How to find quality, affordable health insurance for your small business

Health care is expensive. As small business owner, you have the opportunity to give your employees access to group health insurance – if you choose the right plans.

When faced with a list of plans from multiple insurance companies, it can be difficult to figure out which factors matter and how to balance your business’s costs with the value you’re providing to your staff. We’ve simplified this step for you, by outlining the key elements that impact the value and costs of your small business’s insurance plan.

Cost components

Insurance plans are built around a few different types of costs that directly impact health care spending for your business and employees:

• A premium is the monthly payment required to have an active health plan. It can be paid fully by an employee, by an employee and your business, or fully by your business. Low premium plans are typically the most affordable option for businesses. However, a low premium usually places more financial burden on your employees, since this type of plan often comes with a high deductible.
• A deductible is the amount an employee will spend on covered services before their plan starts paying for care. A high deductible plan with a low monthly premium can save your employees hundreds of dollars a year if they don’t need a lot of health care but want basic coverage in case of an emergency. For employees with chronic conditions or upcoming medical procedures, a high premium plan with a low deductible is probably a better option.
• Out-of-pocket expenses include any money an employee pays toward covered health care expenses, including copays and coinsurance. The lower your employee’s premium, the more they’ll have to pay out-of-pocket for things like prescription drugs.
• An out-of-pocket max is the maximum amount an employee will pay for health care during the year. After they meet this amount, their plan will pay for all covered medical expenses. Like deductibles and out-of-pocket expenses, the cheaper an employee’s monthly premium is, the higher their out-of-pocket max will likely be.

Network types

A network is the group of doctors, medical groups, and labs members have access to as part of their insurance plan. Usually, the larger a health insurer’s network, the more expensive their plans will be.

The four main types of networks are:

• HMOs (Health Maintenance Organizations) are typically the most affordable health insurance option, with a limited network designed around a single medical group or hospital system. You must select a primary care doctor, and referrals are required before you go to a specialist, lab, or other medical facility. Generally, out-of-network care isn’t covered.
• EPOs (Exclusive Provider Organizations) like Oscar offer the best care for the price. Networks are smaller, and combine the flexibility of a PPO with the cost savings of an HMO. You don’t need to choose a primary care doctor or ask for referrals. Care is covered by doctors and facilities in the network. Out-of-network care won’t be covered except in certain situations (like emergencies, or if there are no in-network options available).
• POSs (Point of Service) offer broader networks for a moderate price. They provide lower costs when you see in-network doctors, and include coverage for out-of-network care with a referral. You must elect a primary care doctor and get referrals to see a specialist, even if they’re in-network.
• PPOs (Preferred Provider Organizations) are the most expensive option. These plans have the broadest networks, and typically cover care from both in-network and out-of-network doctors and facilities. You don’t have to choose a primary care doctor, and referrals aren’t required to see a specialist.

Plan designs

Insurance plans come in a variety of of shapes and sizes. How an insurance plan is designed will impact how much your small business and employees pay for health care.

Traditional plans are available from almost every insurance company. They follow a standardized tier structure and cost share between the employee and the insurer. These plans all offer the same health benefits – the difference lies in how much your business and employees will pay.

• Bronze plan: Low premium, high deductible. 60% of covered health costs paid by insurer, 40% paid by employee.
• Silver plan: Moderate premium, moderate deductible. 70% of covered health costs paid by insurer, 30% paid by employee.
• Gold plan: Higher premium, lower deductible. 80% of covered health costs paid by insurer, 20% paid by employee.
• Platinum plan: Highest premium, lowest deductible. 90% of covered health costs paid by insurer, 10% paid by employee.

HSA-compatible plans are high-deductible plans that work with a health savings account (HSA). Employees choose how much to contribute, pre-tax, to their HSA and use that money to pay for health care expenses. This type of plan is typically one of the more affordable options, but most health care expenses will have to be paid by the employee until their deductible is met.

Bringing it all together

Now that you know the factors affecting cost and value, how do you choose the best insurance for your company and employees? Beyond your business’s budget, the number one consideration should be your employees’ unique needs.

If you run a small business of healthy people in the earlier stages of their careers, a cost-conscious plan with lower premiums and higher deductibles might be the best fit. If your team skews older with more chronic health issues, a higher monthly premium and lower deductible makes sense.