Small Business Health Insurance Costs: How Pricing Works

How you customize the health plan you offer will affect what you pay for coverage.

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Our partners at Oscar + Cigna offer guidance on understanding health insurance premiums

Cost is a huge consideration for small business owners deciding whether to offer health insurance, but there’s no one-size-fits-all plan or price tag. What you pay for coverage — called the premium — depends on how you customize the plan you’re offering.

What is a premium?

Let’s start with the basics. A premium is the fixed dollar amount paid per month to an insurer for health insurance coverage.

Premiums can be paid entirely by your business, but most commonly the cost is shared between employer and employee. How much premiums cost each month depends on a number of factors, such as:

  • Plan design: coverage level, the deductible, single or family coverage.
  • Type of network: Health maintenance organizations (HMOs), Preferred provider organizations (PPOs), Point of service plans (POS), or Exclusive provider organizations (EPOs).
  • Business location: prices may fluctuate depending on the region.
  • Your contribution target: how much money you put toward employee premiums.

Let’s take a closer look at some of the factors that determine small business health insurance premium prices.

How plan design affects business health insurance premiums

In 2019, 75% of firms offering health benefits offer only one type of health plan, according to Kaiser Family Foundation. That percentage is even higher for small businesses, so it’s important that the one you choose is right for your company and your employees.

Traditional plan choices are offered by most every insurance company, and sound a bit like Olympic medals: bronze, silver, gold and platinum.

Each plan offers the same essential health benefits. What’s different is the split between how much employees will pay for care vs. the insurance company. Take a look at this chart:

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Note: Business Health Insurance Cost Breakdown by Tier.

Low premium plans are usually the most cost-effective option for businesses, but tend to put a greater financial burden on your employees, since this type of plan often comes with a high deductible.

Each plan offers the same essential health benefits. What’s different is the split between how much employees will pay for care vs. the insurance company.

How location impacts business health insurance costs

Where your business is based also affects costs. This is because competition, local regulations, and cost of living vary in different areas.

In 2019, group health insurance premiums were relatively even across regions, but annual premiums were most expensive in the West for individual plans and in the Northeast for family plans. The Midwest saw the least expensive annual premiums for family coverage, as did the South for individual coverage. Here are the average annual premium costs for covered workers by region, according to Kaiser Family Foundation:

Screen Shot 2020-06-24 at 4.33.21 PM
Note: Business Health Insurance Cost Breakdown by Region.

Read the rest of the article on Cigna + Oscar’s blog.

Note: This article was originally published on Zenefits has no control over, and assumes no responsibility for, the reliability, quality, or accuracy, of this content.

Cigna + Oscar coverage is insured by Cigna Health and Life Insurance Company.
CA: benefits administered by Oscar Health Administrators. Other states: benefits administered by Mulberry Management Corporation. Pharmacy benefits provided by Express Scripts, Inc. Cigna + Oscar health insurance contains exclusions and limitations. For complete details on product availability and coverage, please refer to your plan documents or contact a representative.

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