Rhode Island Small Business Health Insurance 101

Are you considering providing small business health insurance? You’re in good company! Did you know that health insurance is still the number one benefit that employees look for when considering taking or remaining at a job?

Here are a few things to know or to consider as you make this decision. In this post, we’ll share an overview of trends that make the cost of providing health insurance worthwhile for many employers, outline national and Rhode Island-specific options, and provide links to further resources as you explore the alternatives.

Who is required to offer health insurance?

According to the Affordable Care Act (ACA), employers with more than 50 full-time equivalent (FTE) employees are required to offer health insurance. Employers with 1-50 employees are not required, but are eligible to purchase coverage for their employees through the Small Business Health Options Program (SHOP), which was formed to make it easier for small businesses (who don’t have the mass purchasing power of larger businesses to negotiate lower rates) to purchase affordable insurance.

Why should I consider providing health insurance if I’m not required to?

Health insurance is expensive and complicated. There’s simply no getting around that fact. It’s legitimate to wonder why an employer would take on this “burden” if they don’t have to. And yet, many employers truly appreciate their employees and want to be able to provide a comprehensive benefit package that values their contribution. Here are two ways to reassess the true cost:

The alternate cost of retention may be as high–or higher–than providing insurance. The Aflac 2018 Workforces report details the ways strong benefits packages are related to job satisfaction and retention: 34% of employees report that improved benefits would help keep them in a job and 26% say they have left or rejected a job due to benefits.
If you don’t provide insurance, your business may not be attracting the best employees in the first place. A recent Fractl employment survey found that 88% of employees would take better health, dental, and vision benefits into “serious” or “some” consideration over a job that paid a higher salary. If your business requires highly skilled or educated personnel for particular roles, not offering health insurance may disqualify you from consideration for many potential employees.
Employees with fewer than 25 FTE employees may be eligible for a tax credit that pays up to 50% of the amount spent on healthcare premiums for businesses that:
Purchase health insurance through the SHOP marketplace
Do not exceed an average wage threshold

What are my small business health insurance options in Rhode Island?

HealthSource RI serves as the insurance exchange for Rhode Island, for both individuals and employers. This is where employers should begin when looking to determine which plans and benefits they will be offering to employees in the historically common defined benefit option, where employers provide a certain level of insurance and certain preset plan options for their employees (and then may adjust that benefit or plans offered as costs rise).

Rhode Island also now offers defined contribution health plan options, in which the employer can choose a specific dollar amount to offer employees as a contribution toward individual health insurance premiums, and the employee can choose their own plan from a much larger pool of options. This can:

help keep costs down for employers
allow employees more freedom to choose a plan that suits their own–or their family’s–health insurance needs
free small business owners up to spend more time running a business and less time trying to select plan options to offer that will satisfy all employees

While all small business employers who choose to offer a defined benefit plan can search for plans directly on the exchange, Ralph Coppola–Meridien Pensionmark senior advisor and member of the HealthSourceRI advisory team who works extensively with small businesses in the state–recommends that when you are searching for plans that will cover five or more people, it’s worth it to reach out to a broker who can contact and negotiate with carriers on your behalf.

One thing to avoid, according to Melissa Travis, the commercial sales director of the employer arm of HealthSourceRI, are cheap, short-term health plans that satisfy the requirements of the ACA but offer very little to employees in the way of protection or coverage. While some shady brokers will push these plans because they can earn a commission (and their premium prices appeal to employers feeling the squeeze), they tend to cover very few services, and are often not accepted at many RI hospitals. These plans would leave an employee quite exposed in the case of a serious accident or illness.

How are my rates determined?

Travis reported the cost of small business health insurance (when choosing a defined benefit plan to offer all employees) can vary widely, currently from around $123 per employee per month, up to $1400 per employee per month–of which the employer pays 50%. These variations are due to:

the level of plan selected (bronze, silver, gold, or platinum)
the size of the deductible
the demographics of an employer’s workforce (age, gender)

High deductible plans are very popular because they significantly reduce the size of the monthly premium (in exchange for requiring health care users to pay for more services upfront before their insurance fully kicks in). Many employers choose to select a high deductible plan (with lower premiums) and then offer the employee either a lump sum or a matching amount (often $500-1000/year total) into their health savings account (HSA), which can be used to pay for medical costs incurred as part of the deductible (among other things).

Still feeling overwhelmed?

Small business owners should take a deep breath at this point and remember they don’t need to become experts. Finding a trustworthy broker to walk through the process can be a huge help.

To begin researching small business health care plans and the associated costs, start by compiling an accurate list of your employees, that includes the date of birth and gender of each employee and any family members they need covered. This information will allow you to get an accurate quote from a carrier for defined benefit plans. For planning purposes, remember that the process will likely take a good month to complete and will need to be completed by the 15th of the month in order for enrollment to begin on the first of the following month.

For further reading and information, check out these resources:

Providing small business health insurance doesn’t have to be daunting. If you’re considering offering this benefit to hire, retain, and care for your employees, there is plenty of support available to help you take this step.