Phil owns a small consulting firm in Fort Worth. Business is and his team is growing. He’s proud of the work they do and knows his employees are the reason for his success. But lately, he’s been hearing concerns from his team about health insurance. Or specifically the lack of a business health insurance plan.
Some of Phil's team are paying high premium costs for individual plans, while others don’t have coverage at all. Phil wants to do the right thing and offer a business health plan. But the cost? That scares him.
Phil has heard horror stories from his friends about spending thousands every month just to provide coverage. He doesn’t want to promise something he can’t afford, but he also knows that not offering health benefits could hurt his business in the long run.
Before making a decision, Phil knew he needs to understand what group health insurance coverage actually costs and what affects those costs. As he digs into the details, he realizes that there’s more to this than just paying a monthly premium bill.
The first thing Phil learns is that health insurance costs aren’t just about the monthly payments for both he and the employees. He had assumed the business would pay a set amount each month and that would be the end of it after he selected a plan design. But after looking into it, he realizes there are other expenses and some deductions that come with offering a plan.
Phil learned about administrative costs. Managing health insurance isn’t always as simple as signing up and forgetting about it. Different types of health insurance plans have fees for keeping the plan active. If Phil uses a third-party administrator to handle paperwork and claims, that can be an extra cost, too.
He also realizes that the cost of health insurance changes over time. Just because he locks in a good price this year with a new to market plan doesn’t mean it will stay the same next year. Insurance companies raise annual premiums based on claims and market trends, so he has to think ahead instead of just looking at what the first-year price tag says.
After seeing the long list of costs, Phil was glad to learn about potential deductions and savings. Learning about tax credits for his contribution towards their employee premiums was something that changed his outlook.
Since he owns a business, the money he contributes toward employee premiums can be deducted from his taxable income. That means even though he’s paying for health insurance, he’s also lowering the amount of income his business gets taxed on.
His employees also benefit as well. Money paid toward the employee contributions toward their health insurance comes out of their paycheck before taxes. That lowers their taxable income, meaning they keep more of their hard-earned money each pay period.
What seemed like a heavy financial burden now looks a little easier to manage. Phil realizes that he’s not just spending money, he’s investing in his business and employees in a way that helps everyone financially.
With a better grasp on costs and tax benefits, Phil starts looking at different plan options. He quickly learns that not all business health plans are the same. The type of plan he picks will affect how much he and his employees pay.
Deductibles, co-pays, and out-of-pocket maximums play a role in employee costs and satisfaction. If Phil picks a plan with a lower premium, that often means employees will have to pay more out of pocket when they go to the doctor. On the other hand, a plan with a higher premium might mean lower costs for his team when they need care. Balancing those two items is vitally important to making overall health care costs affordable.
Phil also sees that HMO plans usually have lower premiums, but employees must use a specific network of doctors. That means they have less flexibility for the lower costs.
PPO plans on the other hand, give employees more freedom to choose their doctors. Even out-of-network providers when needed. The trade off is they come with a higher average cost.
Phil likes the idea of offering a PPO so his employees can see the doctors they want, but he also needs to keep costs under control. He realizes he has to find the right balance between affordable medical costs and network care flexibility.
As he digs further, Phil discovers another option that might help him provide care at a lower annual cost. High-Deductible Health Plans (HDHPs) typically have lower premiums, which means he could save money each month. But they also come with higher deductibles, meaning employees would pay more out of pocket costs before the insurance kicks in.
To help with this, he learns about Health Savings Accounts (HSAs). With an HSA, his employees could set aside additional pre-tax money to pay for medical expenses. These automatic deposits towards health care expenses can make an HDHP more manageable. This setup works really well for younger, healthier employees who don’t visit the doctor often but still want protection against big large medical expenses.
Phil also comes across self-funded group health plans. Instead of paying an insurance company a fixed premium every month, he could set aside money to cover employee healthcare costs directly. This could lead to big savings if his employees don’t use a lot of medical services, but it also comes with more financial risk if they do.
Phil started this process worried about the cost, but now he understands that business health insurance plans don’t have to break the bank. He sees that the true cost of insurance depends on more than just monthly premiums and that federal tax credits help offset the cost.
He also realizes that he has more options than he thought. Instead of just picking traditional plan types, he can explore non-traditional options. Choosing from self-funded plans, fully funded plans, high deductible plans, HSAs, and even other alternative plans can make coverage more affordable.
What started as a scary financial decision now feels like an opportunity. Offering health insurance won’t just help his employees, it will help his business grow by attracting and keeping great talent. Working with an experienced small business health insurance broker can allow your business to evaluate it's options and find health insurance benefits that work for your business. Just like Phil did.
If you’re a small business owner in Texas, and you’re ready to explore group health plans, click the button below to start the conversation. Let’s find the right plan that works for your business and your budget.