health insurance plans for small business in texas

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Health Insurance For Small Businesses

Uncover new insights with our latest post: Guide to Comprehensive Health Insurance Coverage – Part 2

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Available. affordable. attainable., small business health insurance plans designed to fit any size small business and budget..

Now it is more convenient than ever to purchase small business health insurance coverage for your employees.

It shouldn’t be complicated or stressful to shop health insurance for small business. By requesting a Blue Cross and Blue Shield of Texas health insurance quote, you begin your journey to available, affordable, and attainable health coverage for your employees.

Why Should You Offer Health Insurance?

Productivity.

of employees respond with higher degrees of engagement and productivity when their holistic needs are being met and they feel valued at work. 1

of employees see health insurance as a “must-have” benefit 2

of employers cite attraction and retention as a priority concern. 1

Get the information you need to apply for your small business health insurance.

Why healthier employees means a healthier business:

It’s easy to enroll your team..

Blue Cross and Blue Shield of Texas can help you select between our flexible PPO and HMO health plans for small businesses based on your budget and needs. Our team is built to provide health insurance quotes for small businesses like yours.

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Get your health insurance quote for small business coverage by answering a few simple questions about your business and health care coverage needs.

Learn About Your Options

See the small business health insurance plans available in Texas, and compare their coverage options and estimated monthly cost.

Once you select the health insurance plan(s) you want to offer, you can apply for coverage online or over the phone.

Guide to Comprehensive Health Insurance Coverage – Part 2

Guide to Comprehensive Health Insurance Coverage – Part 1

How Small Businesses Thrive Despite Health Care Challenges

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All You Need to Know About Small Business Health Insurance in Texas

• February 7, 2023
• Richard Monello

Table of Contents

55% of employers with fewer than 100 employees offer health insurance despite it being legally required under the Affordable Care Act for businesses with more than 50 employees. Despite the legal requirements, it’s a massive perk for small businesses looking to attract top talent.

Are you a small business owner in Texas looking to ensure your employees have access to quality health insurance? We’ve got you covered. 

This comprehensive guide will break down the ins and outs of obtaining small business health insurance in Texas, from understanding the different types of coverage available to navigating state regulations and more.

With helpful tips and resources tailored just for businesses located in Texas, consider this as your starting place towards ensuring that both you and your employees enjoy peace of mind when it comes to health insurance.

Is Small Business Health Insurance in Texas Mandatory?

It depends on how many employees you have. As mentioned above, under the Affordable Care Act , any employer with more than 50 employees must offer affordable health insurance . This isn’t a Texas law; it’s a federal law.

As part of this mandate, if you offer health insurance, you must offer it to all eligible employees as soon as they become eligible for coverage. This means you can’t discriminate between employees and offer coverage to certain ones without reason. It’s important to note that the eligibility period can’t extend beyond 90 days either.

What qualifies as an “eligible employee?” Typically, in Texas, anybody works for your small business for at least 30 hours a week. They also need to work year-round, so you don’t have to offer Texas health insurance to seasonal employees, for example.

But what if you have less than 50 employees? You’re not required to offer anything and won’t get in legal trouble for not doing so. Still, it’s highly recommended. We’ll jump into the details of why below.

Finally, a law states that you, as the small business owner, don’t legally have to share the cost of health plan premiums. With that in mind, certain insurance companies will require you to pay a part of your employees’ premiums. However, that’s up to the insurance companies.

Benefits of Texas Health Insurance

While you might not be required to offer a group insurance plan or any sort of health plan, doing so greatly benefits your bottom line as a business owner. Don’t believe us? Just check out these four great benefits of investing in small business health insurance in Texas.

Reduces Absenteeism

When employees have access to preventive care and other services through insurance, they are more likely to stay on top of their health, reducing the number of days they will need off due to illness or injury. Additionally, when you help reduce financial strain by providing health insurance, your employees are less likely to take excessive time away from work due to medical-related expenses.

Boosts Productivity

One study found that healthy workers were three times more productive than those with poor health. Simply put, investing in health insurance is great for your employees and your company’s productivity rates. With their basic needs taken care of, they’re able to focus more on favorable working conditions, resulting in higher staff morale and better performance levels.

Attracts Top Talent

What’s the number one job perk employees look for these days? You guessed it. It’s employer-sponsored healthcare . 68% of employees want this as part of their job, and in today’s hiring landscape, you want to offer the best perks to be able to attract top talent.

Provides Tax Credits

Lastly, you can actually receive a tax credit by offering insurance plans for your employees. It’s part of the Small Business Health Care Tax Credit, and it’s worth up to 50% of the total cost you pay for the premiums. You have to meet a few requirements to qualify for this, however.

Namely, this tax credit is specifically designed for employers with fewer than 25 full-time employees. However, if you qualify, it’s a great way to reduce your business tax bill yearly while offering an attractive perk to top talent.

Texas Health Insurance Options

What are your options as you start to search for small business health insurance  in Texas? You don’t have to purchase health insurance from specific insurance companies. However, there are two main types of health insurance plans most small business owners opt for in these situations.

Individual Insurance Plan

These are ideal insurance plans for business owners with no employees. For example, let’s say you own a content creation agency. You have a Texas-registered LLC, and you outsource some of your content creation work to freelancers but don’t have full-time employees. In this case, an individual health insurance plan would be ideal for you and your family.

Is this necessary? Not technically, no. However, it’s incredibly important these days. Private health insurance can protect you against financial hardship due to high medical bills. Plus, anyone can apply for individual health insurance.

They’re also a great option for small business owners who cannot meet minimum participation requirements for group coverage or for those who are self-employed. It’s worth noting that individual health insurance benefits can be tax deductible, making out-of-pocket costs even lower.

Furthermore, individual health insurance plans give you control and flexibility over your coverage. With individual health insurance, you can tailor your policy to fit your unique needs and circumstances. As you grow personally and professionally, keeping up with your ever-changing lifestyle is easier.

Group Insurance Plan

If you do have employees ,  you’ll likely want to look into a group health insurance plan. Group health insurance plans are a fantastic way for employers to provide benefits while staying within budget. By sharing costs between the employer and employee, group health insurance plans are cost-effective and easily accessible.

Furthermore, group health insurance plans often extend coverage to dependents. This means they can look after their loved ones without worrying about costs. All in all, group health insurance plans balance quality and affordability for small business owners.

Types of Texas Health Insurance Plans

Now that you know what kind of health insurance you might need to look for as a business owner in Texas, what are the most popular plans? Again, you can often customize your health plans to fit your coverage needs and budget these days. However, here are four popular types of Texas health insurance plans to consider.

PPO Health Insurance

PPO plans are Preferred Provider Organization plans. They allow employees to visit any doctor or hospital on the insurance company’s list of preferred providers . This ensures that their claims are paid at the highest level.

PPOs are great for business owners because they don’t limit coverage only to certain doctors and hospitals like HMOs do. Plus, PPOs offer various benefits and help small business owners save money. However, the benefits depend on the type of coverage you need and how many employees you have.

Ultimately, PPO health insurance plans  provide flexibility, cost savings, and reliability, with little to no risk on the business owner’s part. This makes them an excellent choice in today’s competitive market.

HMO Health Insurance

HMO stands for “Health Maintenance Organization.” HMO plans feature a vast network of contracted providers. This includes primary care physicians (PCPs) who can direct members to HMO specialists for more in-depth care if needed.

Additionally, HMO plans are relatively simple and straightforward. As a business owner, this means fewer headaches and confusion. Forget about navigating coverage and paperwork. HMO health insurance plans offer a solid balance between cost and quality of health care services.

Sure, they’re somewhat less flexible than PPO plans. However, they’re most cost-effective in the long run for you.

HSA-Qualified Health Insurance

HSA refers to the Health Savings Plan. These PPO plans are designed for use with a Health Savings Account . This means participants can save pre-tax money and use it for medical expenses later.

For employers, HSA-qualified plans can be further enhanced using Section 105 Healthcare Reimbursement Plans (HRPs). HRPs provide even more advantages. Among them are increased savings and keeping HSA funds in the employer’s hands. However, keep in mind that the contribution limits are somewhat low.

Short-Term Health Insurance

Finally, you might want to consider short-term health insurance . This is ideal for solo business owners in need of temporary health insurance. It’s also ideal for small business owners who can’t offer health insurance to their employees but want to recommend an affordable option they can purchase on their own.

You can secure up to $2 million of coverage with short-term health plans. They’re designed to cover short-term gaps such as furloughs or job changes. It’s a highly flexible option that offers coverage terms, deductibles, and payment options specific to your individual needs.

Plus, you can get started soon after signing up. Most short-term health insurers will have your policy in compliance within 24 hours. Moreover, short-term health insurance is much more affordable than typical health plans.

The trade-off is that the coverage is short-term, obviously. However, if you’re in good health, it’s a great option for you (and a great one to recommend to employees who might need it).

What About Health Sharing Plans?

You might have heard of another option referred to as a “health sharing plan” or a “health share plan.” With this type of health coverage, members must pay a monthly share. They also pay an annual unshared out-of-pocket amount before the plan covers any associated medical expenses.

The biggest benefit?

Health sharing plans let you opt out of certain services you wouldn’t use, so you save money on your premiums. Furthermore, health share plans offer entry into health care coverage with a basic list of included services which is great if you don’t need all the extras that usually come with traditional health insurance.

However, that doesn’t make them the right option for small business owners or their employees. In fact, they’re not technically health insurance plans at all.

Instead of relying entirely on a health insurance company, health-share plans have members pay for some expenses directly from each other. Though this might sound intriguing, these plans usually don’t cover wellness visits or preventive care.

Members are responsible for funding those with their own money. Additionally, they rarely offer coverage for dental or vision care either. Lastly, remember that health share plans typically come with restrictions on pre-existing conditions. This isn’t currently allowed for regular health insurance plans under the ACA.

Group Health Insurance Brokers in Texas

• Evaluating independent health insurance providers
• Expertise in plan underwriting
• Processing health insurance claims
• Easy online applications

There’s more to it than that. However, you (hopefully) get the point. Working with an experienced broker can make all the difference.

Get a Quote

Ready to explore your options for small business health insurance in Texas? We’re here to help! We have over 60 years of experience serving customers looking for quality health insurance at Custom Health Plans.

To start the process, click here to get a free quote. Or, feel free to contact us to chat about your small business needs and how we can customize a plan to fit them. 

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Small business health insurance in texas.

Affordable. And built for Texas small businesses.

Everything may be bigger in Texas, but it doesn’t mean your health insurance costs have to be. Sana is based in Austin, Texas, and we offer comprehensive, flexible plans that fit most any budget. You’ll use Sana’s easy-to-use admin platform, your employees can see any doctor they want, and they’ll have access to free virtual doctors’ visits.

Texas telehealth with a team approach

Your Dallas-Fort Worth and Austin-based employees will receive free, unlimited telehealth appointments through Sana. It’s virtual care with a concierge-level healthcare team dedicated to consistent, compassionate treatment.

Medical services for Texans

Sana partners include: Labcorp , with hundreds of locations throughout the state; Dispatch Health that provides at-home urgent care in Austin, Cleburne, Dallas, Fort Worth, Houston and San Antonio; and Green Imaging , with 150+ locations in Texas, including El Paso, Dallas, Houston, Corpus Christi and Austin. This Sana Care ecosystem is available to members at no cost.

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Sana vs. blue cross, it’s time to change the way you do benefits..

We don’t do hidden fees. With Sana, your costs are transparent and predictable so you can budget with confidence.

Forget out-of-network hassles and limitations. Our PPO Plus network is all-access, meaning you and your employees can choose any provider without out-of-network costs or referrals.

Sana offers you access to high-quality providers and the ability to add dental and vision care to any plan. Video doctors’ appointments, mental wellness, physical wellness, maternity and pediatric care are all included.

You own your plan, so you own your data. We give you access to modern tools that make understanding and administering your plan simple and transparent.

Texas does not require any company to offer health insurance benefits, although the Affordable Care Act (ACA) does. But not all companies are under the health care mandate. If your company has 1 to 50 full-time employees, you do not have to provide them with health insurance. However, offering coverage will make you a more attractive employer to employees evaluating their options.

Sana provides plans to businesses with five or more employees.

Establish your budget and objectives. You can streamline the process by working directly with Sana, so you don’t have to use brokers or third-party administrators. In addition to providing plan administration and claims adjudication, we’ve got a seasoned implementation team to help you onboard. Also, you are not required to wait until your current plan cycle ends. You’ll be able to transition mid-year with our team’s help.

Your costs will vary depending on the percentage of employee premiums you cover, the number of people you enroll, and whether you cover employees only or also their dependents. Your choice of plan also influences costs (and that of your employees).

Sana negotiates pricing with providers based on objective, industry-accepted metrics. Shrinking provider markups reduces the cost of care, making premiums more manageable. As a small business, you can deduct the cost of employee premiums from your federal taxes. You may also qualify for a tax credit.

Of course. The dashboard on our site allows employers and administrators to easily add new employees, update contact information, adjust benefits (such as when an employee has a Qualifying Life Event), or remove employees from the plan. Additionally, plan administrators can take advantage of Mineral (formerly ThinkHR) for free. Mineral provides plan administrators with a team of advisors for assistance with HR-related programs and tasks. They can get a compliant employee handbook with prewritten and automatic policy updates, and they can use an award-winning resource center.

See what our members are saying about Sana.

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• Want some help? Find a SHOP agent or broker.  Visit  Find Local Help  to find a SHOP-registered agent or broker in your area. Using an agent or broker won’t cost you more and can make the process easier.

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Best Texas Health Insurance (2024 Plans)

Ambetter from Superior HealthPlan offers the best health insurance in Texas in 2024. MoneyGeek used factors like age, income, plan types and maximum out-of-pocket costs to evaluate the best health insurance providers in the state.

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About Mark Fitzpatrick

Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC , NBC News and Mashable .

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.

Texas health insurance plans

You have more insurance options for your health than you think, Texas

If you’re self-employed or without insurance from your employer — in other words, you’re looking for individual or family health insurance in Texas — you might be looking for Affordable Care Act insurance. However, we want to make you aware of the whole range of individual and family insurance products we have available in your state.

Plans for health insurance coverage in Texas

Health insurance coverage for multiple years.

TriTerm Medical Insurance , 5  underwritten by Golden Rule Insurance Company, is short term health insurance that offers coverage for preventive care, doctor office visits, and prescriptions.

• Apply once for insurance coverage terms that equal one day less than 3 years
• $2 million lifetime maximum benefit per covered person on most plans
• Eligible expenses for preexisting conditions are covered after 12 months on the plan

Questions about TriTerm medical insurance? Call 1-844-711-0168   / TTY 711 to talk to a representative.

Short term health insurance in Texas

A temporary medical insurance plan like  short term health insurance 1  underwritten by Golden Rule Insurance Company may provide:

• Budget-friendly monthly payments
• Health care coverage while you search for a long term option

Questions about short term insurance? Call 1-844-711-0168   / TTY 711 to talk to a representative.

UnitedHealthcare Individual & Family ACA Marketplace plans in Texas

Looking for health care plans on the Affordable Care Act (ACA) Marketplace? UnitedHealthcare Individual & Family ACA Marketplace plans offer affordable, reliable coverage options from UnitedHealthcare of Texas, Inc.

As part of the  American Rescue Plan Act of 2021  and Inflation Reduction Act of 2022 , many individuals and families are now eligible for lower — or in some cases $0 2, 3, 4   — monthly premiums for ACA Marketplace health coverage.

Call 1-800-273-8095 / TTY 711  to talk to a licensed insurance agent.

Already a member with a UnitedHealthcare Individual & Family ACA Marketplace plan?  Sign in  or call  1-877-265-9199   / TTY 711

Supplemental, dental and vision insurance in Texas

Hospital & doctor insurance.

Health ProtectorGuard fixed indemnity insurance , 6  underwritten by Golden Rule Insurance Company, can supplement your major medical plan by paying cash for eligible, covered medical services, like a doctor visit, a trip to urgent care or a surgical procedure.

• No deductibles or copays to pay first
• Benefits paid regardless of other insurance
• Money to pay costs not covered by major medical plans, like a deductible

Texas dental plans

Dental insurance plans, underwritten by Golden Rule Insurance Company, have no age limit restrictions. 7 They offer coverage for the dental services many medical insurance plans don’t include. 

Texas vision plans

Vision insurance plans, underwritten by Golden Rule Insurance Company, have no age limit restrictions. 7 They offer coverage for the vision services many medical insurance plans don’t include. 

Accident & critical illness insurance

Accidental injuries and critical illness happen when you least expect them. Those unexpected expenses can strain any budget.  Accident insurance 6 and  critical illness insurance 6  can help by paying cash benefits for covered injuries or illnesses.

The Accident Pro series of products, underwritten by Golden Rule Insurance Company, combines accident insurance with critical illness, hospitalization, and accidental death and dismemberment coverage all in one. Some plans are guaranteed issue, meaning your application won’t be turned down for preexisting conditions.

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Medicare plans

Health insurance for individuals who are  65 or older , or those under 65 who may qualify because of a disability or another special situation.

Call 1-844-232-1426 to learn more.

Medicaid plans

We offer low cost or no cost health insurance plans for those with limited incomes.

How Group Size Influences Business Health Insurance Costs

To optimize health insurance costs, business owners and HR professionals often grapple with a critical question: Can group size affect health insurance costs? Understanding this dynamic is crucial, especially as businesses strive to provide competitive and comprehensive benefits while managing costs effectively.

Understanding Group Health Insurance

The cost of group health insurance is not static and can be influenced by various factors beyond the size of the group. Understanding these factors is essential for any business that aims to manage its health insurance costs effectively while ensuring adequate coverage for its employees.

Risk Profile of the Group

One of the primary factors insurers consider is the group's overall risk profile. This includes the age demographics, the general health of the group members, and the industry in which the business operates. Typically, younger groups with a good health record receive lower premiums due to their lower expected healthcare usage, whereas industries with higher health risks might see higher rates.

Geographic Location

The location of your business plays a crucial role in determining insurance costs. Different states have varying healthcare costs and insurance regulations, which can affect premiums. For example, states with higher medical costs or those that mandate more comprehensive coverage may see higher insurance premiums.

Plan Design

The specifics of the plan chosen also significantly impact costs. Plans with higher deductibles, copays, or coinsurance generally have lower premiums because they shift more of the cost burden to the employees. Conversely, plans that offer extensive coverage with low out-of-pocket expenses for employees will generally come at a higher premium.

Number of Covered Individuals

While this ties into the group size, it specifically refers to the number of dependents covered under the plan. More dependents lead to higher premiums because it increases the potential for claims.

Carrier and Network Type

The choice of the insurance carrier and the network type can also affect costs. Some carriers might offer more competitive rates but have more restricted provider networks. Conversely, plans that include a broader network of doctors and hospitals tend to be more expensive.

Renewal Rates and Claims History

The group’s claims history from the previous year can influence renewal rates. A year with high claims can lead to increased premiums in the following year as the insurer adjusts for the increased risk. Businesses should manage this by promoting wellness programs that may help reduce overall health-related claims.

Regulatory Changes

Lastly, changes in health insurance regulations can impact costs. New mandates or modifications in existing laws may require plans to cover additional benefits, potentially driving up costs.

By closely analyzing these factors, businesses can better negotiate with carriers, choose the most cost-effective plans, and manage their health insurance expenses more effectively. 

Small Groups vs. Large Groups for Health Insurance

Can group size affect health insurance costs? Let’s examine the pros and cons of small vs large group health insurance.

Pros and Cons of Each Group Size

Small Groups:

• Pros: Often have more personalized service and flexibility in plan options. They also benefit from specific state-level protections that aim to balance insurance costs.
• Cons: Small groups often face higher per-person costs due to their size. Insurers view smaller groups as having a higher risk due to less predictable medical claim patterns.

Best group health insurance for small businesses 

Large Groups:

• Pros: Benefit from economies of scale, which can lead to lower per-person costs. Large groups, due to their buying power, can negotiate more favorable terms with insurers.
• Cons: While generally cheaper per capita, large group plans may offer less personalized coverage options and could be less responsive to individual needs within the group.

Large Group Plans and Cost Reduction

Large group plans are often synonymous with cost reductions in health insurance for businesses. Understanding their advantages and how they can lead to potential savings is crucial for business owners looking to optimize their employee benefits strategy while managing costs effectively.

Advantages of Large Group Plans

What is a large group health plan? Large group health insurance plans cover organizations with significant employees, typically exceeding 50 members. Why is group insurance cheaper? The sheer scale of these groups offers several advantages:

• Risk Pooling: Larger groups can spread the risk across a more extensive base, often lowering per capita costs. With a wider array of health profiles, the risk of high-cost claims impacting the overall group is minimized.
• Negotiating Power: With more members to insure, large groups have significant bargaining power when negotiating terms with health insurance carriers. This can lead to lower premiums and better coverage options that might not be available to smaller groups.
• Administrative Cost Efficiency: Due to economies of scale, the administrative costs associated with managing health benefits are generally lower for large groups on a per-member basis.

Potential Savings for Business Owners

What are the advantages of group plans? One advantage is the potential savings associated with large group plans can be substantial, offering a strategic advantage to businesses that qualify:

• Lower Premiums: Due to their lower risk and greater negotiating power, large groups often secure more favorable premium rates than small groups or individual plans.
• Customized Benefit Design: Large groups have the flexibility to tailor benefits plans to meet the specific needs of their employees better, potentially enhancing the plan's overall value while keeping costs in check.
• Improved Coverage Options: Often, insurers offer more comprehensive coverage options to large groups, including wellness programs and preventive care, which can improve overall employee health and reduce long-term costs.

Leveraging Large Group Benefits

To fully leverage the benefits of large group plans, business owners should consider the following strategies:

• Annual Review and Negotiation: Regularly review your health insurance plan and negotiate with providers to ensure that your coverage meets your needs at the best price.
• Employee Education: Educate employees on the plan's benefits and available features. Well-informed employees are more likely to utilize the plan effectively, which can lead to better health outcomes and cost savings.
• Wellness Initiatives: Implement wellness programs that encourage healthy lifestyles among employees. Preventive measures can reduce healthcare costs by decreasing the need for medical treatments.

Large group plans are an effective way for businesses to reduce health insurance costs while providing robust benefits to their employees, illustrating how group size can affect health insurance costs. 

State Variations on Health Insurance

Health insurance costs and coverage options can vary significantly from state to state, influenced by local regulations, competitive landscapes, and the general health demographics of the population. For businesses, especially those operating in multiple states or considering expansion, understanding these variations is essential for developing an effective health insurance strategy.

Regulatory Impact on Costs

Each state in the U.S. has its regulations governing health insurance, which can affect everything from the types of coverage that must be offered to the pricing structures insurers can use. For example:

• Mandated Benefits: Some states require that health insurance plans cover specific services, such as maternity care, mental health services, or substance abuse treatment, which can increase the cost of premiums.
• Community Rating Laws: In states with strict community rating laws, insurers are restricted in how much they can vary premiums based on factors like age or health status. This can lower costs for older or less healthy individuals but might increase premiums for younger or healthier people.
• Risk Pools: The size and health of the state’s insurance risk pool also affect costs. States with healthier populations often enjoy lower average insurance costs, while those with higher rates of chronic illness or poor health outcomes may face higher costs.

State-Specific Examples and Considerations

Different states also have unique health insurance markets and strategies to manage costs and coverage:

• New York and California: These states have very active regulatory environments and often lead in implementing policies that broaden coverage but may also lead to higher premiums.
• Texas and Florida: These states have less restrictive regulations, which can mean more variation in plan types and costs. Potentially, these states offer lower-cost options but with varying levels of coverage.
• Minnesota and Massachusetts: Known for their innovative approaches to healthcare management and funding, these states offer programs that can reduce costs for businesses and individuals while maintaining high levels of coverage.

Navigating Multi-State Insurance Challenges

For businesses operating across state lines, these variations present unique challenges and opportunities:

• Compliance: Ensuring compliance with multiple regulations can be complex and requires careful planning and administration.
• Plan Selection: Companies must carefully select insurance plans that meet the needs of their employees in different states while also effectively managing costs.
• Broker Expertise: Utilizing brokers knowledgeable about specific state markets and regulations can provide invaluable guidance in navigating these complexities.

Understanding state-specific insurance regulations and market conditions is crucial for businesses to manage their health insurance costs and ensure compliance effectively. 

Cost-Effective Alternatives to Group Plans

While comprehensive, traditional group health insurance plans can sometimes be financially burdensome, particularly for small businesses or those with a highly diverse workforce. As a cost-effective alternative, Health Reimbursement Arrangements (HRAs) like ICHRA (Individual Coverage HRA) and QSEHRA (Qualified Small Employer HRA) provide flexible and potentially more affordable solutions for businesses looking to offer health

Overview of HRAs: ICHRA and QSEHRA

HRAs are employer-funded plans that reimburse employees for medical expenses and, in some cases, insurance premiums. These arrangements are not health insurance plans but rather a means for employers to provide health benefits without needing a traditional group health plan.

• ICHRA (Individual Coverage HRA): Introduced in 2020, ICHRAs allow employers of any size to reimburse employees tax-free for health insurance purchased individually rather than providing a one-size-fits-all group plan. This flexibility allows employees to choose the best plan, while employers can control costs by setting reimbursement rates.
• QSEHRA (Qualified Small Employer HRA): Specifically designed for small businesses with fewer than 50 employees that do not offer a group health plan, QSEHRAs allow employers to reimburse employees for qualifying health expenses, including premiums for individual health insurance policies, up to a set annual limit.

Benefits of ICHRA and QSEHRA for Different Group Sizes

• Benefits for Large Groups: ICHRAs can be particularly attractive for larger companies looking to customize their health benefits offerings. By allowing employees to select their plans, businesses can cater to a broader range of needs and lifestyles, enhancing employee satisfaction and retention without the administrative complexity and cost associated with traditional large-group plans.
• Benefits for Small Groups: For smaller businesses, QSEHRAs offer a viable solution to provide health benefits without the financial strain of sponsoring a group health plan. Since QSEHRAs require no minimum contribution requirements, small employers can define their own budget constraints, providing a predictable cost while still offering substantial health benefits to their employees.

Implementing HRAs

To implement an HRA, businesses must ensure compliance with IRS regulations, which can include providing appropriate documentation and adhering to contribution limits. Employers should also communicate effectively with their employees about accessing and using their HRA benefits, possibly providing training or resources to help employees understand how to select individual insurance plans and submit expenses for reimbursement.

Tax Advantages

Both ICHRAs and QSEHRAs offer significant tax advantages. Reimbursements made through these HRAs are tax-free for employees, provided they are used for qualifying medical expenses. For employers, contributions to HRAs are deductible as a business expense, which can reduce the overall taxable income of the business.

In conclusion, HRAs such as ICHRA and QSEHRA provide flexible, cost-effective alternatives to traditional group health plans. By understanding and utilizing these options, businesses of all sizes can offer tailored health benefits solutions that meet their workforce's diverse needs while managing costs effectively.

How much do small-group health plans cost? 

Choosing the Right Group Plan for Your Business

Selecting the appropriate group health insurance plan is critical for any business. It involves balancing cost, coverage, and compliance to meet the organization's and its employees' needs. Here’s a guide to help businesses navigate the complex process of choosing the right group plan.

Assessing Business Needs and Employee Preferences

The first step in choosing the right group plan is understanding your business's specific needs and your employees' preferences. Consider the following aspects:

• Demographics: Age, gender, and the prevalent health conditions in your workforce can influence the coverage you need. For instance, a younger workforce might prioritize mental health benefits and wellness programs, whereas older employees might need more comprehensive chronic disease management.
• Business Objectives: Align the health plan with your company's broader objectives, such as improving employee satisfaction, reducing turnover, or attracting top talent.
• Budget Constraints: Determine how much your business can afford to spend on health insurance. This will guide you in choosing plans that offer the best value without compromising the necessary coverage.

Guide to Small Business Health Plans 

Comparison of Available Plans

Once you've assessed your needs, compare different health insurance plans. Look for these key elements:

• Coverage Details: Evaluate each plan's coverage, including preventive care, hospitalization, emergency services, prescription drugs, and specialty care. Check for any exclusions or limitations that could affect employee satisfaction.
• Cost: Analyze each plan's cost-effectiveness by considering premiums, deductibles, copays, and out-of-pocket maximums. Lower premiums might mean higher out-of-pocket costs for employees, affecting their decision to seek necessary care.
• Network of Providers: Ensure the plan includes a wide network of doctors and healthcare facilities. A more extensive network provides better accessibility for your employees and reduces their out-of-pocket expenses.
• Additional Benefits: Some plans offer extra perks, such as telemedicine, wellness programs, and employee assistance programs, which can enhance the overall attractiveness of your benefits package.

Engaging with Stakeholders

Involving key stakeholders in the decision-making process is crucial. This includes engaging with:

• HR Department: They will manage the plan and handle any associated administrative tasks.
• Employees: Gather feedback through surveys or meetings to understand their health needs and preferences.
• Insurance Brokers or Consultants: These professionals can offer expert advice based on your business size, industry, and specific needs.

Regular Review and Adaptation

Health insurance needs can evolve due to changes in your workforce, the economic environment, or healthcare regulations. Regularly review your group plan to ensure it remains aligned with your business objectives and employee needs. Be prepared to make adjustments as necessary to maintain an optimal balance between coverage and cost.

Employee insurance for small businesses

How Group Size Influences Health Insurance Costs for Businesses

Choosing the right health insurance plan for your business is pivotal for managing costs and ensuring employee satisfaction and retention. Throughout this discussion, we've explored how the size of a group can significantly affect health insurance costs. Larger groups generally benefit from lower per capita costs due to economies of scale and greater bargaining power. Conversely, smaller groups often face higher costs but may gain from more tailored health plans and potentially beneficial state-specific regulations.

Key Takeaways:

• Risk Pooling: Larger groups provide insurers with a lower risk, which often translates into reduced premiums.
• Customization: While larger employers can negotiate comprehensive benefits at competitive rates, smaller groups can tailor plans to meet specific demographic needs, balancing cost with coverage.
• State Regulations: Understanding the impact of state-specific insurance laws and regulations is crucial as they can significantly influence premium rates and available coverage options, differing markedly from one state to another.
• Alternative Options: For businesses looking for more flexibility and potentially lower costs, HRAs like ICHRA and QSEHRA present viable alternatives to traditional group plans, allowing businesses to reimburse employees for individual insurance costs effectively.

As businesses grow and evolve, so should their approach to health insurance. Regular assessments of group health plans are essential to ensure they continue to meet the changing needs of your business and workforce. By staying informed about how group size affects insurance costs and remaining adaptive to industry trends and regulations, businesses can better navigate the complexities of health insurance to find the most cost-effective and beneficial solutions for their employees.

We encourage business owners and HR professionals to consider these factors carefully to make informed decisions that align with their operational goals and the well-being of their employees. By doing so, you foster a supportive work environment and contribute to your business's long-term sustainability and success.

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Susanne is a copywriter specializing in the health and wellness industry. Before starting her own business, she spent nearly a decade at a marketing agency doing all of the things – advisor, copywriter, SEO strategist, social media specialist, and project manager. That experience gives her a unique understanding of how the consumer-focused content she writes flows into each marketing piece. Susanne lives in Oklahoma City with her husband and two daughters. She loves being outdoors, exercising and reading.

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How to Choose a Health Insurance Plan for Your Small Business

A s a small business owner, you're no doubt aware that it's important to not only attract solid talent, but do what you can to retain talented employees. And a good way to do that is to make sure you're offering a nice benefits package. That package might include a retirement savings plan you help contribute to, paid vacation time, and health insurance.

Now, you should know that if you run a business with fewer than 50 full-time employees, you're technically not required to provide health insurance. But that doesn't mean you shouldn't.

Healthcare can be an astronomical expense in the absence of insurance. And even if you're willing to raise salaries in lieu of providing insurance, you may find that prospective employees are turned off by the prospect of having to go out and purchase health coverage themselves.

Of course, choosing a health plan for your business isn't exactly an easy thing to do. Here are some tips for navigating the process.

1. Decide how much you're willing and able to spend

Within the realm of small business health insurance, there's a range of plans. As you might imagine, costlier plans tend to offer superior coverage, while those that are less expensive don't offer as much to participants.

It's important to be realistic about how much you can afford to spend on health insurance. As a smaller operation, you can't benefit from the bulk rates a company with 12,000 employees might snag. So you'll need to take a look at your banking records and see what's realistic, keeping in mind that you'll likely be picking up a large share of those premium costs.

2. Figure out if you want a high-deductible insurance plan

High-deductible health insurance plans can be burdensome for participants -- especially those with family members who tend to get sick often. But the costs for these plans can be more reasonable, as plans with higher deductibles tend to come with lower premiums. That's something to keep in mind if you'll be covering those premiums at 100%.

Also, if you offer a high-deductible plan, it may allow you to offer a health savings account in conjunction with that plan. That could make it easier for your employees to cover their medical costs while reaping tax savings.

3. Consider partnering up with an insurance broker

As a small business owner, you may not be all that well-versed on health insurance options. But it's the job of an insurance broker to walk you through your options and do research on your behalf, so you can focus on running your business. Not only might an insurance broker help you find the right plan, but they can generally help you get set up so you don't find yourself lost in a sea of paperwork.

Whether a health insurance plan is something you're looking to offer because it's a requirement or because it's a benefit you want to provide, it's important to find the best plan for your company. Take your time in making that decision so you and your employees wind up happy with it.

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Can a business pay for employees' individual health insurance plans?

Health Benefits • May 14, 2024 at 9:58 AM • Written by: Holly Bengfort

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In today's ever-evolving workforce, business owners are constantly looking for new ways to attract and retain top talent . Instead of offering a costly group health plan, one tactic they may consider is offering to pay employees' individual health insurance costs .

While it may seem like a generous and attractive perk for employees, employers need to consider several factors before deciding to pay for individual health insurance plans. From costs and tax implications to legal requirements and employee preferences, navigating this benefit option can be complex.

In this article, we'll go over a better type of employer-sponsored health benefit that allows you to reimburse your employees for their healthcare costs instead of paying premiums directly.

Takeaways from this blog post: Under the ACA, an employer cannot directly pay for an employee’s health insurance premiums. Employers do have the option to reimburse employees on a tax-free basis for more than 200 eligible medical costs, including healthcare premiums, through an HRA. By offering to reimburse employees for their individual health plan coverage, businesses can provide a valuable benefit that helps boost recruitment and retention.

Are you a small employer? Get our guide on how to offer health benefits with a tight budget.

How business owners can pay for individual health insurance plans

Historically, organizations could pay for employees’ individual health insurance premiums directly. However, the Affordable Care Act (ACA) changed this. IRS Notice 2015-17 1 clarified information about employer payment plans (EPPs) and whether employers could pay for employees’ individual health insurance plans.

Because the IRS and ACA consider EPPs group plans, they must meet ACA standards. Since EPPs can’t integrate with individual health insurance plans, they don’t satisfy the ACA. Offering an EPP could subject you to fines if you have 50 or more full-time equivalent employees (FTEs).

Thankfully, federal law allows employers to reimburse employees for their monthly premiums for individual health insurance policies, as long as it's done through a compliant health reimbursement arrangement (HRA). This allows employees to choose a health insurance plan that best fits their individual needs while still receiving financial assistance from their employer.

HRA vs. traditional group health insurance

Employers often associate employee health insurance with a group health plan. When employers purchase a group policy, they offer their employees and dependents coverage. Employees have the option to enroll or decline coverage, with most plans requiring a minimum participation rate of 70%. From there, the employer and employee split the health insurance premiums . This isn't always a problem for larger companies with big budgets, but it can put a strain on small business owners.

HRAs are the more cost-effective health insurance option. An HRA is an employer-funded health benefit that reimburses employees tax-free for out-of-pocket medical expenses . With a stand-alone HRA, employers can reimburse employees for their insurance premium costs instead of buying the health plan coverage for them. This is especially beneficial in states where individual coverage is cheaper than group coverage.

How an HRA works

HRAs aren't as complicated as they may seem. Each type of HRA follows the same basic steps.

Here's a breakdown of the HRA process:

• The employer sets aside a specific amount of tax-free money for each employee.
• Employees pay for medical expenses such as health insurance, doctor visits, prescriptions, and other healthcare services using their own money.
• They submit proof of those out-of-pocket costs to their employer for reimbursement.
• Once the employer or third-party administrator approves the expense, employers reimburse employees up to their allowance amount. Employers can reimburse employees on a pre-tax basis for more than 200 medical expenses listed in IRS Publication 502 and the CARES Act.

Common types of HRAs

There are a few different types of HRAs that businesses can offer to reimburse employees for their individual health insurance plans, including the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA).

This chart shows how they compare.

How HRAs benefit employers

HRAs are employer-friendly for two reasons: they offer tax advantages and work with all budgets.

Under an HRA, reimbursements are exempt from payroll taxes for employers. Employees enrolled in a policy that meets minimum essential coverage (MEC) requirements, such as a plan from state or federal health insurance marketplaces, can participate in the HRA, meaning they also receive tax-free reimbursements.

Unlike a traditional group health plan, an HRA isn't subject to unpredictable rate increases or strict participation requirements. They're a more affordable alternative since employers control their own budgets. They set a monthly allowance that they can afford, so they can offer employees as much or as little as they choose.

John F. Pace is a CPA at Pace & Associates 2 with more than 40 years of experience. He's observed various business insurance structuring scenarios, including the intricate ways employers handle health insurance. He finds HRAs beneficial because they offer greater flexibility and tax benefits.

"For example, in one instance at my firm, we transitioned a client from a traditional group insurance plan to an HRA," Pace said. "This change not only streamlined their benefits administration but also resulted in notable cost savings, echoing similar benefits to the ones I managed during my tenure overseeing family trusts and associated commercial properties, where every financial decision impacted broader estate and tax planning strategies."

How HRAs benefit employees

In today's competitive labor market, offering competitive benefits is crucial for attracting top talent. Employers also need to keep job satisfaction high if they want to discourage their current employees from looking for better opportunities elsewhere.

PeopleKeep's 2024 Employee Benefits Survey found that 81% of employees said an employer’s benefits package is an important factor in whether or not they accept a job. Another 92% of employees said that health benefits are an important employee benefit.

While a traditional group health plan can satisfy this need, it's a one-size-fits-all approach that groups your employees together. HRAs promote individuality since your employees can pick the health insurance plans that meet their specific wants and needs. In addition to having their health insurance premiums reimbursed, they can also submit other eligible healthcare expenses for reimbursement, resulting in additional savings.

How PeopleKeep can help

If you’re new to offering HRAs, PeopleKeep can help. We specialize in HRA administration, helping thousands of employers easily reimburse their employees with our hassle-free software. Our team of experts generates legal plan documents, reviews employee expenses based on IRS guidelines, and sends necessary notices automatically for your convenience. This frees up more time for you to focus on running your business.

Healthcare costs are on the rise, and many employers are seeking out more affordable healthcare coverage options for their employees. An HRA is an excellent alternative to a costly group health plan. With a QSEHRA or an ICHRA, employers can reimburse employees for their individual health insurance coverage on a pre-tax basis. Providing reimbursement for employees' individual health insurance plans can be a cost-effective and attractive benefit for businesses looking to take care of their employees' well-being while staying within their budgets.

This article is for information purposes only. It's important for businesses to consult with legal and financial professionals to ensure compliance with applicable laws and regulations when implementing this type of benefit.

This article was originally published on April 23, 2013. It was last updated on May 14, 2024.

• https://www.irs.gov/pub/irs-drop/n-15-17.pdf
• https://pace.cpa/

New to HRAs? Learn which is best for you in our comparison chart.

Holly Bengfort

Holly is a content marketing specialist for PeopleKeep. Before joining the team in 2023, Holly worked in television news as a broadcast journalist. As an anchor and reporter, she communicated complex stories to the vast communities she served on a daily basis. Her background has given her a greater understanding of people and the issues that affect our lives. When Holly isn’t writing, she enjoys reading, exercising, and spending time at the beach.