Small businesses that offer health insurance to their employees see big rewards in finances (tax credits and benefits) and in operations (improved recruiting, better job satisfaction and higher productivity), yet too few small business owners are taking advantage of this opportunity.
The Federal Government Bureau of Labor Statistics indicates that while 88% of employers with over 500 employees provide company health plans, only 55% of small businesses (companies with fewer than 100 employees) do the same. Perhaps entrepreneurs believe that most health insurance options are beyond their reach, however, a business only needs one or more full-time employees to qualify for most group plans.
To make choosing a health insurance policy easier for self-employed owners of small firms, we’ve created this guide to small business health insurance plans.
In this article, we’ll look at the different plan options available to small businesses, then give a rundown of the five best small business health care companies.
Health plans for small business: What are the choices?
Here’s a quick guide to the 6 main types of health insurance plan:
1. What is a Health Maintenance Organization (HMO)
This type of plan varies greatly between states and insurance providers. Generally HMOs:
- Don’t cover out-of-network health costs
- Require in-network Primary Care Physician (PCP) referrals to get specialist care
- The number of providers in your network will vary by location
- Staying in-network keeps out-of-pocket costs are low
2. What is a Preferred Provider Organization (PPO)
A PPO offers choice to patients but can be more expensive. PPO’s usually have the following features:
- You’re still expected to stay in-network of providers, but a PPO network is usually larger
- You can still face large out-of-network costs
- You don’t need a referral to see a specialist
- PPO premium costs can be much higher than other plans – some are over $1,000 per month
3. What is a Point of Service Plan (POS)
A POS health plan offers some of the flexibility of a PPO with the lower costs of an HMO. A POS usually has:
- A low/no deductible for in-network care
- You probably need a Primary Care Physician (PCP), especially for referrals to specialists
- You can access out-of-network care but at a higher cost
4. What is a High Deductible Health Plan (HDHP)
HDHP health plans are a risk unless you’re comfortable paying a large amount out-of-pocket in the event of medical care. Generally HDHP health insurance plans:
- Have a high deductible. Your plan only starts paying out once you’ve personally contributed at least $1,300 for your care
- The high personal cost of treatment makes regular health issues or doctors visits very costly
- An HDHP can be structured as either an HMO or PPO with many of the same features, but with the addition of a high deductible
5. What is a Flexible Spending Account (FSA)
The FSA is an account that both the employer and the employee contribute to from which the employee can pay for health care costs. FSAs vary, but most have the following features:
- The employee decides how much to contribute at the start of an annual period, and can’t change their mind.
- The money paid in by the employee is pre-tax up until $2,550, and the employer can add money to increase the appeal of the health plan benefit
- Unspent money in the account reverts to the business owner at the end of the annual period
6. What is a Health Savings Account (HSA)
An HSA is an account that the employee or employer can contribute to with pre-tax money to help with medical expenses. The features of a normal HSA are:
- Unlike an FSA, the account isn’t reset each year.
- To be eligible, you or your employees must have an HDHP plan.
- There’s an annual contribution limit of $3,350 for an individual and $6,750 for a family.
- Employees can get an HSA on their own, even if the employer doesn’t offer one.
- Money withdrawn for non-medical expenses will be taxed and you’ll owe a 10% penalty if you’re under 65.
Top 5 health insurers for small businesses
We looked at the different providers and ranked our top 5 health insurance providers for small businesses in 2019. Here’s how they compare.
1. Best small business health insurance: Aetna
Aetna operates nationwide through a reasonably large network of health providers.
This national network gives Aetna an advantage over regionally focused health insurance companies like Humana and Kaiser Permanente, while being competitive on price.
Aetna’s health plans offer value for money, with good health coverage across their plans with reasonable premiums and deductibles.
Aetna plans for small businesses
Aetna offer three types of small business health options programs:
- Open Choice Plan – A PPO-style option offering choice at a premium.
- Traditional Choice Health Insurance Plan – Also strong on choice, but with a claim based system.
- Aetna HealthFund One-to-One – Great tax benefits and the ability to link to a health savings account or health fund.
Is Aetna worth it?
Aetna’s main weakness maybe their lack of short-term plans. As it doesn’t affect company plans, this leaves Aetna in a strong overall position among health insurers for small businesses.
Accessing the health benefits that come with Aetna is also easy, with the secure employer and member websites reducing bureaucracy and adding clarity. The added tools are also helpful.
We rate Aetna as the strongest option nationally. However, check what’s available in your area from more locally-focused health insurers like Humana and Kaiser Permanente.
See the full review of Aetna here.
2. Humana: Quality health insurance for local businesses
Unlike big national healthcare providers like Aetna, Blue Cross Blue Shield (BCBS), and UnitedHealthcare, Humana is only available in 22 states.
However, if your small business is located in the south, west, or midwest, you’ll likely be able to take advantage of Humana’s reasonably low health insurance premiums, copays, and out-of-pocket costs. They have other useful features and respectable coverage.
While some of Aetna’s plans are best only for small businesses located in 22 states, their nationwide PPO plan allows members to find an outside local provider in any state.
This is useful for employers with main offices in an area where Humana operate but also has remote workers or smaller regional offices elsewhere.
Humana plans for small businesses
Humana has a wide range of plans for individuals, groups, and businesses of different sizes. Humana health insurance plans suitable for small businesses are:
- Humana Simplicity – Let members decide on their own co-pays and offers 100% payment coverage after deductibles. In-network preventive care and wellness incentives.
- Level Funded Premium – For small businesses of 10+ employees interested in tax savings, comprehensive coverage, and wellness programs.
- Self-Funded Plans – Lower premiums and predictable costs in exchange for higher out-of-pocket payments.
- High Deductible Health Plans – Low premiums in exchange for a higher deductible. Includes medical treatment, prescription drugs, 100% coverage for annual in-network exams, and pairing with a health savings account.
- Humana Copay Plans – Including 100% payment coverage for annual in-network exams, flat service fees, and reduced costs for care from in-network providers.
- Coinsurance Plans – 100% coverage for preventive exams and discounts on out-of-pocket payments on other medical services from in-network providers.
Is Humana worth it?
Humana’s health plans provide impressive coverage. There are several added benefits like access to wellness centers and online tools.
Humana has a good range of flexible and affordable plans to accommodate the different needs of small businesses.
However, as the majority of Humana plans are only available in 22 states it’s difficult to recommend them as a national provider. Check to see if Humana is available in your area. If they are, Humana is a health insurance provider worth considering.
See the full review of Humana here.
Like Humana, Kaiser Permanente is only in a small number of states. However, within those areas, Kaiser Permanente has an impressive collection of doctors and facilities available. Kaiser Permanente has over 17,000 physicians, more than 600 medical or outpatient facilities, and 38 hospitals. They also have at least one plan that allows small business employees not located in one of their core areas to access outside providers.
Kaiser Permanente is active in the following states and districts:
- Washington D.C.
If your firm operates in one of these locations, you should consider Kaiser Permanente. Their premiums tend to be low compared to other top small business health options.
Another advantage of Kaiser Permanente is that the quality of care your can access is consistent because they offer their own system of doctors, hospitals, and medical specialists.
Kaiser Permanente plans for small businesses
Kaiser Permanente offers the following 6 types of healthcare plan appropriate to small businesses:
- Traditional HMO Plans – A good option for predictability due to the cost-sharing system and out-of-pocket maximums. Low copays and zero deductibles.
- Deductible HMO Plans – Similar to traditional HMO plans, but lower premiums in exchange for added deductibles. You can pair your plan with a health savings account.
- HRA and HSA Qualified Plans – Lower premiums than the other health plans with the added benefit of tax savings and online decision-making tools.
- Deductible HMO and HRA Plans – Combines the cost advantages of a traditional deductible HMO and the tax benefits of an HRA plan. Features the same online decision-making tools as other plans and preventive care services.
- PPO Plans – Good for flexibility. Employees outside Kaiser Permanente’s core areas can get care from other providers.
- Point of Service Plans – Blends a traditional HMO plan with a PPO. Offers comprehensive support and choice within Kaiser Permanente service areas with the ability to go out of their network if necessary.
Is Kaiser Permanente worth it?
Kaiser Permanente offers quality care across their network which, though large, is heavily concentrated in certain states. Fortunately, Kaiser Permanente offers a plan allowing access to outside providers in other regions.
Kaiser Permanente offers a great choice of plans at affordable rates compared to many big national insurance providers, with excellent support and online tools that make planning and managing your healthcare less of a headache.
UnitedHealthcare is currently the largest health insurance provider in the United States. Their network includes 895,000+ physicians and health professionals, and 5,600+ hospitals. While they’re one of the most expensive health insurance providers we reviewed, they offer a number of valuable features, such as 24/7 access to online ‘virtual visits.’
Combined with their strong group of online features and wellness plans, the higher average cost may be justified for some small businesses.
UnitedHealthcare plans for small businesses
UnitedHealthcare small business plans are typically for companies of between 2 and 5,000+ people – a higher range than usual. Small business health plans from UnitedHealthcare include:
- UnitedHealthcare Choice – Fixed dollar copayments, coinsurance options, discounted access to in-network care, 100% coverage for preventive care. You won’t have to select a primary care physician (PCP) to get referred for specialist care.
- UnitedHealthcare Choice Plus – The benefits of the UnitedHealthcare Choice plan, plus lower out-of-pocket costs at the point of use if members go out-of-network.
- UnitedHealthcare Options PPO – Choose any doctor without seeking a referral for specialist care or not, both in or outside the network. Save money with in-network providers. Up to the member to submit claims.
Is UnitedHealthcare worth it?
The large UnitedHealthcare network is a big advantage along with excellent online tools and fairly consistent quality. Managing your small business or employee account is also easy.
However, there are more affordable health insurance providers who may be more attractive to small businesses aiming to keep costs down.
BlueCross BlueShield (BCBS)
BlueCross BlueShield covers 99 million Americans and can be found in over 170 countries.
37 different organizations under the umbrella of Blue Cross Blue Shield operate nationally, so there’s variety both in provider and network depending upon location.
BlueCross BlueShield plans for small businesses:
Small businesses can use Blue Cross Blue Shield customized network solutions to get a plan with the right type and distribution of coverage. Blue Cross Blue Shield small group health insurance plans include:
- BlueCard PPO – in-network access to 96% of US hospitals and 95% of US physicians, but as with most PPOs, it’s not the cheapest option.
- Blue Select Networks – access to locally targeted networks that result in gradual cost savings when compared to broader PPO plans.
- Blue Distinction Speciality Care – access to centers of excellence across all top 100 MSAs, in nine high-cost specialty care areas.
- Blue Distinction Total Care – this health plan uses coordinated care to get costs lower. Good for those with chronic conditions.
- Blue Distinction Flexible Network – helps employees reach a compromise between savings, quality, and access to high-quality providers
Is BlueCross BlueShield worth it?
Blue Cross Blue Shield offers a range of plans at a medium average price. The BCBS network is also large, meaning members giving greater choice in care providers.
However, the structure of BCBS can be confusing and variations in local providers can mean real differences in the nature and quality of care available in different geographic areas.
Health insurance for small businesses: The final judgment
Of the top 5 health insurance providers we reviewed, Aetna came out on top as the best health insurer for small businesses. However, always compare local coverage options and prices before deciding on an employee’s health plan.