Startups and Small Businesses

Employee health insurance: A guide to costs and benefits

Balancing health insurance plan costs and coverage is critical. Learn the basics in this guide so you can make the best decision for your business.

 

 

How much does health insurance cost?

Your employees’ overall health status and the type of health insurance plan you choose play a significant role in the cost of coverage. To give you a general idea of what these costs look like in the United States, we turned to recent data from the 2020 National Compensation Survey (NCS), the 2021 data from the Bureau of Labor Statistics (BLS), and the Kaiser Family Foundation’s 2020 Employer Health Benefits Survey:

  • A total of 86% of employees are covered by medical plans that require employee contributions, each paying $138.76 while the employer pays $459.70 per month.
  • 72% of workers participated in a flat-dollar-premium single-coverage health plan in 2020, with a median price of $120.06.
  • The average health insurance premium for employees is $7,470 annually for single coverage and $21,342 for families.
  • Workers pay a portion of their premiums, typically 27% for a family policy and 17% for a single policy. 
  • A small-business employee pays, on average, $7,483 in annual premiums for single coverage and $20,438 for family coverage. 
  • Employees in 2020 paid only $1,243 for a single plan and $5,588 for a family plan.
  • The average deductible for employees with annual general deductibles was $1,644 for a single policy.

Now that you know what health insurance costs entail, you’ll have a better idea about how much you need to consider in your budget. 

Don’t let the costs intimidate you. Health insurance is, indeed, a considerable business expense. Still, it is an investment in your company’s future and the well-being of your workforce.

Related: 5 types of group health insurance plans for small businesses 

 

How do I get benefits for my employees?

A thorough search to find the best employee benefits for small business owners begins with a close look at your business. Many companies are conducting internal research to identify new opportunities to offer better plans for their employees post-pandemic. 

According to Harvard Business Review, nearly 98% of business leaders plan on offering new benefits to their employees, prioritizing the ones they feel are essential, such as child and senior care benefits, flexibility around when and where work takes place, and mental health. Because of COVID-19, 89% of businesses also indicated they were deprioritizing at least one type of employee benefit. The most common are on-site child care, paid vacation days, commuting benefits, tuition reimbursement, and meals and food.

Whether you are getting health insurance for the first time or rethinking your current benefits, here’s a step-by-step guide to getting the ideal coverage for your small business:

1) Review your available budget

In light of the high cost of health care, we recommend that you determine the amount you can spend on health employees’ benefits. Remember, your staff can also contribute an amount, and you can decide that percentage split.

If you have a limited budget, you may want to investigate alternatives to the large, legacy carriers. Be on the lookout for more modern companies that may offer better and more affordable plans.

For example, some health insurance plans allow you to pay the same monthly amount into a claims fund. Regardless of how high or low your claims are, your costs don’t rise above what you’ve budgeted. As soon as the claims cost exceeds the fund budget, the stop-loss policy kicks in. In the case of low claims, you might get a credit towards next year’s premium.

Small business owners should consider this approach as it can be more affordable than other employee health plans. In addition to reducing taxes and administrative costs, these policies can also help lower your premiums long-term if paired with other cost-saving strategies. 

2) Take stock of what your employees’ needs are. Find out what benefits your employees prefer. Remember that, as their lives change, they may also need different types of coverage.

Modern insurance companies provide a wide range of benefits in addition to medical, vision, and dental coverage. They may include maternity care, virtual doctors’ visits, wellness programs, and more.

If the insurance company charges for out-of-network coverage, you may want to find an alternative insurance provider. Most people want to choose their own doctors without finding one from a narrow, carrier-selected network list. 

3) Request several quotes

Before getting a quote from legacy insurance companies, you and your employees may be required to fill out a substantial amount of paperwork. You often need to provide information about your past claims history in these forms, including invasive health questionnaires.

Employee health insurance companies will calculate their rates based on your employees’ health. Generally, these companies identify how many applicants file many claims or visit a doctor frequently. By using employee medical records and prescription drug databases, they can gather information about past claims. 

The rate calculation process used by carriers is often unclear. These are usually firm rates without much room for negotiation.

As an alternative, modern insurers offer small business owners an easy way to get a quote for their employee benefits. Initial requests will include your contact information and how many employees currently work for the company. In addition to collecting this information, an employee census may ask for each employee’s name, date of birth, ZIP code, and gender. 

Employees won’t have to fill out medical questionnaires, making the process simpler, friendlier, and more convenient.

Related: Choosing the right group health insurance for startups

 

How to get health insurance quotes

Getting a quote for health insurance is best done after assessing your business’s needs. Based on your budget, your premium contribution estimate, and employee needs, you can narrow your search to a few benefits providers.

Estimating your company’s health insurance costs should take into account the types of coverage your employees want. If they’re concerned with dental, you should find a plan that covers more than just preventive services. If they want mental health coverage, find a plan that either gives them access to free virtual visits or a low co-pay for in-person visits. 

Do online research

Several insurance companies have websites where you can get quotes and estimates. Note, however, that the majority of online quotes aren’t final. You can get a rough estimate from your search, but you might have to complete a more in-depth assessment to get a final price.

Compare health insurance quotes on the web to find more affordable employer-sponsored health insurance, often referred to as self-funded or level-funded plans. There is usually less paperwork, and you’ll get a more accurate quote that is unlikely to spike at renewal. Moreover, they are able to offer you quick customer service via phone, email, or chat, as well as comprehensive help with open enrollment.

What if I have a PEO?

A professional employees organization (PEO) handles human resource functions, such as workplace insurance policies for many small to medium-sized businesses.

Businesses that are less healthy overall can lower their health insurance costs by getting volume discounts from PEOs, which aggregate several groups under one umbrella. The major downside here is that if you’re a relatively healthy company, your rates may be higher than needed by being lumped in with less-healthy companies. 

Benefits of offering health insurance to your employees

At this point, besides the high cost, you may be overwhelmed by the complex terminology and process that comes with finding small business insurance options. But seasoned company HR leaders and business owners know it is one of the most effective ways to attract and retain top talent.

In addition to improving the health of your employees, providing health insurance will also improve your business outcomes. While cost is always a concern, you may be surprised to find that the cost of replacing employees that leave due to poor health plans is much higher.

Health benefits impact employee well-being

Four of the nine workplace trends for company leaders to consider are related to employee well-being. Below is a quick summary of the results from the Gartner study:

  • Companies that support the entire employee’s life experience are able to enhance their employees’ mental and physical health by more than 20%.
  • In companies that offer flexibility over when, where, and how many hours employees work, 55% of their employees are considered “high performers.”
  • Candidates and employees alike will appreciate the ability to obtain COVID-19 vaccines through their employee benefits.
  • Retention of current employees factors in whether the company provides or gives access to mental health benefits.

Health care benefits are an influential factor for attracting new talent and retaining top employees

According to a survey by Glassdoor, 48% of job seekers said “attractive benefits” would motivate them to apply for a particular position. Benefits were the leading driver, even higher than salary.

A good health care plan will reduce turnover. Retention experts report: “Depending on the role you are replacing, turnover costs can range from uncomfortably high to truly shocking. A low-paying (traditionally high-turnover) job costs about 16% of the employee’s annual salary. This jumps to 20% for mid-range positions and skyrockets to over 213% for high-level executives.”

If you’re a CEO or founder, the math is simple. In the long run, providing health insurance to your employees will cost less than losing your current employees to competitors that do provide those benefits. 

Furthermore, offering a rich health plan can contribute to your employees’ overall happiness. According to Human Resources Executive, “Burnout experienced by workers is one big reason for an expected spike in resignations. Recent research from Eagle Hill Consulting found that 58% of employees are burnt out, up from 45% in the early days of the COVID-19 pandemic. Some of the reasons for burnout include heavy workloads, balancing work and personal lives, and a lack of communication, feedback, and support from their employer.”

Being a supportive employer with comprehensive health benefits can boost employee retention, productivity, and satisfaction metrics. Candidates greatly value health plans as part of an overall compensation package. 

Health insurance improves productivity and happiness

In addition to providing quality medical care for illnesses and medical conditions, a comprehensive health insurance program can help your company reach record productivity by supporting your employees’ overall wellness and behavioral health. 

“People with poor well-being can’t serve customers as well as the thriving — they’re less productive, less effective, less innovative, and less perceptive. They cost more to insure, they’re absent more often, less likely to be engaged, and have more safety and theft incidents. So, to put it briefly: If you care about your business’ well-being, you have to care about your employees’ well-being,” a Gallup report noted.

You will likely see an improved financial performance with more productive employees, as highly engaged teams produce 21% greater profitability than their non-engaged counterparts. Many insurance companies can provide benefits beyond vision, dental, and medical care. You may also get coverage for maternity care, virtual doctors’ visits, mental health, and physical wellness. Some proactive insurers can provide these services at no additional cost.

Health plans help lessen the negative impact of the pandemic

We’ve learned a lot about the workforce over the last year and a half. A good example is the importance of employers getting or strengthening their employee health coverage. Small business owners with fewer than 50 employees were facing this issue since health insurance is not mandatory for them. Now, they are taking action.

Health and insurance priorities have changed significantly due to the pandemic, according to Benefits PRO. Among other reasons: 

  • People under the age of 25 and those over 50 have attrition rates significantly higher than those under other age categories. 
  • After the arrival of COVID-19, outpatient hospital visits initially declined as people stayed at home in order to remain safe. However, the visits rebounded to pre-pandemic levels in October 2020.
  • As the pandemic unfolded, nearly four out of 10 adult U.S. citizens suffered from anxiety or depression.
  • Life insurance and medical coverage usage both increased, but total reimbursement spend was lower in the first six months of 2020 when compared with the same period in 2019.
  • Through the pandemic, employees have been wondering how the virus may impact their health, which has led to heightened concerns about benefits. 

Health insurance benefits: The bottom line

Finding the right health insurance policy can be a long process, but if you do your research, you may be surprised by what the right company has to offer and how quickly they can set you up with a customized plan. Make sure your compensation packages for your prospects and employees contain top-notch health insurance and wellness benefits. The best benefits can improve your employee recruiting and retention strategy. 

Providing health plans is crucial to your company’s stability, regardless of the size of the business. If you don’t offer benefits, you risk increasing turnover and damaging your brand’s reputation among potential candidates. 

You might not be familiar with the best insurance companies out there today because they’re not the big, older brand names. Small business owners can get personalized guidance from quoting to benefits management from more modern insurers. You should also look for high-quality customer service, including a dedicated account manager and member advocates to respond to your inquiries through phone, e-mail and chat.

You can also get state-of-the-art platforms to help you with benefits analytics, administration guidance, benefits management, health care navigation, and patient advocacy strategies. 

Sana offers small business owners the best health benefits for their employees. Request a quote without filling out any medical questionnaires, and we will assist you during the entire open enrollment and onboarding process. There are no out-of-network fees or limitations with Sana’s simple, comprehensive health plans. Request a quote now.

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