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A Step-by-Step Guide to Small Business Health Insurance Plans

Why Group Health Insurance Plans Matter for Small Businesses

When you’re running a small business, every decision impacts both you and your employees. One of the most crucial choices you’ll make is whether to offer group health insurance plans. These plans provide many benefits, including lower costs and tax advantages, helping you attract and retain talented employees.

Here’s a quick summary of why group health insurance plans are important:

  1. Cost Savings: Group plans are often cheaper than individual plans, reducing the overall cost for both you and your employees.
  2. Tax Incentives: Employers can enjoy favorable tax benefits for offering group health insurance.
  3. Employee Satisfaction: Providing health benefits can boost morale and productivity.
  4. Larger Risk Pool: Spreading the risk among more people helps keep premiums lower.

Offering group health insurance isn’t just an expense—it’s an investment in your team’s well-being and your business’s future.

Group Health Insurance Benefits - group health insurance plans infographic pillar-5-steps

Hello, my name is Dalton Tigner, and I have experience in group health insurance plans. Since 1992, my family business has been helping small businesses like yours navigate the complexities of health insurance. Let’s dive into the essentials to ensure you make the best choice for your team and your business.

Understanding Group Health Insurance Plans

Types of Group Health Insurance Plans

When it comes to group health insurance plans, there are several key types to consider. Each type offers different levels of coverage, flexibility, and costs. Understanding these distinctions can help you choose the best plan for your small business.

HMO Plans

Health Maintenance Organization (HMO) plans are a popular choice for many small businesses. These plans require employees to choose a primary care physician (PCP) who will manage their healthcare needs. Referrals from the PCP are necessary to see specialists.

– Lower premiums and out-of-pocket costs.
– Emphasis on preventive care.

– Limited to a network of providers.
– Requires referrals for specialists.

PPO Plans

Preferred Provider Organization (PPO) plans offer more flexibility than HMO plans. Employees can see any healthcare provider without a referral, including out-of-network providers, though at a higher cost.

– Greater choice of doctors and specialists.
– No need for referrals.

– Higher premiums and out-of-pocket costs.
– More complex billing and reimbursement processes.

Coverage Options

Both HMO and PPO plans cover a wide range of medical services, including:

  • Physician visits
  • Hospital care
  • Prescription drugs
  • Preventive care
  • Mental health services

However, the extent of coverage and the costs involved can vary significantly between plans. It’s essential to review each plan’s specifics to understand what is covered and what isn’t.

Network Providers

The network of providers is a critical aspect of any group health insurance plan.

  • HMO Plans: Typically have a narrow network of providers. Employees must use in-network providers to receive coverage.
  • PPO Plans: Offer a broader network. Employees can choose out-of-network providers but will pay more out-of-pocket.


The cost of premiums is a significant factor for both employers and employees.

  • HMO Plans: Generally have lower premiums due to the restricted network and need for referrals.
  • PPO Plans: Higher premiums due to the flexibility and broader network of providers.

Offering group health insurance plans can provide your employees with peace of mind and access to necessary medical care. Choosing the right type of plan involves balancing costs, coverage, and flexibility to meet the needs of your business and employees.

Next, let’s explore the benefits of group health insurance plans for small businesses.

Benefits of Group Health Insurance Plans for Small Businesses

Cost-Saving Benefits

Group health insurance plans can be more cost-effective than individual plans. By pooling employees together, insurers can spread the risk, which often results in lower premiums. This is especially beneficial for small businesses looking to provide comprehensive coverage without breaking the bank.

Larger Risk Pool

A larger risk pool means that the cost of high medical expenses is spread across more people. This helps keep premiums stable and predictable. Group health insurance is a widespread and effective solution for many businesses.

Employer Contribution

Employers can choose to contribute a portion of the premium costs. This not only makes the plans more affordable for employees but also demonstrates the employer’s commitment to their well-being. For instance, businesses that pay at least 50% of the insurance premium may qualify for significant tax benefits.

Tax Incentives

Offering group health insurance plans can also provide tax benefits. Small businesses may be eligible for tax incentives if they meet certain criteria, which can significantly offset the cost of providing health benefits, making it an attractive option for budget-conscious businesses.

Employee Satisfaction

Providing health insurance can boost employee satisfaction and retention. Employees are more likely to stay with a company that offers comprehensive health benefits. This not only helps in attracting top talent but also reduces turnover and training costs.

A study by Tigner Financial found that offering benefits like health insurance can enhance the attractiveness of your business to prospective employees and boost morale, productivity, and retention rates among your existing team.

How to Choose the Right Group Health Insurance Plan

Choosing the right group health insurance plan for your small business can be challenging, but breaking it down into steps can make the process smoother.

Cost Considerations

First, evaluate your budget. Understand the balance between monthly premiums and out-of-pocket costs like deductibles, copays, and coinsurance. For instance, plans with lower premiums might have higher deductibles, which could be costlier if your employees need frequent medical care.

Health Services Covered

Next, review the health services covered by potential plans. Ensure the plan covers essential services like doctor visits, hospitalization, prescriptions, mental health services, and preventive care. For example, if your employees frequently need specialized care, ensure the plan includes those services.

Employee Needs

Consider the specific needs of your employees. If you have employees with chronic conditions, a plan with comprehensive coverage for ongoing treatment and medication might be necessary. Conducting an anonymous survey can help you understand their preferences and requirements better.

Plan Selection

There are different types of group health insurance plans to choose from, such as Health Maintenance Organization (HMO) plans and Preferred Provider Organization (PPO) plans. HMO plans typically have lower premiums but require employees to use a network of doctors and get referrals for specialists. PPO plans offer more flexibility but come with higher costs.

Licensed Agents and Brokers

Consulting with a licensed agent or broker can provide valuable insights. They can help you compare plans, understand the fine print, and ensure you select the best option for your business needs. They can also assist with the enrollment process and ongoing management of the plan.


Small employers with 1-50 employees are generally eligible to purchase coverage through the Small Business Health Options Program (SHOP). This program offers a range of plans and may provide tax credits to help offset costs.

SHOP and Private Insurance Companies

If you qualify, SHOP is a good place to start. If no SHOP plans are available in your area or you have more than 50 employees, you can work with private insurance companies to explore other group plans.

Enrollment Process

The enrollment process involves selecting a plan and enrolling eligible employees. Make sure to communicate clearly with your employees about their options and any necessary steps they need to take. Using online portals provided by insurers can simplify this process.

Tax Credits

Enrolling in a SHOP plan is generally the only way for eligible small employers to claim the Small Business Health Care Tax Credit. This can significantly reduce the overall cost of providing health insurance to your employees.

By following these steps, you can choose a group health insurance plan that meets the needs of your business and your employees.

Next, let’s explore Health Reimbursement Arrangements (HRAs) and other tax-favored health plans.

Health Reimbursement Arrangements (HRAs) and Other Tax-Favored Health Plans

Health Reimbursement Arrangements (HRAs) are a flexible way for employers to help their employees with medical expenses. They work like a company-funded account that employees can use for health care costs, including premiums for individual coverage in some cases.

How HRAs Work

Employers decide how much money to contribute to the HRA. Employees then use these funds to cover eligible medical expenses. The best part? Employers only pay for the funds that are actually used. This can be a cost-effective way to offer health benefits without the complexity of managing a traditional group health insurance plan.

Example: Imagine you run a small business with 15 employees. You decide to allocate $2,000 per employee per year into an HRA. Your employees can use this money to pay for doctor visits, prescriptions, or even their health insurance premiums.

Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) are another excellent option. They are available to employees who are enrolled in High Deductible Health Plans (HDHPs). HSAs allow employees to set aside pre-tax money to pay for medical expenses. Unlike Flexible Spending Arrangements (FSAs), the funds in an HSA roll over year to year and can even be taken along if the employee changes jobs.

Benefits of HSAs:
Tax Advantages: Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.
Flexibility: Unused funds roll over each year.
Portability: Employees keep the account even if they leave the company.

Flexible Spending Arrangements (FSAs)

Flexible Spending Arrangements (FSAs) allow employees to set aside pre-tax dollars for eligible medical expenses. This reduces their taxable income and helps cover out-of-pocket healthcare costs. However, unlike HSAs, FSAs typically have a “use-it-or-lose-it” rule where unused funds may not roll over to the next year.

Benefits of FSAs:
Immediate Tax Savings: Contributions reduce taxable income.
Employer Contributions: Employers can also contribute to the FSA.
Wide Range of Uses: Funds can be used for a variety of medical expenses, including co-pays, prescriptions, and some over-the-counter medications.

Note: FSAs are often paired with traditional health insurance plans, making them a versatile option for many businesses.

Why Consider These Plans?

Offering HRAs, HSAs, and FSAs can help you manage healthcare costs while providing valuable benefits to your employees. These plans offer flexibility and tax advantages that can make a big difference for both employers and employees.

Key Takeaways:
HRAs: Employer-funded and flexible, only pay for what’s used.
HSAs: Tax-advantaged savings for employees with HDHPs, funds roll over.
FSAs: Pre-tax savings for medical expenses, but funds may not roll over.

By integrating these tax-favored plans into your benefits package, you can provide comprehensive health coverage options that meet the diverse needs of your workforce.

Next, let’s address some frequently asked questions about group health insurance plans.

Frequently Asked Questions about Group Health Insurance Plans

What is an example of a group health insurance plan?

A common example of a group health insurance plan is an HMO (Health Maintenance Organization) plan. HMOs require members to choose a primary care provider (PCP) and get referrals to see specialists. They usually have lower premiums and out-of-pocket costs but restrict coverage to network providers.

Another example is a PPO (Preferred Provider Organization) plan. PPOs offer more flexibility by allowing members to see any doctor or specialist without a referral. They have higher premiums but provide broader access to healthcare providers.

Both HMO and PPO plans are designed to meet different needs, offering various levels of coverage and flexibility.

What is a group policy health insurance?

Group policy health insurance is an employer-sponsored plan that provides healthcare coverage to employees and often their families. These plans pool the risk among all members, which helps keep premiums lower compared to individual policies.

Employers typically contribute a portion of the premium, making it more affordable for employees. Coverage usually includes medical care, hospital stays, prescriptions, and preventive services.

This type of insurance is a cornerstone of employee benefits, promoting a healthier workforce and enhancing job satisfaction.

Is group health insurance worth it?

Absolutely. Group health insurance offers several cost-saving benefits:

  • Employer Contribution: Employers often cover a significant portion of the premiums, reducing the financial burden on employees.
  • Tax Incentives: Small businesses may qualify for tax credits, especially if they enroll in plans through the SHOP marketplace.
  • Larger Risk Pool: Spreading risk across a larger group helps keep premiums lower and more stable.

These advantages make group health insurance a valuable investment for both employers and employees, fostering a supportive and productive work environment.


In summary, group health insurance plans offer small businesses a practical and cost-effective way to provide essential healthcare coverage to their employees. By leveraging employer contributions, tax incentives, and larger risk pools, these plans not only reduce costs but also enhance employee satisfaction and retention.

At Tigner Financial, we specialize in guiding small businesses through the complexities of group health insurance. Our expertise ensures that you select the right plan tailored to your unique needs, helping you achieve financial security and a healthier workforce.

Additionally, integrating whole life insurance into your benefits package can offer long-term financial stability and peace of mind for your employees. This dual approach not only protects your team but also strengthens your business’s overall financial health.

Ready to explore the best small business employee benefits for your company? Contact Tigner Financial today to get started on building a robust and comprehensive benefits package.

By understanding the ins and outs of group health insurance and leveraging our expertise, you can ensure your small business thrives while providing invaluable support to your employees.