How Does Small Business Health Insurance Work?

Know More About Small Business Health Insurance


Small business health insurance, also known as group health insurance, provides small business owners access to coverage for their employees. Whether you have just a few — or more than a few — employees, small business health insurance goes beyond healthcare coverage for you and your company. Small group plans also provide valuable incentives to attract and retain employees.

What Are My Small Business Health Insurance Options?


Small employers (generally those with 2–50 full-time employees1) may be eligible to purchase through the Small Business Health Options Program (SHOP) Marketplace. Created through the Affordable Care Act (ACA), SHOP offers affordable and flexible plan options to small businesses. If you do not qualify or there are no SHOP plans available in your area, you can also find a small business health insurance plan through a licensed broker or through an insurer like Anthem.


How Many Employees Do You Need To Offer Small Business Health Insurance?


The number of employees is just one of four requirements to qualify your business for small group health insurance. You must generally:

  1. Have 2–50 full-time employees1 (other than spouses, family members, or partners).
  2. Offer coverage to all full-time employees working 30 or more hours per week.
  3. Enroll at least 70% of the employees in your insurance plan.
  4. Have a physical work site within the state where you purchase your plan.



What Types Of Small Business Health Insurance Plans Are Available? 


As a small business owner, you can choose from five types of healthcare plans for your business. 

HMO (Health Maintenance Organization)
An HMO is designed to keep costs low and predictable by only using doctors and hospitals within the HMO network. It typically has low premiums, deductibles, and fixed copays for doctor visits. Primary care physicians (PCP) are the primary point of contact for all medical care, including specialty referrals.


PPO (Preferred Provider Organization)
PPO networks let you choose where to go for care, without a referral from a PCP or having to only use providers in your plan's provider network. These plans typically have higher monthly premiums and out-of-pocket costs like copays, coinsurance, and deductibles.


EPO (Exclusive Provider Organization)
An EPO offers a local network of doctors and hospitals to choose from. If you’re looking for lower monthly premiums and are willing to pay a higher deductible when you need healthcare, you may want to consider an EPO plan.


POS (Point of Service)
A POS plan requires that you get a referral from your PCP before seeing a specialist. This plan covers out-of-network doctors at a higher out-of-pocket cost than in-network doctors.


HDHP (High Deductible Health Plan)
An HDHP has low premiums but higher immediate out-of-pocket costs. Employers often pair HDHPs with a Health Savings Account (HSA). This is a tax-free fund used to offset costs such as deductibles.



What Is The Average Cost Of Small Business Insurance?


The cost of small business health insurance will depend on the type of plan or plans you want to provide as a small business owner. You will need to think of how much coverage is needed for your employees. Consider premiums, out-of-pocket costs, and provider networks when comparing plans.



How Can I Lower My Small Business Health Insurance Costs? 


Under the Affordable Care Act, employers who have fewer than 25 full-time employees, who pay average wages of $56,000 or less, or who cover at least half of their employees’ premiums may be eligible for tax credits for their small group health insurance plans. These tax credits can help lower the cost of your small business health insurance.



When Can I Enroll In A Small Business Health Insurance Plan?


There is no limited enrollment period for small business health insurance and employers can shop for a new plan any time of year. If you enroll in a plan by the 15th of each month, coverage can usually begin on the 1st of the following month.


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1Number of eligible employees may vary by state.