Health Insurance Plans and Alternatives for Small Businesses

Health care plans can be a bit of a double edged sword; you can bundle them in with compensation plans to entice talent to join your organization, but the costs can be prohibitive. Plus, with major differences between plans, it can be difficult to pick one that will work for all of your employees. Since 2012, employer-based health care plans have increased roughly 4% every year for family coverage according to the Kaiser Family Foundation. A 4% increase per year might not seem like a lot, but as it compounded, businesses and employees are paying 50% more for their plans then they used to. Since most small businesses pay for some or all of their employees premium, it has become a definite threat to a company’s competitiveness and bottom line.¬†You’ll need some clarity on how the whole thing works before choosing a plan… so check out the insurance and non-insurance options below to begin formulating your strategy.

Traditional Group Health Care Plans

Health Maintenance Organization (HMO): HMOs are a great way to cut costs for your organization . They have the lowest premiums, but also have the least coverage for your employees. Additionally, most HMOs require employees to use providers that are in their network.

Preferred Provider Organization (PPO): PPO plans allow for a larger network of providers than HMOs and will cover both in-network and out-of-network costs. PPO premiums are generally higher than HMO premiums. However the plans offer more flexibility and greater provider access for your team.

Point of Service (POS): POS plans combine the features of an HMO and PPO, and the premium is right in the middle of those plans. Employees must select an in-network provider as their primary care physician, but as with PPOs, they can also go outside the network for care if absolutely necessary. This allows more flexibility, but it should be stressed to your employees that out-of-network costs can be high.

Exclusive Provider Organization (EPO): EPO plans cover only in-network care. However an EPO’s network is typically much larger than a traditional HMO. The premiums for an EPO are normally higher than an HMO’s and lower than a PPO’s. For example there are EPO plans for Bon Secours here in Richmond. Since Bon Secours has a huge number and variety of practices/providers, in their network, it can be a great option.

High-Deductible Health Plans (HDHP)

HDHPs are the lowest premium plans you can offer to your employees. As you could gather from the name, HDHPs generally require a large deductible before coverage kicks in. Think of these more as disaster coverage plans. The employee could be out-of-pocket up to $10,000 for emergencies and critical care, but since the costs associated with that sort of care can be in the hundreds of thousands, your employee will still be far better off.

HDHPs have low premiums, and are often paired with HSAs. An HSA lets employees set aside a defined amount of money, pretax via payroll deduction, to pay for qualified health care expenses. Many companies match the employee’s contribution or add a monthly stipend to offset the HDHP’s higher deductible.

Other Health Care Plans and Alternatives for Small Businesses

  • Health Reimbursement Arrangement (HRA). Employers can directly reimburse employees, tax-free, for qualified medical, dental and vision expenses.
  • Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). Employers that do not offer health insurance and have fewer than 50 employees can give employees a monthly, tax-free allowance to pay for medical, dental and vision expenses.
  • Individual Coverage Health Reimbursement Arrangement (ICHRA). Employers reimburse employees tax-free for the cost of buying their own health insurance instead of purchasing it through them. ICHRA covers medical, dental and vision expenses.
  • Flexible Spending Accounts (FSA).¬†Employees can set aside pretax dollars via payroll deduction to pay for medical, dental and vision expenses. They do not need to have health insurance in order to enroll in a health FSA.

Need More Help? Get in Touch with Capital Payroll!

We hope this helps to inform your health care plan decision. It can be a big one, and an expensive one… but it can also be a tool for attracting top talent. Choose wisely!

If you’d like to consult with us, or even have us assess your business to determine what plan would be best, get in touch. You can call us at (804) 364-7220 or fill out the form below to reach us.

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