The honest answer is: too many small business owners pick health insurance plans without asking their employees what they actually want—and that’s a recipe for frustration, wasted money, and worse, unhappy employees. If you’re navigating the maze of small business health insurance, you know there’s no one-size-fits-all solution. But how do you find the best fit without knowing exactly what your team values?
Let’s break this down in plain language, like two friends hashing it out over coffee. We'll cover practical questions to ask your employees, compare your health plan options, and explain key tools like the SHOP Marketplace and how tax credits might save you some cash. Along the way, I’ll bust myths about expensive group plans and highlight common mistakes to avoid—because, trust me, picking a plan without your employees’ input is a disaster waiting to happen.
Why Ask Employees What They Want in Health Insurance?
So, what’s the catch? You might think, "I’m the boss—aren’t these benefits my decision?” Sure, you’re the one footing the bill (partially), but a health plan is a tool intended to support your people. Miss the mark on what they really need, and you lose in productivity, morale, and retention.
According to recent employee benefits surveys from the Kaiser Family Foundation, the biggest factors employees care about include:
- Low out-of-pocket costs (deductibles, copays, coinsurance) Access to preferred doctors and specialists Prescription drug coverage Coverage for dependents Flexibility with telehealth or alternative care options
Ignore these, and your $200-$300 monthly contribution per employee (a common range documented by Small-Group Health Plans resources) might as well be flushed down the drain.
Common Mistake: Not Getting Employee Input Before Choosing a Plan
One thing I see over and over: business owners pick a plan based on the shiny brochure or an insurance broker’s slick pitch without pulling their team into the conversation. Then, when healthcare bills come in or a preferred provider isn’t covered, employees complain—or worse, opt out and you still pay for coverage nobody uses.
Imagine buying premium tires for a car your teenagers drove daily, but they wanted budget tires because they don’t drive fast or off-road. You just wasted money on something nobody needed or wanted. Same thing with health plans.
Questions to Ask Your Employees Before Selecting a Health Plan
What do you value most in health coverage? - Cost? Network? Specific services like mental health, maternity, or chronic care? Do you have preferred doctors or specialists you need covered? - Narrow networks can be a deal-breaker. How important is prescription drug coverage? - This can be a big budget driver for employees with ongoing medications. Would you use telehealth services? - This impacts your plan choice and convenience for your team. Do you expect to cover dependents or family members? - That affects your overall cost and plan design options. Are you currently on any treatments or planning any procedures? - Helps anticipate out-of-pocket costs and network adequacy. What monthly premium range do you feel comfortable with? - Helps you gauge if the $200-$300 monthly contribution per employee is realistic for both sides.Comparing Small Business Health Insurance Options: Group Plans vs HRAs
Now that you’ve got your employee input, it’s time to understand the options on the table. Running a small business means balancing cost with offering benefits that actually matter. Two big choices here are traditional small-group health plans and Health Reimbursement Arrangements common questions on offering health insurance (HRAs).
Traditional Small-Group Health Plans
This is your “classic” group plan offered through insurers or the Small-Group Health Plans marketplace. These plans usually cover a variety of services, often with fixed copays and deductibles, and generally provide access to broader provider networks.
Advantages:
- Predictable coverage with familiar benefits Regulated under the Affordable Care Act (ACA), so essential health benefits must be included Easier for employees to understand and access
Downsides:
- Can be expensive, especially for micro-businesses with fewer than 10 employees Plans can be rigid—less customization possible Premiums often rise steeply year over year
Health Reimbursement Arrangements (HRAs)
HRAs have become more popular since the IRS loosened the rules around them. Here, you provide a fixed dollar amount (say $200-$300 monthly per employee) as a tax-advantaged reimbursement that your employees can use to buy their own individual health plan on marketplaces like HealthCare.gov SHOP Marketplace or elsewhere.
Advantages:
- Greater employee choice and flexibility—everyone can pick a plan that suits their needs exactly Potentially lower and more predictable employer costs Tax benefits for the employer
Downsides:
- Can be confusing for employees unfamiliar with insurance marketplaces Employees might choose plans with coverage gaps or higher out-of-pocket costs, leading to dissatisfaction Administrative overhead to set up and manage the reimbursements
How Does the SHOP Marketplace and Tax Credits Work?
If you’re leaning toward a group plan, don’t overlook the SHOP Marketplace. It’s designed for small employers and offers some advantages:
- Simple shopping: You can compare plans side-by-side, like shopping online for car insurance. Tax credits: If you have fewer than 25 full-time equivalent employees with average wages under about $58,000 (numbers from IRS guidelines), you might qualify for a tax credit that covers up to 50% of your premium cost. But is it actually worth it? That depends on your payroll and overall contribution.
Important to note: your employees must enroll in these SHOP Marketplace plans to keep the tax credits flowing and stay within ACA guidelines.
Understanding the True Cost Drivers of Health Coverage
Here’s where many business owners lose the plot—focusing on premiums alone. Like buying a car, the sticker price isn't everything. What’s more important are the total costs:
- Premiums: Your monthly contribution (remember the $200-$300 ballpark? That’s for premiums, not total cost.) Deductibles: How much do employees pay before insurance kicks in? Copayments and coinsurance: The fees at the doctor’s office or pharmacy Out-of-pocket maximums: The worst-case scenario cost your employees might face
Ignoring these can mean you pick a “cheap” plan that saves money upfront but burdens your employees with sky-high bills when they get sick.
Bottom Line: Choose a Plan with Team Input and a Clear Budget Strategy
It’s tempting to just pick the easiest option or sign up for whatever the broker recommends. But small businesses, especially those under 10 employees, do better when they start with the people who will use the coverage.
Create an employee benefits survey, hold a simple group meeting, or even just have one-on-one conversations. Ask the questions listed above and weigh the results against your budget. Use tools like the SHOP Marketplace for group plans with potential tax credits, or consider HRAs if your team prefers more individual plan choice and you want to lock your costs.
Remember, health benefits aren’t just an expense—they’re an investment in your workforce. Ask the right questions, crunch the numbers, and avoid the rookie mistake of flying blind. Your employees—and your bottom line—will thank you.