What to Consider with Small Business Group Health Insurance

With millions more job openings than there are workers to fill them, offering health insurance at your small business can help you attract and retain top talent. In November 2021, a Robert Half survey of 1,000 candidates in the U.S. found 76% of respondents said health insurance was a necessary benefit. Dental insurance, vision insurance, life insurance and accidental death and dismemberment (AD&D) insurance were also frequently cited as top benefits.

If you want to keep your top employees and attract better candidates to your small business, offering health insurance can bolster your value. This guide on small business group health insurance explains what you need to know.

What Is Small Business Group Health Insurance?

Small business group health insurance plans are available to any employer with more than 2 full-time staff, including for K-1 partnerships. There is an exception: a business co-owned by spouses is not eligible for small business group health insurance. As the employer pool grows, the ability to purchase more affordable plans increases at certain milestones.

Small group plans provide actual healthcare coverage for employees and their dependents. Business owners purchase these plans, which must comply with Affordable Care Act (ACA) rules that apply to small group health plans, including:

• If you provide health insurance to your workforce, you must offer it to all eligible workers when they become eligible for health coverage. There’s a 90-day maximum waiting period, which is the period that must pass before coverage for an employee or dependent can become effective.
• Employers must provide employees with a standard “Summary of Benefits and Coverage” (SBC) form that explains what their health plan covers and what it costs.
• Most plans can be offered on a pre-tax basis to both the employer and employees under Section 125.

As a small business owner, you’re in charge of choosing the plan provider and how much you’ll cover for the plan’s monthly or annual premium cost. The employee would be responsible for contributing the remaining portion of the premium. Employers can offer between three to five plans, depending on the insurance provider.

Business owners can purchase health insurance coverage at any time during the year. Your employees can join the plan during open enrollment or during a special enrollment period, such as when they first become eligible for the plan.

If you’re not able to cover premiums towards types of insurance beyond medical (such as dental, vision, disability, accident, etc.) you can still offer this coverage to your employees as part of their health insurance plan. They’ll be able to choose the amount of coverage they want and can cover the costs themselves.

How to Get Small Business Group Health Insurance

The type of group health insurance that’s available to you will depend on how many employees you have. As you grow your company and your workforce, you can also evolve your small business health insurance offerings based on employer milestones you reach and the health insurance provider you choose.

In most cases, we recommend getting fully insured or level funding insurance plans for a small business. These are defined as:

• Fully insured, also known as community rated, plans are based on age and county, not your employees’ health or pre-existing conditions.
• With level funding plans, the insurance carrier underwrites the policy based on your employees’ past and current health.

Depending on how many employees you have, here’s what’s currently available from each provider in Arizona. These offerings will differ from state to state.

• 5 enrolled employees: You can look at underwritten strategies using health applications for your employees.
• 10 enrolled employees: UnitedHealthcare and Humana will underwrite with no applications, as long as the group has prior coverage. If there’s no prior coverage, applications are required.
• 15 enrolled employees: Blue Cross Blue Shield will underwrite with no applications, as long as the group has prior coverage. If there’s no prior coverage, applications are required.
• 20 enrolled employees: Cigna will underwrite with no applications, as long as the group has prior coverage. If there’s no prior coverage, applications are required.
• 25 enrolled employees: Aetna will underwrite with no applications, as long as the group has prior coverage. If there’s no prior coverage, applications are required.

Once your small business exceeds 50 active full-time staff members, your group becomes an applicable large employer (ALE). The “community-rated” aspect to fully insured plans, which bases coverage on age and county, goes away. All health insurance rates will then be based on factors like utilization, health and pre-existing conditions.

In other words, all group health insurance offers for businesses with 51 or more full-time eligible staff will be underwritten. If you have 100+ enrolled employees, you’ll also need to fill out a Form 5500 for each line of coverage in excess of 100 enrolled.

Once you exceed 300 employees, partial self-funding starts to make more sense. That’s because the risk you incur is more spread out. With partial self-funding, you “rent” an insurance carrier network and pay for claims as they’re incurred. You also purchase reinsurance (also called stop-loss insurance) to cap your risk.

The opportunities for savings in this case may be larger. A business health insurance broker can help you navigate your options based on your unique circumstances.