Covered Cheaper

What is the smartest and most affordable way for small businesses to provide health insurance benefits for their employees? It sounds like such a simple question, but it’s a very complex challenge for most business owners. As one insurance expert that we talked to put it, “Health insurance, just like the fields of medicine and law, has become highly specialized.”

But even though there isn’t a one-size-fits-all answer, there are still several useful steps that employers can take to protect their budgets and continue providing quality health insurance as a benefit. With a few key decisions, companies can save a lot of money.

Smartest Route, Depends

Matt Glaros.

Though most employers are going to want the best coverage available for their people, experts agree the smartest way to go is with the option that best fits the company’s individualized needs.

“The smartest and most affordable route is different for every group and dependent on the group’s overall health. Healthier groups may find the most savings with a level-funded or self-insured plan. These plans can be paired with wellness and education programs that will promote effective plan usage and, hopefully, result in lower claims,” said Matt Glaros, an employee benefits advisor with Merrillville-based insurance firm Meyers Glaros.

Broadly speaking, there are three general plan types to consider: fully insured, self-funded, or level-funded plans.

• Fully insured plans are what most people probably picture as regular health insurance. The company purchases a plan from an insurance company and that insurer assumes the liabilities. In most cases, this would be the most expensive option.
• With a self-funded plan, companies set aside money to cover their employee medical claims. Under this type of plan, the company would determine its own premiums based on the health needs of those insured. Most of the risk for liabilities would rest on the employer, but there is a higher chance of savings. In some cases, there may also be opportunities to receive a credit at the end of the plan year for unused funds.
• Level-funded plans are kind of a hybrid of the first two types. The employer would make payments to an insurance firm that creates a fund for any liabilities. An option for a year-end credit may also be possible with these plans. This option may work best for small firms with generally healthy populations of employees, and they’ve been growing in popularity. About 38% of small firms that offer health benefits had a level-funded plan in 2022, which is higher than preceding years, according to survey data from the Kaiser Family Foundation.

With any of these types of packages a company chooses, it’s always important to work with the right guide. Just like one wouldn’t represent themselves in a court of law without a licensed attorney, the selection of a skilled partner to assist with navigating the insurance world is highly recommended.

"An employee benefits plan can get complicated and needs to be curated to fit a group’s specific needs. We recommend working with a trusted, experienced broker who will review all options and create a package that’s specific to you and your employees,” said Glaros.

Tax Credits May Help

Surprisingly, there’s a large chunk of small employers that are unaware of federal tax credits that could help offset health insurance costs. These may be a route to substantial savings for small business owners.

This option is called the Small Business Health Care Tax Credit and it’s associated with insurance plans under the Small Business Health Options Program (SHOP). The maximum benefit available could be worth up to 50% of the costs an employer pays for employee premiums.

There are specific qualifications to meet, such as having fewer than 25 full-time workers, average salaries at or below $56,000, enrollment in a SHOP plan, and other factors. But it’s worth considering as the program has such potential for savings.

Evaluate Regularly

Even though providing affordable health insurance is a major challenge for employers, it’s always worth revisiting periodically to find new ways to save. Health insurance needs and costs can change over time, so it's important to review and evaluate plans regularly to make sure that the company is getting the most value for its money. The best approach will depend on the specific needs and circumstances of the company and its employees, which will evolve. So always make a point to revisit, review, and look for new savings potential.