Owning a small business is hard even before you factor in the difficulties involved in offering a health insurance benefit. Budgets always seem to be tight and the workload constantly keeps you on your toes. In that environment, it may be tempting to skip dealing with health insurance altogether and leave it to your employees to figure out. And if you have fewer than 50 employees that’s technically an option, but it’s not a great one.
Your employees are human and will need health care. Figuring out a way to make health insurance accessible to them is both a valuable employee retention tool and a way to increase the odds that they’ll show up to work happy and healthy each day. Fortunately, you no longer have to deal with the cumbersome work and high costs of traditional group health plans to provide this benefit. Instead, you can take advantage of ICHRA.
A short explanation of ICHRA
ICHRA is a long, hard to pronounce acronym that stands for Individual Coverage Health Reimbursement Arrangement. Since becoming available in 2019, it gives employers the option to offer employees pre-tax money they can spend on the health insurance plan of their choice.
The challenges of small business health insurance before pre-tax health benefit (ICHRA)
ICHRA is an important development because before it became an option, providing a health insurance benefit as a small business was nearly impossible. Group health insurance works well enough for big businesses because the high number of employees helps them keep costs relatively low. But for businesses with 20 employees or less, the math doesn't work as well. In particular, group plans present a few main challenges for small businesses:
- The time commitment to get started is very high. It can easily take more than 30 hours over weeks to get a group plan set up—even though the number of employees it serves is small.
- Most group plans have a minimum participation requirement of around 70%. Without a significant majority of your employees on board, the group plan option falls apart.
- For small businesses on a budget, health insurance costs are hard to swallow. According to KFF, the average premium for individuals in 2023 is $8,435 a year. For families it’s $23,968. That’s a 22% increase since 2018 and likely to only go up with time.
Small business health insurance options in Florida: the rundown
If you want to offer some kind of health insurance benefit to your employees, there are three main routes you can go:
- Traditional group health insurance plans
- Cold, hard cash
- ICHRA
Here are the main factors to consider with each option.
#1 Traditional group health insurance plans
Traditional group health insurance is what most people think of when they think about employee health insurance. For a small business owner, going this route typically means working with a broker to review your options and providing the same health insurance plan to all your employees at a uniform rate.
For big companies, traditional group plans are standard. But this option is harder to make work for small businesses. Nonetheless, there are some distinct advantages to group insurance plans that are worth noting.
Benefits of group health insurance:
- It’s good for employee recruitment and retention. Many people strongly weigh health insurance benefits when deciding whether to take a job. You’re competing for talent with companies that can offer traditional health insurance plans. So if you don’t, some workers may see it as a mark against you.
- All plans must meet state regulations. Health insurance companies must ensure the group plans they offer meet all state and federal guidelines. That means you can count on these plans to cover everything the ACA (Affordable Care Act) defines as essential, like some forms of preventative care and pregnancy and childbirth,
- Once you’ve chosen your plan, your costs will be consistent for the next year regardless of what health concerns your staff experience.
Issues with traditional group plans:
- Costs are high. The price tag for group health insurance is extremely high—often well beyond what a small business can reasonably fit into its budget.
- Your costs are only set for a year. While group plans can promise predictable costs for a year, that’s as far as the predictability goes. It’s normal for costs to rise every year no matter how much your employees use their insurance. But if just one employee has expensive medical issues in a year, it can mean a big bump in your expenses the following year.
- They offer little flexibility. In most cases, SMBs aren’t able to offer employees choice. Everyone gets the same health insurance plan, even if their needs vary widely.
- Almost everyone has to participate. Even though employees can’t choose a specific plan under this model, they’re still faced with pressure to accept whatever’s offered. If at least 70% of employees don’t sign on, most group plans cease to be an option.
- Getting started has a high time cost. For small business owners, time is often at least as limited as budgets. Even if you can afford the expense of group insurance, can you really commit approximately 30 hours over several weeks to get a plan set up?
#2 Cash
If you want to do the right thing and help your employees get insurance, but you’ve ruled out group plans as a feasible option, the next best thing may seem to be giving them cash. Employees can simply spend the money you would have put toward their health insurance on a plan they choose. That seems straightforward enough, but it overlooks some big issues with this option.
Benefits of offering cash:
- It removes the hassle. You don’t have to deal with all the work involved in group plans. Writing a check is comparatively painless.
- Cash is popular. Have you ever heard anyone—employee or otherwise—complain about being handed cash? People will always be happy to get more money.
- You keep control. Group health insurance means playing by the insurance company’s rules. They offer limited plan options and decide the cost. With cash, you pick the number and control the process for getting it to your employees.
Issues with offering cash:
- It doesn’t feel like a benefit. You can do your best to communicate clearly that the extra money is for health insurance, but if it’s just extra money tacked onto their paycheck they may forget to see it that way. Some employees may not even use it for a health insurance plan, leaving them unprotected when they need care.
- Taxes take a big cut. Employees will only get a portion of the cash you offer, diluting its value. 15.3% of it will go to FICA and 22% to federal income taxes. That means nearly half of the amount you generously set aside for the purpose will be lost to both of you.
#4 ICHRA (the pre-tax, fixed health benefit)
ICHRA introduces a way to give employees money for health insurance without having to deal with those steep taxes. For many small businesses, it finally makes offering some form of health insurance benefit feasible. But many SMBs don’t even know it exists yet, because ICHRA only came onto the scene recently.
Benefits of ICHRA:
- Your costs are predictable. With ICHRA, you can set the budget for what you offer based on what you can afford. You’re not stuck with whatever health insurance companies charge.
- It’s obviously a health benefit. There’s no room for confusion about what the money is for. Employees that participate understand that the money must go toward a health insurance plan.
- Participation is up to employees. ICHRA has no minimum participation requirements. Even if only a few employees choose to take advantage of it, others can opt out at will.
- It allows for flexibility. ICHRA gives you the flexibility to offer a different amount to employees based on their status (part time or full time). And it allows employees the ability to select the plan that’s right for them.
- Your time commitment is minimal. Where group health plans take hours to set up, offering ICHRA is much simpler. You can put all those hours toward the many other responsibilities on your to-do list instead.
Issues with ICHRA:
- It puts some work on employees. Offering ICHRA saves you time, but it means employees have to spend their time researching the available options and selecting the right one. And with how complex the health insurance industry is, some may find the process confusing.
- Group plans are sometimes more robust. For employees who have worked for big companies before, the individual plans available on the marketplace may look like a step down from what they’re used to. While it can vary by city, Individual plans sometimes have smaller networks or more limited coverage.
How Florida small business employees can find a health plan: the marketplace
Employees that opt to take advantage of ICHRA will need to research and find their own plan—and it has to be an ACA compliant plan to count. The best way for employees to shop for a plan that meets all requirements is on the healthcare marketplace. Any insurance plan that shows up in their searches there will be ICHRA-compatible. And they can rest assured it will cover everything the ACA defines as essential, like reproductive healthcare and prescription drug coverage.
Health insurance carriers in Florida
While the details of individual health insurance plans tend to look a bit different than for employee group insurance, your employees can rest assured that the main big providers on their radar will likely be represented.
The specific companies present may vary based on your city, but some common options they can expect see on the Florida marketplace include:
- Aetna
- Ambetter
- Florida Blue
- Molina Healthcare
- Oscar
- United Healthcare
What health insurance plans cost in Florida
One of the first things someone perusing the marketplace will notice is that plans come in three main varieties, all named after metals:
- Gold
- Silver
- Bronze
These levels tell you something about how much the plans comparatively cost (gold the most, bronze the least, silver in the middle), as well as the level of coverage you can expect. For gold, you should anticipate higher premiums in exchange for lower out-of-pocket costs for your care. Bronze will have lower monthly premiums, but likely a much higher deductible and higher copays. If you anticipate needing much healthcare throughout the year, paying more monthly will likely save you money in out-of-pocket costs. Whereas for the relatively young and healthy, the plans with lower premiums may add up to lower costs overall (barring an unexpected health event).
Tiers are one of the main indicators of what your monthly premium will cost. Age and location are two other main factors. To give you an idea of what to expect a health care plan to cost depending on your city and age, here’s an overview of typical prices in three main Florida cities.
Snapshot of health insurance costs in Miami, Florida*
*Prices for plans from Ambetter, myBlue, and AmeriHealth Caritas
Snapshot of health insurance costs in Tampa, Florida*
*Prices for plans from Ambetter
Snapshot of health insurance costs in Jacksonville, Florida
*Prices for plans from Ambetter
Start offering a health insurance benefit at your Florida small business
Many small business owners have long wanted to offer employees a health insurance benefit, without seeing a way to make it work. Now that a pre-tax fixed benefit (ICHRA) is an option, you can finally act on your good intentions. With ICHRA, the pre-tax fixed health benefit, you can supply employees with the care they need and deserve without breaking the bank. Want some help navigating how to offer ICHRA pre-tax fixed health benefits? Reach out to StretchDollar or get started here.
