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Small Businesses, Big Insurance Benefits Opportunities

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Bigger isn’t always better when it comes to business. According to data from the Small Business Administration, small businesses employed 58.9 million people (47.5% of the workforce) in 2015, creating 1.9 million net jobs in 2015 alone.

Despite being nearly 50% of the workforce, small businesses struggle to find the proper funding to provide the best healthcare for employees. Since small businesses under 50 full-time employees are not legally obligated to provide health insurance, it can be seen as a luxury that cannot be fit in a small business budget. Owners want to provide the best work environment for their employees to maintain employee happiness and health, but what options does a small business owner have that can appease both employees and the bottom line?

In general, there are 4 options for small business owners when it comes to providing health insurance:

1. The Affordable Care Act

The Affordable Care Act (ACA) ended the practice of using a small group claim experience to set rates, and instead used a practice called “community rating”, which requires insurers to pool the risk across all of their small group business in a given geographic area.

There are pros and cons to this practice. Older, less healthy employees are able to have their premiums lowered with the help of younger, healthier employees; however, employers that already have younger, healthier groups fail to reap the benefits of this act. Another pro of the ACA is that it also mandates that small business health insurance would not be exempt from new provisions, including the requirement to cover all essential health benefits, with no annual or lifetime benefit maximums.

Insurers and brokers also now offer self-funded plans which allow companies to circumvent  community rated plans.Features such as stop loss insurance and level-funding arrangements allow small businesses to embrace self-funding without taking on more risk to provide coverage. In addition, self-funded plans do not have as many limitations as most ACA reforms.

2. Individual Health Insurance Through a QSEHRA 

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a small business HRA. The benefit of this practice is that it allows employees to explore insurance policies and then receive a tax-advantaged reimbursement from their employer to help cover the premiums.

To qualify a small business to offer a QSEHRA, It can’t offer another type of group health policy to any of its employees, and it must employ fewer than 50 full-time “equivalent” employees.

The most attractive part of this practice is the level of reimbursement that it can offer for employees. In 2018, businesses can offer up to $5,050 per year for individuals and $10,250 per year for families. Employees can purchase insurance through an insurance broker, online on their own, or through the ACA marketplace.

3. Small Business Health Options Program (SHOP) 

The SHOP Marketplaces are public exchanges which sell small group health insurance policies. This is usable for small businesses with less than 50 full-time equivalent employees.

There are different qualifications for SHOP based on your state, so it’s best to refer to  Health Insurance Marketplace Public Use Files. These files provide extensive data on the plans available to consumers through the Federally-facilitated Marketplaces.

SHOP is an excellent choice for businesses with less than 25 full-time equivalent (FTE) employees, but there are several other requirements to be eligible:

  • The employer’s average employee salary is about $50,000 per year or less
  • The employer pays at least 50 percent of full-time employees’ premium costs
  • The employer offers SHOP coverage to all of their full-time employees.

4. Multiple Employer Welfare Arrangement (MEWA)

The fourth option for small business owner seeking health benefits for its employers is a multiple employer welfare arrangement (MEWA). An AHP, or association health plan, is a type of MEWA. Both allow small employers to band together to create a larger pool of employees. This allows them to take advantage of economies of scale. This s a great option for small businesses with few employees can be seen as a company with far more employees, and can access greater healthcare benefits.

Due to a 2018 executive order, the Department of Labor has loosened restrictions on MEWAs, which is great news for small business owners. The order exempts association health plans from ACA regulations and expands the rules for who can form an AHP, such as crossing state lines or venturing outside your industry. This also means that sole proprietors could partner to form an AHP instead of purchasing through the ACA marketplace.

What Are The Next Steps For A Small Business Owner?

It is best to refer to an Insurance Broker like Florida Healthcare Marketing before making any decisions regarding healthcare for your small business. Our services can help you find the best, most cost-friendly option for you that will make your employees and wallet happy.

We look forward to working with you and seeking the very best employee benefits option for you and your small business! If you’re interested in exploring your healthcare options, leave us a comment or reach out to us for more information!

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