What it costs a small business to offer health insurance, and what moves the number

The short answer: it depends on six things, and you control three

The cost of offering health insurance to a small team depends on who enrolls, how old they are, where they live, the plan design you pick, the network you choose and how much of the premium the business pays. The first three are facts about your group. The last three are decisions, and they move the number more than most owners expect. I do not quote a typical price in a guide like this, because a figure without your census attached is a guess, but I can show you exactly what builds the number.

I am Rex Slover, and at Slover Agency most of my work is health insurance and employee benefits for businesses in Murphy, Plano and the wider Dallas area. Owners who call me about benefits for the first time usually ask the same question in different words: what am I signing up for each month. This guide answers it in the order I would walk you through it across a desk.

Facts about your group that shape the quote

Carriers start from the people. In a small-group plan, each enrolled employee is generally rated by age, so a team of people in their twenties and a team of people in their fifties will receive very different quotes for the same plan. Location matters as well, because carriers price by area, and the zip codes where your employees live affect the rate. Dependents add cost: an employee who covers a spouse and children costs more than one who covers only themselves.

The number of people who actually enroll matters too. Carriers usually have participation rules, meaning a share of eligible employees must take the coverage or have other coverage elsewhere, and the rules vary by carrier. A group where half the team waives because they are on a spouse's plan can be fine, but it changes the math, so I ask about it on the first call.

• Ages of the employees who enroll
• Where they live, by zip code
• How many cover a spouse or children
• How many eligible employees enroll versus waive

Plan design: the biggest lever you have

The Texas Department of Insurance puts the trade-off plainly in its consumer guide: plans with higher deductibles, copayments and coinsurance usually have lower premiums, but people pay more when they get care. Every plan you look at sits somewhere on that line. A rich plan with a low deductible costs more each month and less at the doctor. A leaner plan costs less each month and more when someone is sick.

A common middle path for small employers is a high-deductible plan paired with a health savings account. According to IRS Publication 969, money in an HSA carries over from year to year and stays with the employee if they leave, and withdrawals for qualified medical expenses are not taxed. Some employers lower the premium with a high-deductible plan and put part of the savings into employees' HSAs, which softens the deductible for the people who use care. Your CPA should weigh in on the tax side of contributions.

You can also offer two plans side by side, a richer one and a leaner one, and let employees choose. The business contributes the same amount either way, and the employee pays the difference for the richer plan.

Network type changes the price of the same benefits

Two plans with identical deductibles can carry different premiums because of the network. HMO and EPO plans generally require members to use network providers except in emergencies, while a PPO lets people see doctors outside the network at a higher cost, as TDI describes in its health coverage guide. The more freedom the plan gives, the more it tends to cost.

For a Dallas-area employer, the practical question is whether the doctors and hospitals your employees already use are inside the network you are pricing. A cheaper plan that sends your team to new doctors can cost you goodwill that never shows on the invoice. I check the network against the providers your people care about before I put a plan in front of you.

Set your contribution before you look at quotes

The single most useful number you can bring to a first meeting is what the business can contribute per employee per month. The premium is shared between the business and the employee, and the split is your decision within carrier rules. Many owners contribute toward employee-only coverage and let employees pay the extra to add family members. Others contribute a fixed dollar amount and let employees choose the plan.

Once that number is set, the quotes stop being abstract. We are no longer asking what insurance costs. We are asking what the best plan is that fits inside your contribution, and what your employees would pay out of their paychecks for each option. If you are weighing whether you need to offer coverage at all, I cover the rules in whether a Texas business has to offer health insurance.

Funding options beyond a standard insured plan

Most first-time employers start with a fully insured plan: you pay a set premium, and the carrier takes the risk of claims. My agency's group benefits page names three structures beyond that, HSA, level-funded and self-funded plans, and I also broker PEO arrangements. Each changes cost in a different way.

None of these is right by default. Level-funded and self-funded arrangements shift some risk to the business in exchange for the chance of a lower cost, so they suit groups with steady claims and owners comfortable with that trade. A PEO can make sense for a company that also wants payroll and HR handled. I put them next to fully insured quotes so you can compare them honestly.

• HSA-qualified plans: a lower premium with a higher deductible, plus a tax-advantaged account for employees
• Level-funded plans: a fixed monthly payment that includes stop-loss protection, with a possible refund if claims run low
• Self-funded plans: the business pays claims directly with stop-loss insurance capping the exposure, usually for larger groups
• Professional employer organization (PEO): employees join a larger pool for benefits, with payroll and HR bundled in

The tax credit worth asking your CPA about

HealthCare.gov describes a Small Business Health Care Tax Credit that can be worth up to 50% of the premiums an employer pays. It has conditions: the business must have fewer than 25 full-time-equivalent employees, average wages must fall under a limit the government sets, the employer must pay at least half of employees' premium costs, and the coverage must be bought through the SHOP marketplace. Many small businesses do not qualify, and those that do should confirm the details with a tax professional before counting on it.

If you do not already have one, a CPA such as Joe Hockaday can tell you whether the credit applies to your numbers and how your premium contributions are treated on your return. I can tell you which plans are available. Those are two different jobs, and you want both done right.

Costs that never appear on the quote

Premium is the visible cost. The invisible ones are just as real. A plan your employees do not understand gets little credit for the money you spend on it. A plan with a deductible your lowest-paid employees cannot afford may be enrolled but unused. And going without benefits has its own price when a good candidate takes another offer because it included health insurance.

Owners also forget the ancillary pieces. Dental, vision, life and disability coverage can be added to the medical plan, and some employees value them as much as the medical plan itself. Building the package with all of them in view, instead of bolting them on later, usually produces a cleaner result.

Decisions to make before anyone runs numbers

Owners who settle a few questions before they ask for quotes get a cleaner comparison and a faster decision. None of these needs a broker to answer, and most can be decided in an afternoon with whoever runs your payroll. Write the answers down, because every carrier application will ask for some of them.

If you are unsure about any of them, that is fine. I would rather you bring a rough answer than wait for a perfect one, since the census and the quotes usually make the right choice obvious once you see the numbers side by side.

• Who is eligible: full-time employees only, or part-time staff too
• How long new hires wait before coverage starts
• Whether the business will contribute toward dependents or only employees
• One plan for everyone, or a choice between two
• Whether dental, vision, life or disability belong in the first year
• The date you want coverage to begin, and who will answer employee questions

How I build a quote for a first-time employer

I start with a short call about your team, your budget and what you want the benefit to do. Then I need a census: each eligible employee's date of birth, zip code and whether they would cover dependents. With that, I request quotes from multiple carriers, including BlueCross BlueShield of Texas, UnitedHealthcare, Aetna, Cigna and Humana, across a few plan designs.

I lay the results side by side with the employer cost and the employee cost for each option, and I tell you which I would choose and why. You decide. Once you do, I handle the applications and enrollment, and I stay as your contact through the year. The service costs you nothing, because carriers pay the broker. If you want a checklist for vetting any broker, including me, read questions to ask a health insurance broker. And when the first renewal arrives a year later, here is what to do when a group health renewal goes up.

Questions people ask me