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Building, running, and growing a business is a complex process that you are already familiar with as a small business owner. In addition, providing employee benefits, such as affordable health care coverage, can be complex.

Most business owners turn to brokers and agents for guidance when it comes to the health insurance industry, since it is multifaceted and somewhat complicated.

Nevertheless, with the passage of the Affordable Care Act, or ACA, in 2010, the complexity of choosing and purchasing group health insurance has made this type of assistance even more necessary.

A business owner should understand the various options available to him or her when looking for small business health insurance. Even if small businesses are not required to offer small group health insurance, it can be beneficial for employers and employees to select and offer these policies.


First, let's define a few terms. If we speak of "group coverage" for businesses, what do we mean exactly?

One definition of health insurance is as follows:

"Group medical coverage, commonly referred to as group medical insurance, refers to a single policy issued to all eligible employees and their dependents (usually a business with employees)."

Title 26 of the Internal Revenue Code contains a version from the IRS.

In a group health plan (including self-insured plans), employers (including self-employed people) or employee organizations provide health care (directly or indirectly) to their employees, former employees, the employer, or other individuals associated with the employer in a business relationship.

Not so long ago, small business employees thought group health insurance plans were a premium benefit rather than an expectation. Some employers cover the entire cost of group health insurance for their employees, which is gaining popularity with smaller companies.

As part of its Employer Health Benefits Survey released in 2020, Kaiser Family Foundation (KFF) revealed the following trends:

  • Small businesses offered health benefits to at least some employees in 55 percent of cases.

  • In small firms, 27 percent of employees are covered by a plan where the company pays the entire premium

  • One in four employees are in a plan where they are required to pay more than 50 percent of the premium for family coverage.

Rather than asking whether small businesses should offer group health insurance, the question should be what kind?


Small businesses can choose from many different types of group health insurance plans, including:

  • Fully-Insured Plans

There are a number of traditional options available, including fully-insured plans. The benefits of a fully-insured plan are covered by an insurance company that charges your business an annual premium. Your employees partially pay for this premium.

  • Self-Funded Plans

The employer is responsible for covering the employee health costs when self-funding is used. In exchange for more affordable rates and more control over a policy, your business takes on the risk of having to pay for catastrophic claims.

  • Level-Funded Plans

Plan types that are level-funded are based on monthly payments. Your small group's insurance carrier will determine its premium based on census information. Insurers calculate this rate based on factors like fees, stop-loss coverage premiums, and claim allowances. Insurers adjust the monthly level based on group performance at the end of the year.

  • Health Maintenance Organization (HMO)

Members of an HMO pay monthly premiums for specific health services provided by the organization. You'll be able to choose from a network of healthcare providers and locations through an HMO, but you'll only be able to choose providers within the network. As compared to other types of health insurance, HMOs are usually more affordable.

  • Preferred Provider Organization (PPO)

A PPO plan offers more flexibility than an HMO plan. While PPOs have a network of healthcare providers and facilities, they allow members to visit physicians or locations outside the network. The costs of these visits are higher than those of an HMO plan, but they do provide members with greater freedom than HMOs.

  • High-Deductible Health Plan (HDHP) and a Health Savings Account (HSA)

For members of a group HDHP, premiums are lower and deductibles are higher. As a result, members of this type of health insurance must pay more out-of-pocket before the plan pays. For employees who don't need a lot of medical services, this option offers lower premiums, making it a good choice for group health insurance.

It is important to note that the primary benefit of a group plan is that it spreads risk over a large group of insureds. Keeping premiums low benefits group members, and insurers can better manage risks when they know who they are covering.

When considering group health coverage, keep these points in mind:

  • Insurers reduce their risk by spreading it among a group of policyholders, resulting in lower premiums.

  • For a plan to be valid, at least 70 percent of participants must participate.

  • Members and the organization share premium costs, and coverage may be extended to members' families and/or dependents for an additional fee.

  • When employers offer their employees group health insurance, they can benefit from favorable tax treatment.


In business since 1992, Routt Insurance is a local, family-owned business operating in Pinellas County.

Our firm offers licensed health insurance plans for small businesses and individuals in 30 states. Furthermore, we are licensed and certified by each of these insurance carriers to offer coverage to individuals, families, and small groups, as well as Medicare supplement and prescription drug plans.

Health insurance for yourself, your family, or employees, as well as vision and dental coverage may raise several questions and concerns for you.

It is our pleasure to assist you in finding the right insurance coverage at Routt Insurance.


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