs include:
- Premiums: Employees and employers split the cost of premiums, which are monthly fees from health care company that are paid on a regular basis. Payment schedules can vary from quarterly to monthly, so make sure you know what you owe and when. By splitting the cost of premiums, your employees are guaranteed health care at a (more) reasonable price.
- Health Savings Accounts (HSAs): These accounts are tax-free health care-related spending accounts. Both employees and employers contribute to them regularly, as they’re usually a part of a high deductible health plan (HDHP) from most insurance companies. As a tax incentive payment account, this is a versatile health care tool for both small businesses and their employees.
- Flexible Spending Accounts (FSAs): These accounts are also tax-free health care-related spending accounts. The difference from HSAs, however, is that these accounts are provided primarily by the employer. The employee has to spend everything in the account by the end of the year or the funds go back to the employer.
The general rule is you should provide healthcare to any employees working over 30 hours a week at your business.
Who should you cover?
The general rule is you should provide healthcare to any employees working over 30 hours a week at your business. You should be prepared to provide both individual and family plans, which are plans that include spouses and children under the age of 26. Keep in mind that there are certain labor laws around health care as well. Depending on what state you’re in, you may be required to provide benefits to employees working over a certain threshold at your business.
How to save on health insurance costs
Despite the rising costs of healthcare, there are a few ways you can try and save your small business money:
- Telehealth options, which are growing in popularity, are physician appointments done by audio and video consultation rather than in-person visits. They are less expensive, and are often convenient for the patient.
- Offering an HDHP with an HSA, because deposits into the HSA, whether deposited by the employer or the employee, are done on a pre-tax basis and are not subject to FICA or Medicare taxes. are two fairly simple ways to save.
- Consider a fiduciary provider, that can offer lower costs for prescription medications compared to most pharmacies.
[Read: A Quick Guide to Small Business Employee Health Insurance]
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