With the annual open enrollment period in full swing, now is the perfect time to review the benefits options you offer to your employees. But for business owners, this can be just as intimidating as tax season — especially when you consider the uncertainty of the new normal.
Whether you have provided insurance benefits for years or you’re offering them for the first time, here are a few considerations as you navigate open enrollment as a small business owner.
What Must I Do to Offer Health Insurance?
As a chaotic year comes to a close, it’s important to understand the health insurance requirements for businesses in 2021.
To provide group health insurance to your employees, your business must be legally registered in your state. You must also employ at least one full-time worker who is not the owner or spouse of the owner.
In addition, the business must contribute at least 50 percent of the cost of employees’ monthly premiums. This only applies to the cost of insuring the employee, not his or her dependents. For example, say the cost of insuring the employee is $500 a month and it costs another $500 to cover the employee’s dependents. In this scenario, the employer is only required to contribute $250 a month toward the insurance plan, which is 50 percent of the employee’s coverage.
Where Can My Business Find a Group Plan?
Small business owners have a few options for providing health care coverage to their employees, including:
Private insurance carriers. This is the most common source of group health insurance coverage. Because there are many carriers with a number of competitive plans, you may want to work with a licensed insurance broker who can shop for you and make recommendations about the best options.
Professional Employer Organization (PEO). Small to medium-sized businesses often outsource payroll and benefits to firms called PEOs. This is a good way to lower insurance costs because your employees would be joining a larger pool served by the PEO. These firms usually charge a percentage of overall payroll to provide these services.
Association Health Plan. If you belong to an industry association or your chamber of commerce, you may be able to find coverage through your membership.
Government plan. The Affordable Care Act created the Small Business Health Options Program (SHOP). It enables companies with less than 50 employees to purchase group coverage. With SHOP, employers choose the level of contribution required by employees as well as any waiting times that apply before employee coverage begins.
Now that you have a better understanding of your options, it’s time for some due diligence.
How Do You Choose the Right Group Health Insurance Plan?
Most small business owners know little about choosing the right group insurance plans. Therefore, you’re advised to seek assistance from a licensed agent or broker who specializes in helping small businesses with group plans.
As you navigate the process, here are three considerations:
Plan cost. As mentioned above, you have to contribute at least half of what it costs to cover every employee. Therefore, you should begin by thinking about how many employees your plan will cover and how much you can afford to pay.
Plan design. Once you’ve settled on a budget for health insurance, you can determine how much coverage it will provide. This includes the annual deductible, and co-payments, and co-insurance for treatments. The less you and your employees pay for out-of-pocket expenses, the more you will pay in premium, and vice versa.
Plan type. There are several types of health insurance plans. The type of network you choose will dictate the type of access your health plan offers to doctors, specialists, hospitals, etc. Here are the main types of networks you should understand:
- A Health Maintenance Organization, or HMO, requires you to select a primary care physician (PCP). Your PCP must refer you to specialists or diagnostic services.
- A Preferred Primary Organization, or PPO, does not require referrals. You will need to choose care providers within the plan’s preferred network. Providers outside the network will only be partially covered.
- A Exclusive Provider Organization, or EPO, is similar to a PPO. The key difference is that out-of-network care will not be not covered at all.
- A Point of Service Organization, or POS, requires you to select a PCP for referrals. Out-of-network care will be partially covered.
Before finalizing your decision, make sure you fully understand the implications of your plan’s cost, design, and type.
SEE ALSO: 3 Ways Your POS Helps With Payroll
Should I Consider Providing Supplemental Group Insurance?
You can make your benefits package more valuable by adding one or more group supplemental insurance plans and benefits. Examples include:
Disability insurance. A group disability insurance plan can help your employees in the event they can’t work for an extended period due to injury or illness by replacing a portion of their income. It’s important to note this is not the same as workers’ compensation. Disability insurance covers disabilities that are not work-related. You can also take this opportunity to educate your employees about the value of owning a personal disability insurance plan, too.
Life insurance. Group life insurance is a valuable benefit you can offer employees, many of whom likely do not have adequate coverage through an individual policy.
Critical illness insurance. This is a type of supplemental insurance that pays a lump sum benefit if you are diagnosed with a covered illness. It’s designed to pay for care or other expenses that health insurance does not cover. Critical illness coverage focuses on serious conditions, such as cancer, heart attack, stroke, and organ damage, including transplants. Some policies may also provide coverage for less common diagnoses.
On top of these common perks, you may also want to consider other benefits that companies use to recruit and retain top talent:
- Retirement plan
- Health and wellness discounts
- Student loan assistance
- Tuition reimbursement
- Employee assistance programs
- Identity theft protection
- Legal assistance
- Pet insurance
To avoid spending money on benefits nobody will use, you may want to survey your employees to see what benefits they find important and how much they’d be willing to pay for group coverage.
SEE ALSO: Your Checklist for Hiring an Employee
Whatever Your Plans Are, Communicate With Your Employees
You should provide employees with information about your insurance benefits before open enrollment begins. This gives them time to review the options available and ask questions.
Continue to communicate with employees through the open enrollment period. Remind them to submit applications or make changes to their existing plan before the end of the open enrollment period.
Although open enrollment officially ends December 15, you can actually enroll in a small business health insurance plan at any time during the year. However, the current period is a great opportunity to review health insurance and other benefits for yourself and your employees.