small business health insurance employees multiple states

Small Business Health Options Program (SHOP)

A new way to shop.

The Affordable Care Act introduced a new way for small business employers to shop for group health insurance. SHOP is an online marketplace where eligible employers can choose coverage options for their employees and where their employees can shop for insurance.

Learn more about the SHOP plans UnitedHealthcare offers.

A broker or insurance agent can help employers choose coverage options for their employees through the SHOP Marketplace. Employers can also choose to work directly with us or shop on their own through a SHOP Marketplace.

• DC - Members of Congress
• Massachusetts

What employers can offer plans through the SHOP?

• In most states, eligible employers must have 50 or fewer full-time equivalent employees to participate in the SHOP Marketplace. In California, Colorado, New York and Vermont, eligible employers may have up to 100 full-time equivalent employees.
• Employers pay a portion of the premium, but no federal subsidy assistance is available to employees who purchase health insurance through the SHOP.
• Small business employers with fewer than 50 full-time equivalent employees are not required by health reform law to offer health insurance.

What is the Small Business Tax Credit?

The Small Business Tax Credit is available to employers with fewer than 25 full-time equivalent employees (not counting owners or their family members) who earn less than about $56,000 annually.

• These employers must pay 50 percent of the premiums to qualify, but they may also be eligible for a tax credit of up to 50 percent.
• This is a temporary tax credit.

What plans are offered through the SHOP?

Employers may choose one plan or, in many states, have the option to offer multiple plans to employees through the SHOP.

• Meet Essential Health Benefits requirements .
• Meet minimum value requirements because the plan pays at least 60 percent or more of the plan's total allowed benefit costs anticipated for a standard population.
• Are available in four insurance plan categories or metal levels known as Bronze, Silver, Gold and Platinum.
• Work with us: 1-866-469-9226 (for all states except New York)
• If New York: 1-888-201-4216
• Work with a broker
• Shop on your own through each state exchange marketplace: DC Health Link , Maryland Health Connection , Massachusetts Health Connector , NY State of Health Marketplace
• Or visit healthcare.gov/small-businesses to learn more

Need help in another language?

• Visit language assistance resources for help in different languages.
• Para servicio al cliente en español, por favor llame al 1-800-985-3859, TTY 711, o visite la página de asistencia de recursos de idiomas .
• 語言協助 / 不歧視通知

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Exploring coverage options for small businesses

Health insurance for businesses, group health insurance coverage.

• Learn more about purchasing insurance through SHOP
• See SHOP plans and prices
• How the Affordable Care Act (ACA) affects small businesses

Health reimbursement arrangements

• Qualified small employers
• Individual coverage, such as Marketplace plans
• Additional health benefits (when offered with a traditional group plan)

Health Savings Accounts and other tax-favored health plans

A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums.

Refer to glossary for more details.

Health Reimbursement Arrangements (HRAs) are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over to be used in subsequent years. The employer funds and owns the arrangement. Health Reimbursement Arrangements are sometimes called Health Reimbursement Accounts.

Employers With Workers In Several States Face Challenge Using SHOP Exchanges

By Jordan Shapiro, The St. Louis Post-Dispatch November 14, 2014

Republish This Story

Businesses with employees in multiple states could face additional hurdles when looking to offer health insurance coverage through the online marketplace.

The online access to the Small Business Health Options Program, or SHOP, is scheduled to go live Nov. 15. Firms with fewer than 50 full-time workers will then be able to sign up for SHOP plans through HealthCare.gov.

But like the marketplace for individual customers, SHOP plans will be organized by state — posing an additional challenge to small employers with workers who live or work in different states.

The problem isn’t new as firms have coped with the issue of insuring multistate businesses for years. But it could create a stumbling block to small businesses looking to use the SHOP marketplace to provide health insurance — and potentially secure a lucrative tax credit worth up to 50 percent of the health coverage’s cost.

Employers looking to offer coverage through SHOP must create a HealthCare.gov account, upload an employee roster and select the level of coverage they want to offer to their workers.

But each state has varying options and regulations for selecting plans, and possibly different access points.

“Its an ongoing issue of how to purchase insurance that way,” said Mary Timmel, an outreach manager for the Small Business Majority. “It does get a little complicated.”

In Missouri, for example, employers will be able to select a baseline level of coverage for their workers, who would then be responsible for selecting whatever plan best meets their needs.

That option, however, doesn’t exist in Illinois’ SHOP marketplace, where employers will only be able to select one plan for their employees.

Federal guidelines for the SHOP exchange say that firms should purchase SHOP coverage through the state where their business address is located. If they have multiple business addresses, then they may need to offer different plans for each state in which they have a location.

“The employer can decide whether they want to offer coverage through the Missouri marketplace or if they want to offer it through both” locations, said Linda Blumberg, a health policy expert with the Urban Institute.

If the states both have federally facilitated marketplaces, then the business seeking SHOP coverage would need to create only one HealthCare.gov account.

But if one of the business locations is in a state with its own exchange, then the company would need to create an account for each marketplace. Missouri and Illinois both have exchanges run by the federal government.

Blumberg said enrollment shouldn’t be too complicated for businesses with addresses in Missouri and Illinois, but added that employers should pay attention to which providers are available in a carrier’s network when making decisions about a SHOP plan.

“If the provider network for the plan seem to be more concentrated then they may need to offer something in the other marketplace,” she said.

It’s not clear how multistate businesses will cope with SHOP’s participation requirement given the different eligibility requirements and plan availability.

To participate in SHOP coverage, firms must have 70 percent of their employees agree to join the plan. In an effort to boost sign-ups, federal health officials are waiving that requirement for the first month of enrollment.

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The problem isn’t new as firms have coped with the issue of insuring multistate businesses for years. But it could create a stumbling block to small businesses looking to use the SHOP marketplace to provide health insurance — and potentially secure a lucrative tax credit worth up to 50 percent of the health coverage’s cost.

“Its an ongoing issue of how to purchase insurance that way,” said Mary Timmel, an outreach manager for the Small Business Majority. “It does get a little complicated.”

That option, however, doesn’t exist in Illinois’ SHOP marketplace, where employers will only be able to select one plan for their employees.

“The employer can decide whether they want to offer coverage through the Missouri marketplace or if they want to offer it through both” locations, said Linda Blumberg, a health policy expert with the Urban Institute.

Blumberg said enrollment shouldn’t be too complicated for businesses with addresses in Missouri and Illinois, but added that employers should pay attention to which providers are available in a carrier’s network when making decisions about a SHOP plan.

“If the provider network for the plan seem to be more concentrated then they may need to offer something in the other marketplace,” she said.

It’s not clear how multistate businesses will cope with SHOP’s participation requirement given the different eligibility requirements and plan availability.

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Small Business Health Options Program (SHOP)

The Small Business Health Options Program (SHOP) helps businesses provide health coverage to their employees.

SHOP insurance is generally available to employers with 1-50 full-time equivalent employees (FTEs). If you have fewer than 25 employees, you may qualify for the Small Business Health Care Tax Credit, if you buy SHOP insurance. Learn more about SHOP eligibility rules and the Small Business Health Care Tax Credit .

If you're a sole proprietor or self-employed with no employees, you may be able to get individual coverage through the Health Insurance Marketplace for individuals and families . 

Enrolling in SHOP insurance

Employers have two options for enrolling in SHOP insurance:

• Through an insurance company
• With the assistance of a SHOP-registered agent or broker

To learn more about SHOP visit HealthCare.gov .

Benefits of SHOP Insurance

• You control the coverage you offer and how much you pay toward employee premiums.
• You can choose from high-quality private health insurance plans that meet the needs of your business and employees.
• You can choose to offer health only, dental only, or both health and dental coverage. If offering dependent coverage and an employee enrolls, the employee’s dependents can enroll in health only, dental only, or both health and dental coverage.
• You can start coverage any time of the year.
• If you have fewer than 25 employees, you may qualify for a Small Business Health Care Tax Credit worth up to 50% of your premium costs (up to 35% for tax exempt/non-profit employers). You can still deduct from your taxes the rest of your premium costs not covered by the tax credit.  The tax credit is generally available only when an employer enrolls in a SHOP plan . Use the Small Business Health Care Tax Credit Estimator to find out if you may qualify and how much you may save.

 How to know if you qualify for SHOP 

• SHOP insurance is available to employers with 1-50 full-time equivalent (FTE) employees in most states (in some states, employers with 1-100 employees qualify). Use our FTE Employee Calculator to find out if you qualify to use SHOP.
• You must offer SHOP coverage to all of your full-time or FTE employees – generally those working 30 or more hours per week on average.
• In many states, at least 70% of employees offered coverage must accept the offer, or be covered by another form of coverage, for the employer to participate. (Employers who apply for or renew SHOP coverage between November 15 and December 15 each year can enroll without meeting this requirement.) For help calculating the SHOP minimum participation rate (MPR) in your state, visit the MPR Calculator .
• You must have an office or employee work site within the state whose SHOP you want to use.

Get more details on SHOP eligibility rules .

Preview plans and prices now

Browse health and dental plan information right now. See the available plans and sample prices based on the number and ages of employees and their dependents.

SHOP Tools and Resources

• English (PDF)
• Spanish (PDF)
• Full-time Equivalent (FTE) Employee Calculator
• Small Business Health Care Tax Credit Estimator
• Minimum Participation Rate (MPR) Calculator
• See Plans and Prices
• SHOP Eligibility Determination Form

SHOP regulations and guidance:

For additional resources, please visit marketplace  

Contact the SHOP Call Center at 1-800-706-7893 (TTY: 1-888-201-6445)

• Search Search Please fill out this field.

We independently evaluate all recommended products and services. If you click on links we provide, we may receive compensation. Learn more .

• Business Insurance
• Small Business Insurance

Best Health Insurance Companies for Small Businesses for 2024

Blue Cross Blue Shield stands out as the best health insurance company for small businesses because of its range of coverage options. The company offers a nationwide preferred provider organization (PPO) network and extra benefits for employees, including an extensive discount program. 

Depending on your state, you may have a few options for finding health coverage for your employees, including through the Small Business Health Insurance Options Program (SHOP)—a government marketplace for small business health plans—and by purchasing a traditional group health plan from a broker or directly from an insurer. 

To choose the best health insurance companies for small businesses, we evaluated major health insurance carriers based on financial strength, customer satisfaction, coverage options, telehealth and wellness benefits, digital tools, and more. These are our top picks. 

• Best Overall: Blue Cross Blue Shield
• Best for Customer Satisfaction: Kaiser Permanente
• Best for Part-Time and Seasonal Workers: UnitedHealthcare
• Best for Self-Funded Plans: Aetna
• Our Top Picks

Blue Cross Blue Shield

Kaiser Permanente

UnitedHealthcare

• See More (1)

The Bottom Line

• Insurance Options

Why You Should Trust Us

• Methodology

Best Overall : Blue Cross Blue Shield

Blue Cross Blue Shield (BCBS) offers flexible options to small business owners, including the option to access the nation’s leading PPO network. In many states, BCBS employee plans come packed with extra benefits, and most plans include an extensive discount program.

Nationwide availability

Health and wellness discounts

Workplace wellness programs in many states

Poor J.D. Power ranking in some regions

Blue Cross Blue Shield, which is also our pick for the best health insurance company overall, offers employers many options. Among them are plans that include access to the BlueCard PPO network, which gives employees coverage when traveling nationwide. In some states, BCBS offers fully insured, level-funded, and self-funded plans. Blue Cross Blue Shield is a group of companies, so benefits and plans vary by region, but many member companies offer extra benefits. 

For example, the member company Anthem provides an employee assistance program at no extra cost to help members manage stressful events, from legal issues to the search for care. In many states, BCBS plans also come with 24/7 telehealth and access to mobile app plan management. Most members also get access to Blue365, an extensive discount program that also offers a $25 gym membership in some states. 

BCBS and Anthem companies had a combined average of 3.5 stars out of 5 stars from the National Committee for Quality Assurance (NCQA), an independent body that judges insurance plans on the quality of their providers, as well as customer satisfaction. But customer satisfaction ratings vary by region. Check the 2023 J.D. Power U.S. Commercial Member Health Plan Study to see how BCBS fared in your region. While rankings are poor in many regions, BCBS was top-ranked in Florida. 

BCBS companies also have an A or A- financial strength rating from AM Best . 

Best for Customer Satisfaction : Kaiser Permanente

Kaiser Permanente has top customer satisfaction ratings from the NCQA and J.D. Power, along with an award-winning app and a suite of virtual care options.

4.2-star average NCQA rating

Top-ranked by J.D. Power in most regions where available

Administers HRAs, HSAs, and FSAs

Robust support for chronic conditions

Only available in eight states and D.C.

Kaiser Permanente has better customer satisfaction ratings than any of the major health insurance providers we reviewed, with a 4.2-star average NCQA rating and top J.D. Power rankings in four regions. The company offers employers many options. While Kaiser is known for its health maintenance organization (HMO) plans , it also offers preferred provider organization (PPO) plans . Employees can pair some plans with a Kaiser-administered health reimbursement arrangement (HRA) , health savings account (HSA) , or flexible spending account (FSA) . Members can even submit HRA and FSA claims using their mobile phone cameras. 

Free wellness coaching is included at no cost. Members who are at risk for chronic conditions are automatically enrolled in a disease management program with comprehensive support and remote patient monitoring. And Kaiser offers several additional employee benefits, including dental, vision, acupuncture, and chiropractic. Kaiser is also our top pick for the best digital tools, with an award-winning app, 24/7 virtual care, mental health apps, and online physical therapy. 

The main drawback is that Kaiser Permanente isn’t available everywhere. The company only offers plans in eight states and the District of Columbia. Kaiser does offer a SHOP (Small Business Health Options Program) plan in Georgia and Virginia.

Best for Part-Time and Seasonal Workers : UnitedHealthcare

UnitedHealthcare offers small business plans nationwide, including a unique coverage solution for contractors, part-time workers, and seasonal employees.

Offers a unique program for non-benefit-eligible workers

Offers wellness resources and incentives

A+ financial strength rating from AM Best

J.D. Power ratings vary by region

UnitedHealthcare is our top pick for small businesses with several types of employees and contractors, including part-time and seasonal workers. Its FlexWork program offers coverage for non-benefit-eligible employees nationwide. The program provides group-premium-equivalent rates for three plan types designed for different types of workers, and you can add extra benefits like $0 telehealth, dental, and vision. 

UnitedHealthcare also offers members access to Self Care (a wellness app), fitness incentives, an online weight loss program, a smoking cessation program, and more. Plus, UnitedHealthcare offers a large provider network of more than 1.3 million healthcare providers. 

UnitedHealthcare also boasts an A+ financial strength rating from AM Best and a 3.5-star average NCQA rating. Though J.D. Power ratings vary by region, UnitedHealthcare was the top-scoring company in Texas and Virginia. The company also offers SHOP plans in Maryland, Massachusetts, New York, and D.C.

Best for Self-Funded Plans : Aetna

Aetna is one of the few health insurance companies to offer self-insured plans tailored to small businesses. We also like that it offers virtual primary care and a CVS allowance.

Offers self-funded plans for up to 25% upfront savings

Offers a variety of health expense funds

Optional robust behavioral health benefits

Members of some plans can access affordable care at MinuteClinic locations

Fully insured group plans in some states don’t include MinuteClinic benefits

Self-funded plans from Aetna offer up to 25% savings upfront, plus stop-loss insurance if your claims for a particular month go over your maximum claims amount. When you renew your plan, Aetna will refund 50% of any surplus funding to you. 

Members get access to CVS Health virtual primary care plus up to a $100 allowance for health and wellness products at CVS. The company also offers HRAs, HSAs, FSAs, and retirement reimbursement arrangements (RRAs) in most states. In addition, you have the option of adding behavioral health benefits that include virtual counseling, mental health tools, and an employee assistance program. Many plans offer MinuteClinic benefits as well, but fully insured plans in some states are excluded. 

Aetna has a 3.5-star average NCQA rating and a financial strength rating of A with AM Best. The company also came out on top in the East South Central, Northwest, and Southwest regions in the 2023 J.D. Power U.S. Commercial Health Plan Study, but ratings vary by region. Aetna offers SHOP plans in Maryland and D.C.

Blue Cross Blue Shield offers the most options for employers, with many plans providing access to the BlueCard PPO network and 24/7 telehealth, along with a variety of funding options in some states. If you’re looking for a self-funded plan, Aetna offers the best option tailored to small businesses in many states, as well as CVS benefits and optional robust behavioral health benefits. Kaiser Permanente takes the cake for customer satisfaction, with high third-party ratings and great digital tools, while UnitedHealthcare’s unique FlexWork program makes it our top pick for nontraditional employees.

Types of Health Insurance Companies for Small Businesses

You have a few options when choosing small business health insurance , according to Robert Slayton, owner of a Naperville, Illinois, employee benefits consulting firm called Robert Slayton & Associates.

Small Group Health Insurance

One option is to purchase a small group plan directly from a commercial health insurance company that serves small businesses or through a broker. “It gives the employer control over which plans to offer and [assurance] that people will remain covered while employed,” said Slayton. However, you may also need to offer COBRA or mini-COBRA plans. Mini-COBRA plans are required by some states for companies with fewer than 20 employees.

Self-Funded Plan

You may be able to save money by taking on the responsibility of paying out employee health claims yourself. This is known as a self-funded or self-insured plan, which typically relies on a commercial health insurer to administer the provider network and provide assistance with enrollment and claims processing. 

Health Reimbursement Arrangement (HRA) 

Another option is for the employer to offer a health reimbursement arrangement (HRA), which is an employer-funded group plan that pays employees back for qualified health expenses up to a certain dollar amount each year. Expenses may include premiums for an employer-sponsored plan, as well as copays and coinsurance. There are several types of HRAs, including a qualified small employer HRA (QSEHRA) for companies with fewer than 50 full-time employees. Another type is an individual coverage HRA (ICHRA), which lets employees use the funds to buy their own health insurance with pretax dollars. Funds can also be used for copays and deductibles. “[Employers] choose an amount to give each employee so that the employee can purchase coverage on their own,” said Slayton. “Employees who claim this reimbursement must have an underlying individual plan or Medicare.” 

The Small Business Health Insurance Options Program allows you to compare small business plans offered on the ACA Marketplace and offer one or multiple options to your employees. These plans are typically the only route to the Small Business Health Care Tax Credit. However, they’re only offered on the federal marketplace in eight states and on state-run exchanges in 13 states. 

Investopedia analyzed health insurance providers on 27 criteria. We gathered data from state and federal insurance marketplace databases and websites as well as from the National Committee for Quality Assurance, which independently rates healthcare plans. We used this data to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999 and has been helping readers find the best health insurance companies for small businesses since 2020.

Frequently Asked Questions

What is a small business.

The U.S. Small Business Administration Office of Advocacy defines a small business as an independent business with fewer than 500 employees. Total number of employees is just one way to measure a business's size, however. According to the SBA, small businesses account for the vast majority of businesses in the U.S.

Do Small Businesses Have to Provide Health Insurance?

If you employ fewer than 50 people full-time, you are not required to offer health insurance to your employees. But more than half of firms that size do offer it, according to the National Federation of Independent Business. A 2022 U.S. Chamber of Commerce survey found that 88% of employees rank health insurance as the most important employer-provided benefit. If you have 50 or more employees and choose not to offer coverage that meets federal standards, you’ll be required to pay a penalty called a Shared Responsibility Payment instead.

How Much Does Small Business Health Insurance Cost?

Costs vary by location and the network and coverage you choose, but on average, small businesses contributed $7,349 per single covered employee in 2023. Experts recommend keeping your total employee benefit costs between 10% to 20% of your overall revenue.

What Is a Self-Insured Health Plan?

A self-insured health plan is a type of group health insurance in which the employer collects premiums and is responsible for paying claims when employees need care. These plans can be self-administered, or the business may work with an insurance provider to get stop-loss coverage (which puts a ceiling on your risk) and administrative support. 

There are several benefits to self-funded plans. Employers can keep surplus premiums (or receive a portion returned by the stop-loss carrier), plans can be customized to a greater degree, and certain ACA provisions that lead to high costs can be avoided. Increasingly, small businesses are opting for self-funded coverage. But self-insured plans aren’t right for every business.

Can an S Corp Pay for Health Insurance?

Yes. An S corp can provide health insurance for its employees. However, most health insurance companies require you to have at least two employees to get a group plan, so if you are an S corp owner and don’t have employees, you’ll need to get individual health insurance from the ACA Marketplace. Additionally, you can’t provide an HRA to anyone with a greater than 2% stake in your company.

Companies We Reviewed

We researched and reviewed multiple insurers to find the best options you see above on this list. These are the companies we researched to help you learn more before making a decision: Aetna, Ambetter (Sunshine Health), Anthem, Blue Cross Blue Shield, Cigna, Kaiser Permanente, Molina Healthcare, Oscar, United Healthcare.

How We Chose the Best Health Insurance Companies for Small Businesses

We chose the best health insurance companies for small businesses by looking at our research for our list of the overall best health insurance companies and then investigating what options these insurers offer for small businesses looking to buy plans for their employees. 

To identify which health insurance companies to review for our overall winners list, we analyzed business and market insight databases, considered health insurance company market share, and researched user-generated data from Google to determine public interest and trends in health insurance companies and plans. 

We collected data from the National Committee for Quality Assurance (NCQA), an independent organization that rates healthcare plans on quality and patient satisfaction. We also gathered data from state and federal government insurance marketplace websites and databases, and directly from companies via websites, media contacts, and existing partnerships. The data collection process took place between Sept. 29 and Oct. 23, 2023.

We then developed a quantitative model that scores each health insurance provider based on 27 criteria that fall into four major categories and are crucial in evaluating the company’s offerings and benefits. We weighted the four categories as follows for this article:

• Plan Quality & Customer Satisfaction : 20%
• Plan Features : 40%
• Availability : 15%

Read our full methodology for reviewing health insurance companies.

J.D. Power. “ Commercial Health Plan Member Satisfaction Declines in Key Areas, J.D. Power Finds. ”

The Commonwealth of Massachusetts. " MiniCobra Continuation of Coverage Benefits Guide ."

Healthcare.gov. " What's An Individual Coverage Health Reimbursement Arrangement (HRA)? "

Healthcare.gov. “ SHOP Marketplace Basics for Employers .”

U.S. Small Business Administration Office of Advocacy. " Frequently Asked Questions About Small Business. 2023 ."

U.S. Department of Health and Human Services. “ As a Small Business Owner, Am I Required to Offer Health Insurance to My Employees? ”

KFF. " 2023 Employer Health Benefits Survey (Section 6) ."

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Does My Business Insurance Cover Me in Multiple States?

Christine Lacagnina has written thousands of insurance-based articles for TrustedChoice.com by authoring consumable, understandable content.

Paul Martin is the Director of Education and Development for Myron Steves, one of the largest, most respected insurance wholesalers in the southern U.S.

Business owners have to consider all potential risks to their property and inventory, and when they operate in more than one location, that only creates more areas of concern. If your business has multiple locations, all of them need to be protected equally. But if your business operates in more than one state, do you need multiple business insurance policies? The good news is that we know, so you don’t have to.

Independent insurance agents know all about business insurance and how much coverage you need, no matter how many locations you have. They know exactly how to protect your business against all kinds of potential threats across the map, and they’ll get you set up with all the coverage you need long before you need it. But before we get ahead of ourselves, let’s take a closer look at business insurance for businesses operating in multiple states.

If My Business Operates in More Than One State, Do I Need Multiple Insurance Policies?

Luckily for those business owners that have several locations, the answer is no. Standard business insurance policies work across the country. It’s only when you have locations outside the US or Canada that coverage concerns would get tricky. But if you stay within the country and just have two or more locations in different states, you’re good to go.

The important thing is to make sure that you communicate with your independent insurance agent about which states your business operates in when you first purchase coverage. Insurance companies may charge different rates for certain coverages depending on your business’s location, and if you’re operating in more than one state, they’ll need to factor this into your premium. Be honest from the start in order to avoid a potential hassle later on.

How Does My Business Insurance Cover Me in Dual States?

Well, you’ll essentially have the same protections in both states where your business is located. Business insurance provides protection for your property and inventory, as well as liabilities and other common perils. Since your business insurance covers you across the country, your business will have all these important protections across all of its locations. Again, just be sure to detail all of your unique business’s locations when first signing up for your coverage.

What Coverages Does My Business Need?

Standard business insurance policies provide the basic protections needed by all businesses, whatever their location. Whether you operate in one state or multiple states, your business should at least have the following coverages provided by a basic business insurance policy:

• Property insurance : Covers loss of or damage to your physical property, including your office space’s structure and inventory. Protected mishaps include fires, storms, and more.
• Workers’ compensation : Covers financial losses if your employees become ill, get injured, or die from a work-related incident. Coverage is mandatory in most states, depending on company size and the type of work being performed.  
• Business auto : Covers company vehicles against perils like theft, vandalism, and natural disasters.
• General liability : Covers property damage or injury claims made by a third party.  

These basic coverages are provided by standard business insurance policies across the board. However, your unique business may need more coverages to get the full picture of protection.

Which Add-On Coverages Should I Consider?

In the event your unique business requires more protection than what’s included in standard business insurance policies, you may need to add on several more types of coverage. It’s best to get set up with all the protection you may ever need from the start.

Optional add-on coverages to business insurance include:

• Professional liability:  Also known as "errors and omissions insurance," this coverage protects against claims made by clients who have suffered financial loss due to the work they've hired you for. Professionals such as consultants typically need this coverage.
• Business income: Covers the financial loss suffered while a business is closed due to covered disasters.
• Crime insurance : Covers losses due to criminal activity such as theft or fraud. Coverage also applies to employees who steal from the company.
• Boiler & machinery : Also known as "equipment insurance," coverage applies to electric equipment in the building (e.g., AC units and boilers) that breaks down due to power surges, etc.

Work with your independent insurance agent to brainstorm all the areas in which your unique business might need additional coverage. The more complex your business and its operations, the more types of coverage will be required to fully protect you.

Can I Have Different Insurance Coverages in Each State?

While it is possible to have different coverages for each of your business’s locations, it’s not actually wise to do this. You could, for example, have commercial auto insurance for one of your business’s locations but not the others. This isn’t recommended, though, because you'll more than likely end up with overlapping policies that compete to respond to the same claim, and this could get messy. Keep it simple by having the same insurance for all of your business’s locations.

Is Business Insurance Tax-Deductible in Both States?

As long as your business insurance serves a business purpose, then yes, your policy is tax-deductible in each state. At the federal level, the IRS categorizes business insurance as a business expense, which is why you are allowed to deduct your premiums from your taxable income. If you have any questions about deducting your business insurance costs from your taxes, your independent insurance agent or accountant can help.

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What Doesn’t My Business Insurance Cover?

No matter how many states you’re located in, standard business insurance policies have two main perils that are never covered, flood damage and earthquake damage. Special flood insurance and earth movement policies would be required to protect your business from damage and/or suspended operations caused by these types of disasters. Businesses with at least one location in a coastal state should highly consider getting at least flood insurance.

If your business has at least one location in an area that’s prone to flooding, your mortgage lender may actually require you to purchase flood insurance. Otherwise, flood insurance is still a really good idea to have if you’re in a flood-prone area. Coverage is only available through the National Flood Insurance Program, which is a part of FEMA. Likewise, if one location is in an area prone to earthquakes, landslides, etc., you’ll want to consider an earth movement policy.

Here’s How an Independent Insurance Agent Would Help

When it comes to protecting your business across multiple states and everything else, no one’s better equipped to help than an independent insurance agent . These agents search through multiple carriers to find providers who specialize in business insurance and add-on coverages, deliver quotes from a number of different sources, and walk you through them all to find the best blend of coverage and cost.

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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.

Let's talk through your HRA questions

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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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.

Interpreting Indiana's conflict between health insurance and health care in 2024

Editor's Note: The following is part of a class project originally initiated in the classroom of Ball State University professor Adam Kuban in fall 2021. Kuban continued the project this spring semester, challenging his students to find sustainability efforts in the Muncie area and pitch their ideas to Ron Wilkins, interim editor of The Star Press, Journal & Courier and Palladium-Item. This spring, stories related to health care will be featured.

In the U.S. health care industry, individuals with chronic diseases make up 86% of health care costs, according to a 2020 article published on the National Library of Medicine's website , and chronic disease is one of the main variables that increase health care utilization.

The more chronic diseases you have, the more money you are going to be spending on health care, according to an article in the Journal of the American Medical Association.

Conversely, insurance companies inherently want to avoid high-risk individuals who could potentially cost their company the most money, meaning that these "vital few" are the exact same group that health insurance agencies are attempting to avoid.

For individuals like export manager Pamela Stevens, this means being stuck between two complex industries that are both driven to extract a profit from their customers.

Stevens suffers from a combination of Raynaud's syndrome, polymyositis and scleroderma. Dealing with three separate autoimmune diseases on a daily basis, Stevens remains one of the "vital few" year after year.

“People are afraid to go to the doctor,” Stevens said. “It’s not patient care; it’s a business.”

In the state of Indiana , companies with fewer than 50 full-time employees are not required to provide health insurance. If you found yourself in this position without qualifying for company-provided insurance, you could face crippling medical debt.

Fortunately for Stevens, she qualifies for company-sponsored health insurance coverage.

Stevens explained that, with insurance, she still paid $2,224 out of pocket for her medications and $2,316 out of pocket in copays in 2023.

According to the National Institute of Health , the average amount spent on health care for patients with at least two chronic conditions in the United States is $4,385, and the expenditure increases by an average rate of 20.25% per additional chronic condition that a patient possesses.

Additionally, for the "vital few," the National Association for Chronic Disease notes that health care costs for those with chronic conditions are five times higher than those without such a condition.

The iron triangle of health care: Quality, access and cost

John Horowitz, interim department chair of economics at Ball State University, explains that the health care system can generally be broken down into a single concept: the iron triangle. Quality, access and cost are the three pillars of this notion with each one directly and indirectly affecting the other pillars.

“If you try to bring down costs, you might also be getting rid of a lot of access,” Horowitz said.

The idea of the health care system being broken down into this simple idea is simultaneously what makes the industry so complex.

In 1987, fellow economist Thomas Sowell posited a similar idea in his book, A Conflict of Visions: Ideological Origins of Political Struggles.

“There are no solutions,” Sowell wrote. “There are only trade-offs.”

This idea rings especially true for the health care industry.

“For example, take the case of Medicaid,” Horowitz said. “Medicaid tells doctors what they’re going to pay them, and Medicaid pays really low rates. What is the incentive to take Medicaid patients?”

A 2022 study from the RAND Corp. showcased a similar problem for Medicare patients, finding that Indiana residents who are not in Medicare-paid hospitals nearly quadruple the amount of money that Medicare beneficiaries paid for the same services.

Similarly, insurance companies are asking themselves the same question when faced with potentially high-risk customers.

“Hospitals make most of their money on a few patients,” Horowitz said. “Patients who — for the insurance companies — are the highest cost.”

Dawn Velasquez, fellow of the Society of Actuaries, affirmed the idea that insurance companies themselves are often used as scapegoats for larger issues within the healthcare industry.

"The whole system is broken,” Velasquez said. “Take pharmaceuticals, for example; they can basically charge whatever they want. My family can make it because we work for large corporations that offer good employee-sponsored health insurance plans, but what about people who don't?"

Stevens, whose father and brother are both doctors, shares a similar notion.

She explained that problems often arise when health care entity mergers push physicians out of their private institutions to work within their system.

“These conglomerates that are merging are forcing private physicians to join,” Stevens said. “Then these medical entities are charging an arm and a leg for procedures; some patients can’t afford to get the care they need. They want to push you out so they can get another bed available for someone right behind you.”

Mergers play a role

According to the American Medical Association , the percentage of physicians working in private institutions fell by 13% between 2012 and 2022.

Private physicians often join larger conglomerates to take advantage of economies of scale by merging for potential cost savings and to increase the likelihood of achieving higher reimbursement levels.

In a 2022 study conducted by UC Berkeley's Petris Center , researchers found that hospital mergers in Indiana were linked to a 10.6% increase in hospital prices for Hoosiers.

The Indiana legislature looked to tackle this issue early in its 2024 session with Senate Bill 9 .

The bill, which was signed by Gov. Eric Holcomb on March 13 after approval in both houses, forces health care entity mergers that meet or exceed $10 million to notify the attorney general’s office 90 days before a deal can be settled to allow time for state regulators to review the deal and its potential impact.

The new law expands on recent progress made within the Hoosier state after 2023 House Bill 1004 was passed last year in an attempt to protect patients by providing an oversight taskforce to monitor patients' costs, as well as monitor Medicaid reimbursements in the state.