What is Small Group Health Insurance?
Building an attractive benefits package is a great way for small businesses to attract and retain high-level talent. Health insurance, in particular, is often one of the most important benefits that job seekers look for.
For small businesses, small group health insurance is an affordable option that allows employers to provide their employees and their employees’ families with comprehensive health coverage that complies with the Affordable Care Act (ACA).
To learn more about your healthcare options as a small business, here’s everything you need to know about small group health insurance.
Attract & Retain Top Talent
Small businesses often have trouble attracting and retaining high-quality talent, as they cannot offer the same benefits and opportunities as larger companies. To build and retain skilled teams, small businesses have to find ways to offer perks that compete with those offered by corporations.
Putting together an attractive benefits package with comprehensive health coverage helps small businesses attract top talent, encourage long-term employee loyalty, reduce turnover rates, and increase workplace morale.
Small group health plans provide cost-effective coverage for small employers that help you ensure all of your employees’ healthcare needs are being met.
Growing Opportunities for Small Businesses
Small businesses have several more options for putting together a competitive benefits package now than they did when the ACA was signed into law in 2010.
All small group plans effective since January 2014 are required to comply with the rules and regulations established in the ACA. For example, insurers are not able to use your group’s medical history to increase your premiums, and premiums for older employees can only be up to three times more than those for younger employees.
Small group plans are required to provide coverage for all the essential health benefits listed in the ACA, including hospitalization, emergency services, pregnancy, laboratory services, and prescription drugs. These plans must also fit into one of the four ‘metal’ categories established by the ACA.
These regulations make it possible for small businesses to create benefits packages that compete with those offered by larger competitors.
What is Small Group Health Insurance?
Small group health insurance is medical insurance for small businesses with two to 50 full-time and full-time equivalent employees.
Health insurance plans purchased must meet the requirements laid out by the ACA. This gives small businesses the ability to offer competitive and comprehensive health plans that offer the same benefits and coverages employees might find at larger companies.
How many employees do you need to qualify for group health insurance?
To qualify for a group health insurance plan, your business just needs to have two or more employees. However, the type of plans you have access to depends on the specific size of your business.
How Does Small Group Insurance Work?
Small group health insurance plans are purchased by small employers, then offered to their employees. Employees can then choose whether to enroll in the plan.
Since plans can only be purchased for groups, they require a certain percentage of employees to enroll in the plan to remain valid. Typically, group health plans require at least 70% participation to be valid.
In some cases, small group health plans may offer different tiers of coverage, and employees can choose which level of coverage to accept. Tiers may offer basic health coverage that meets the minimum requirements set forth by the ACA or more advanced coverage tiers that offer additional perks and add-ons.
With group health insurance, premiums are split between the employer and the employees. This helps reduce costs for employees while keeping costs low for employers as well. Group health plans often extend coverage to the families and dependents of enrolled employees.
How employees can enroll in small group health coverage
When a company purchases a small group health insurance plan, employees have the option of accepting or declining the coverage. Those that accept the coverage are enrolled in the plan.
Like individual healthcare plans, group health plans have an annual open enrollment period. During this period, employees that aren’t already enrolled in the health plan can choose to sign up for coverage.
Qualifying events may trigger a special enrollment period, which allows employees to enroll in coverage outside of the open enrollment period. New hires, for example, can enroll in a group health insurance plan as soon as they are hired and become eligible, regardless of whether the open enrollment period is still active.
What Percentage of Health Insurance do Small Employers Pay?
Group health insurance costs are split between employers and employees, but the percentage that small employers pay depends on the specific plan they choose and how much they choose to pay.
Businesses can choose to contribute a larger amount to their employees’ premiums to help reduce their employees’ healthcare costs. If your business can afford to pay a larger percentage of employee premiums, doing so is a great way to enhance your benefits package and attract talented workers.
What is the Most Affordable Type of Health Insurance?
Health insurance policy premiums vary depending on your insurer, your coverages, and several other factors. As such, there is no single most affordable type of health insurance.
Small group health plans must fit into one of the four categories established by the ACA: Bronze, Silver, Gold, and Platinum. Bronze policies are typically the most affordable as they offer less coverage. With Bronze plans, insurers pay 60% of covered healthcare services, and the purchaser pays 40%.
At the other end of the scale, Platinum plans typically have the most expensive premiums but cover a larger percentage of healthcare service costs. Platinum plans also usually have the lowest deductibles, which is the amount you must pay before your healthcare plan pays for anything.
What factors impact health insurance costs?
Health insurance costs can vary significantly depending on several factors, including:
- The insurance provider
- The type of health insurance plan (e.g. HMO, PPO, POS, etc.)
- Out-of-pocket maximums
- Employer contribution amount
- Employee plan participation
While it may be tempting to choose the most affordable plan possible, it’s important to keep your employees’ needs in mind. Small businesses trying to attract and retain high-level talent need to offer competitive benefits that accommodate their employees’ and their employees’ families’ needs.
What is the Small Business Healthcare Tax Credit?
Small employers that purchase a small group health plan through the SHOP marketplace may be able to claim the small business healthcare tax credit.
According to the IRS, the small business healthcare tax credit applies to employers that:
- Have fewer than 25 full-time and full-time equivalent employees
- Pay each full-time equivalent employee an average wage of less than $50,000 per year. This amount is adjusted annually for inflation.
- For 2014, the adjusted amount is $51,000
- For 2015, the adjusted amount is $52,000
- For 2016, the adjusted amount is $52,000
- For 2017, the adjusted amount is $53,000
- Offer a health plan to its employees through the SHOP Marketplace
- Pay at least 50% of employee healthcare coverage
If your small business meets these requirements, you may be eligible for the small business healthcare tax credit, which can be up to 50% of premiums paid. This amount is on a sliding scale, and smaller employers are eligible for a larger tax credit. This tax credit is also refundable, so tax-exempt businesses may still be able to receive the credit as a refund.
Is Health Insurance Required in SC?
The Affordable Care Act originally included a mandate that required all individuals to have health insurance to avoid a tax penalty, but as of 2019, this mandate does not apply at the federal level.
Since this mandate no longer applies, South Carolina residents will not face any penalty if they do not have health insurance.
Does SC have a penalty for not having health insurance?
No, South Carolina does not issue a penalty against individuals that do not have health insurance.
Previously, the ACA required all individuals to have health insurance or face a penalty. This penalty was called the Shared Responsibility Payment and applied to health insurance plans through 2018. As of 2019, the Shared Responsibility Payment no longer applies, and South Carolina has not established a state-level individual mandate.
Are employers in SC required to offer health insurance?
While the Affordable Care Act does not penalize individuals for not having health insurance, it does impose penalties on some employers that fail to offer health insurance.
Under the ACA, employers that have at least 51 full-time and full-time equivalent employees are required to provide health insurance to 95% of their employees. If they do not meet this requirement, they must pay a penalty to the IRS, which in 2020 was $3,860 per employee. This is known as the Employer Shared Responsibility Payment (ESRP).
Small employers — those with fewer than 50 full-time and full-time equivalent employees — are not subject to the ESRP and do not face a penalty for not offering health insurance.
Is it Illegal to not Have Health Insurance in 2022?
At the federal level, there are no penalties for individuals that do not have health insurance in 2022.
While there is no federal health insurance mandate, there are a select few states, as well as the District of Columbia, that have a state health insurance mandate. These states include:
- New Jersey
- Rhode Island
If you live in one of these states or the District of Columbia, you may face penalties if you do not have health insurance and can afford it.
The Affordable Care Act for Small Businesses
While small employers may not be required to provide health insurance to their employees, many choose to offer health coverage to attract and retain skilled workers. Health insurance is a key benefit that workers look for when applying to jobs, and small businesses that forgo this important coverage may have trouble finding qualified employees.
If your small business does choose to provide health insurance, there are a few important rules and reporting requirements that you should be aware of.
Summary of Benefits and Coverage (SBC)
Small businesses that offer health insurance must also provide a Summary of Benefits and Coverage (SBC). SBC forms explain what a certain health plan covers and goes over all of its costs.
This summary helps employees better understand their coverage and care options, and neglecting to provide this summary can result in penalties.
Workplace wellness programs
The ACA also encourages employers to offer wellness programs that create healthy working environments.
Employers that offer wellness programs that support employee health may be eligible for a reward. This maximum reward is 50% for programs that aim to prevent or reduce tobacco usage.
Reporting information on health coverage
Certain organizations are required to report that they provide health insurance to their employees. These organizations include:
- Employers with 50 or more full-time and full-time equivalent employees
- Health insurance companies
- Self-insuring employers of any size
Organizations that meet these criteria and do not report their health coverage may face penalties.
How can a Small Business Get Group Health Insurance?
Small businesses get group health insurance through a private insurer or from their state’s SHOP marketplace.
Small businesses that purchase a small group health plan through SHOP may be eligible for tax credits that they cannot receive by purchasing through private insurers.
In many states, insurance companies often have participation requirements for group health plans to remain effective. This means that a certain percentage of your employees must enroll in coverage for coverage to be active. Many insurers also require employers to contribute a certain amount of employee premiums.
Small businesses located in states that use Healthcare.gov still need to purchase SHOP plans directly through insurance companies or with the help of a SHOP-certified insurance agent or broker.
At KSA Insurance, we work with small businesses in South Carolina to help them find affordable small group health insurance plans that offer the coverage and benefits employees need to cover their healthcare costs.
Group Health Plans vs. Health Reimbursement Arrangements (HRAs)
Small businesses have more options than ever for contributing to their employees’ healthcare costs.
Employers now have the option of choosing between small group health plans like those offered through SHOP or Health Reimbursement Arrangements (HRAs).
HRAs help small employers reimburse employees for qualifying medical expenses. This includes premiums for individual coverage. These reimbursements are made on a tax-free basis.
With HRAs, employers can choose how much money to contribute to employees’ healthcare costs, up to the maximum amount. In 2020, the maximum amount was $5,250 for individuals and $10,600 for households.
Employees that have a qualifying healthcare plan, like one purchased through the Healthcare.gov marketplace, can generally choose how to use their HRA funds, as long as they use it for qualifying health care expenses.
HRAs are available to small businesses with fewer than 50 employees that don’t offer health insurance.
While HRAs can be a more affordable option for small businesses with a small number of employees, they are often less desirable for job seekers as they require them to find individual coverage which may or may not offer the same comprehensive coverage as group health plans.
Which Group Health Insurance is Best?
If you have decided to offer health insurance to your employees, it’s important to carefully consider which group health plan best suits your employees’ needs while fitting within your budget.
The best group health plan for your business depends largely on our budget, the number of employees you have, where your employees live, how old they are, and other factors.
A good way to get started is by asking your employees to complete an anonymous survey to ask them about their healthcare needs.
Gathering their answers to questions like these will make it easier to find a plan that meets their unique needs.
When shopping for healthcare plans, make sure to request a summary of coverage and benefits to review each policies’ details, including what they cover and how much they cost.
You should also make sure your group health plan complies with the ACA’s requirements and that your plan’s premiums fit your budget.
Request a Quote
Small group health insurance is a great way for small businesses to provide affordable health coverage to their employees and build competitive benefits packages that help them attract and retain talented job employees.
At KSA Insurance, we work with drivers in South Carolina and across the southeastern United States to help them find affordable small group health plans that offer comprehensive health coverage.
Contact us today to request a quote and learn more about small group health insurance in South Carolina.