How to buy affordable health insurance for small businesses in New York
Updated: Nov 20, 2021
Last week, Forbes came out with a report on Cigna and Oscar teaming up to expand their small business insurance offerings into new markets. In other words, small business health insurance is becoming a big business, especially for employers hit hard by COVID-19 and its aftermath.
Starting or owning a small business in New York today means your health insurance and other business costs are probably hitting the ceiling. The problem is, you're supposed to adapt to the "new norm" and protect the health and safety of your staff - all at a greater relative cost and without the vast amounts of working capital that larger businesses have. As a result, health insurance is fast becoming an essential benefit; it's no longer just another perk or fringe benefit.
Health Insurance Options for Small Businesses
Small-group insurance has long been the leading choice for most small employers who want to offer health benefits to their employees. But not anymore. Check out this great interactive map to discover the cost of small group insurance in your specific New York county or borough.
So how can you invest in good commercial health insurance for your employees?
1) Small group insurance
Small-group or fully-funded insurance is the typical source of health benefits offerings for many small businesses. It is meant for companies with less than 50 full-time employees everywhere except in four states, where it applies to companies with up to 10 employees. Group health insurance covers a group of members or employees (and requires at least 70% employee participation to be valid) at a reduced cost since the insurance company's risk is spread across this group of policyholders. New York Small Health works with companies like Cigna and Oscar to bring first-class health insurance at economical premium rates to your New York business.
Advantages - Group health plans cost less than others because the risk pool is relatively big. Moreover, both employees and employers contribute to the premiums at a specified percentage. Of course, you can always make employees pay the full cost of the insurance (but sharing the cost is a popular talent attraction and retention tool).
Disadvantages - Small group insurance can severely damage a small business owner's budget, however. These plans are expensive, one-size-fits-all, and unpredictable in terms of annual premium increases and participation rate conditions. Further, if even one employee gets sick, the rest of your covered employees will face higher premium costs since you all belong to the same risk pool.
2) Self-funded plans
As healthcare costs continue to rise in 2021, many small employers are switching to self-funded plans to reduce their costs. Self-funding or self-insuring is a way for employers to pay for claims out of pocket only when the need arises, instead of paying set premiums to a carrier regardless of whether employees need the insurance. Budgeting for a self-funded plan is easier as the employer controls how much money is required and where that money can go. Self-insured employers set aside a portion of money into a trust fund specifically assigned to pay future claims.
Advantages - Self-funded plans are much more customizable and can directly cater to the needs of your staff. You will have complete control over the plan's reserves to maximize interest income. In addition, self-funded plans aren't subject to state insurance premium taxes, making them cheaper per enrolled employee. Finally, you only need to pay for your own employees' healthcare costs, meaning you may have some money left over to reinvest into your business.
Disadvantages - The biggest problem with self-funded plans is that employers bear the brunt of all the risk. Risk isn't shared with anyone. Plus, you may need to pay claims that far exceed your budget, increasing your company's risk of bankruptcy. Most self-insurers choose to buy stop-loss insurance for this very reason - which, along with your out-of-pocket expenses, could become almost as expensive as group health plans. Further, since you have to manage your self-funded plan instead of a licensed insurance carrier, you'll need to stay informed of all the state and federal healthcare and insurance updates and mandates.
3) Health Reimbursement Arrangements (HRAs)
Unlike Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs), HRAs are employer reimbursements for employee medical expenses (insurance deductibles, medical bills, etc.). In other words, business owners set aside a specific amount of money each month, inform staff about how HRAs work, and outsources the underwriting work and coverage verification to third-party administrators. Employees can then pick their insurance plan, hand in receipts for premium payments or medical bills, and get reimbursed by the employer.
Advantages - HRAs allow employers to offer optimal health benefits by being able to reimburse all kinds of employees. Further, HRAs are very tax-efficient while being within the control of your budget. Finally, HRAs help employers exit the health insurance risk pool by handling only reimbursements for qualified health and insurance expenses, transferring their employees' risk back onto the insurance carriers.
Disadvantages - If you choose to handle your own HRA administration functions, you may face liability or noncompliance issues under the Health Insurance Portability and Accountability Act (HIPAA). The alternative, i.e., going through a third-party administrator, will increase your costs per enrolled employee.
What's the Best Option for Your Company?
New York has a host of options and insurance companies, plans, and brokers - which can get a little overwhelming for any business owner. So instead of adding to your long list of things to do, consider talking to a professional health benefits expert at New York Small Health.
Your staff has unique health insurance needs, and your company has a tight budget. What's best for another business may not be the best for yours. Your company's size, location, industry type, market conditions, and budget all factor into what health benefits you can (and should) offer.