Ohio's small businesses are all too familiar with the struggle of finding affordable health insurance for their employees. However, there's a fresh option out there catching some buzz. It's not your typical group health insurance plan, it's not about handing cash to employees instead of benefits, and it's definitely not about leaving employees without any options.
The new employee health benefit option is called ICHRA (Individual Coverage Health Reimbursement Arrangement). It's a pre-tax health benefit that's been making health insurance way more doable for small businesses. Plus, it gives employees something they seldom get – choice.
Understanding ICHRA in under 30 seconds
The challenging-to-pronounce acronym ICHRA, or "ICK-ruh," represents a relatively new solution designed to enhance employee access to health insurance coverage. It also happens to be significantly simpler, too.
ICHRA was born out of 2019 federal rule, transforming small business access to heath benefits. Now SMB owners can provide their employees with pre-tax money to purchase and own health insurance premiums. This change brings several advantages (beyond making it a whole lot simpler), such as:
- No participation requirements.
- No minimum contribution amounts.
- No long-winded sales process.
Why is access to health insurance a struggle for so many small businesses?
The size of a business affects health insurance costs, which makes it access to health benefits especially tough for Ohio's small businesses. Startups, non-profits, and other small employers with less than 20 employees feel this pinch the most. Here's why else:
- Obtaining a traditional small group plan is a cumbersome (and time consuming) process, often stretching over six weeks and requiring upwards of 60 hours dedicated to meetings, calls, and emails.
- The requirements can be stringent. Many insurers require small businesses to have at least 70% of employees sign up for coverage. Can’t meet the participation rate, and you’re left without an option.
- And budget control is nearly impossible. Health insurance costs have soared in the last decade. Average premiums jumped by 25%, with individuals paying around $8,000 annually and family plans nearing $23,000. With traditional group plans demanding small businesses cover 50% of premiums, keeping up or maintaining a budget has become nearly impossible.
Skyrocketing costs and increasing complexity have made employee health insurance almost impossible for many small and medium-sized businesses (SMBs) to afford. In fact, only 39% of small businesses with fewer than ten employees provide healthcare benefits, hitting a record low.
Facing these challenges, how can small businesses keep their team happy and also recruit new talent without the perks of competitive health benefits?
We've got three options on the table that will work with your Ohio small business: sticking with traditional health insurance plans, offering extra cash instead of insurance, or going for pre-taxed benefit programs like ICHRA. Ready to explore the pros and cons of each? Let's dig in.
Pros/cons of option #1: Traditional group health insurance plans
Traditional "fully-insured" group health plans are what most small businesses go for. Basically, the company works with a broker who digs into options based on the business type, budget, and some basic employee details like age and location. Everyone pays the same rate.
Bigger companies might lean towards "self-funded" group health plans, but since that puts all the risk on the employer, it's not an option for small businesses.
Most small businesses who go this route (76%) pick one health plan for the entire team. (Big companies with over 200 employees tend to offer 3 or more health plans, giving options with different deductibles, copays, and premiums.)
Advantages of traditional group health insurance plans:
- Lower risk for small businesses: When employees suddenly get sick and need serious healthcare, small businesses feel the pinch more than the big guys. With traditional "fully insured" group health plans, it's the insurance company that takes the hit if claims go through the roof compared to the premiums.
- It’s regulated: Since these plans are regulated by the state, insurers have to offer a certain level of benefits, ensuring all employees get steady access to a predictable standard of insurance.
- It helps with employee recruitment and retention: Health coverage is a big part of an employee's benefit package, and when someone's choosing between jobs, the health insurance on the table can be a deal-breaker. Offering a health plan is a great way to compete for talent.
Disadvantages of traditional insurance plans:
- Cost: These plans tend to be the most expensive option, carrying the highest premiums.
- Participation rates: Signing up for a group plan requires, on average, that at least 70% of employees join in. This can be a pretty big hurdle for a lot of small businesses.
- Fewer options: Smaller businesses often have to pick from just a few pre-made plans and typically can only offer the same one to everyone on the team.
- Less premium predictability: High medical costs one year (even just with one employee) can mean higher premiums the next year, making budgeting a potential nightmare.
- Time drain: Small business owners often handle this process on their own, which can eat up over 60 hours across several weeks, every single year.
Pros/cons of option #2: Give employees extra money
Small businesses sometimes throw in the towel when they realize how much time and money group plans cost, choosing instead to just add some extra cash to employees' paychecks. While this approach is well-intentioned and does have its perks, it doesn't always deliver the value it's supposed to.
Advantages of money in lieu of insurance:
- Simplicity:In this scenario, a small employer just needs to add extra cash into a paycheck. Even the smallest company can easily manage that extra step.
- Budgeting: This option lets employers have total control and makes budgeting predictable, since they only give what they can afford.
Disadvantages of giving employees cash:
- Perception: Sometimes employees don't realize they're getting extra cash instead of health insurance, and it just sort of mixes into their overall pay.
- Taxes eat it up: Employees in Ohio will see an average of a 3% income tax on their earnings, but don't forget about the 15.3% FICA cut and another 22% for federal income taxes coming out of that extra cash.
- Employees don’t end up benefiting: Do employees actually use the cash for insurance? Hard to tell, so they might not be getting the intended benefit, leaving some without coverage.
Pros/cons of option #3: Pre-tax, fixed health benefit known as ICHRA
ICHRA (Individual Coverage Health Reimbursement Arrangement) is this newish health insurance option for small businesses. Instead of going the traditional group health insurance route, employers can now off an ICHRA policy and give their employees some cash to help pay for their health premiums. The best part? It's all before taxes.
Many small business owners might not have heard about ICHRA yet since it's fairly new, rolling out in 2020 thanks to IRS legislation passed the year before. But, with the whole global pandemic thing going on, it's understandable if it flew under the radar for the initial couple of years. Adoption has been slow but steadily increasing, and it looks like that will be changing soon.
Advantages of ICHRA for Ohio small businesses:
- Budget friendly: Group plans are unpredictable when it comes to costs. With ICHRA, small businesses can decide how much they want to contribute toward their employees’ health insurance costs.
- No participation rates: No minimum participation is needed for ICHRA. Even if 6 employees opt out but 3 sign up, it's still a go.
- Flexible: With an ICHRA, employers have the flexibility to offer varying contributions to full-time and part-time employees, as well as differentiate between hourly and salaried workers.
- Employees can choose: Instead of a one-size-fits-all health plan (that rarely fits anyone), employees can choose health insurance coverage that fits their unique needs.
- Perception of the benefit: Instead of just thinking of it as "extra cash," employees get that it's meant for health insurance, so they're more likely to see it as a real perk. Plus, unlike with group plans, they know exactly how much their employer is chipping in.
- Simpler setup and oversight for employers: ICHRA simplifies enrollment by allowing employers to bypass the cumbersome process of selecting a broker, managing a lot of paperwork and searching for the perfect group plan.
- Privacy for employees: By letting employees pick their own coverage, ICHRA also sidesteps the awkwardness of getting mixed up in doctor-patient relationships.
Disadvantages of ICHRA for Ohio small businesses:
- Employee confusion: Employees may get overwhelmed by all the choices out there in the marketplace and could have a tough time making a smart pick.
- Expectation gap: Employees or recruits used to super premium health plans might find that the choices in the individual marketplace offer fewer plush benefits.
The comparison: Traditional group health plans, giving cash, and ICHRA
Let's take a look at the pros and cons in an easy-to-read chart.
The individual marketplace in Ohio (where employees shop for health insurance)
Employees who get the pre-tax fixed health benefit, ICHRA, need to pick a "qualified health insurance plan." This means the health insurance plans have to stick to the rules of the Affordable Care Act (ACA), which introduced consumer protections, like coverage for pre-existing conditions, maternity care, prescription drugs, and more.
Back in 2015, a little over 8 million folks signed up for health insurance through the exchange. Fast forward to 2023, and that number jumped to 21 million using the marketplace. More options have popped up over the years. So, what's on the table for employees in Ohio? Let's dive in.
Health insurance carriers in Ohio
The health insurance marketplace in Ohio offers a wide range of health insurance providers, both national carriers and regional brands. For example:
- Aetna CVSHealth
- Ambetter
- Anthem Blue Cross and Blue Shield
- AultCare Insurance Company
- CareSource
- Medical Mutual
- Molina Marketplace
- Oscar Health
- Paramount Insurance Company
- Solstice Health plans of Ohio
- SummaCare
- United Healthcare
Note: The set of insurers changes by county.
Average costs of health insurance coverage in Columbus, Ohio
On the exchange, you'll come across plans named like metals - gold, silver, and bronze. The higher-tier plans cost more each month, but you pay less from your pocket for things like deductibles and copays. The lower-tier plans are easier on your wallet each month but expect to pay more when you actually use services.
Let’s chat about figuring out which option is the best fit for you. Just a heads-up: The prices mentioned are for a 35-year old female in Columbus, Ohio. (Franklin County)
Gold health plans: Best for high expected medical costs
- Te least expensive gold plan in C Ohio (Oscar Health’s Gold Classic Standard (Select) at ~$460/month.
- Keep in mind: Gold plans usually come with the smallest deductibles and copays but ask for higher monthly payments. This works out great for people who may require regular medical visits.
Silver insurance plans: Best for average medical costs
- The cheapest silver plan in Columbus, Ohio is Oscar Health’s Silver Simple PCP Saver (Select) at ~$415/month.
- Keep in mind: Silver plans strike a nice balance among the metal-named options, offering a mix of lower monthly premiums and out-of-pocket costs.
Bronze health plans: Best for healthy folks with emergency savings
- The Bronze plan that costs the least in Columbus, Ohio is Oscar Health’s Bronze Classic PCP Saver at ~$341/month.
- Keep in mind: Bronze plans have the lowest monthly premiums but significantly higher deductibles and copays. If you need medical care during the year, you pay more out of pocket before coverage kicks in.
Snapshot of health insurance costs in Columbus, Ohio
Health care costs vary based on where a person lives and how old they are. Here is a quick overview of the lowest-cost plans in Columbus (Franklin County) by plan tier and age:
Average costs of health insurance coverage in Cleveland, Ohio
Gold health plans: Best for high expected medical costs
- The least expensive gold plan in Cleveland, Ohio (Cuyahoga County) is Molina Healthcare’s Gold 1 at ~$425/month.
Silver insurance plans: Best for average medical costs
- The lowest cost silver plan is Molina Healthcare’s Silver 8 250 ~$380/month).
Bronze health plans: Best for healthy folks with emergency savings
- The cheapest Bronze plan is CareSource Marketplace Bronze First at ~$333/month.
Average costs of health insurance coverage in Cincinnati, Ohio
Gold health plans: Best for high expected medical costs
- The least expensive gold plan in Cincinnati, Ohio (Hamilton County) is Ambetter’s Clear Gold at ~$428/month.
Silver insurance plans: Best for average medical costs
- The lowest cost silver health plan is Oscar Health’s Silver Simple PCP Saver (Select) at ~$400/month.
Bronze health plans: Best for healthy folks with emergency savings
- The Bronze health plans that cost the least in Cincinnati, Ohio are Oscar Bronze Classic PCP Saver and Medical Mutual Market 8300 both priced at ~$328/month.
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Health insurance guides for Ohio cities
Find the best health insurance option for your Ohio small business
If you’re struggling to find a traditional group health insurance plan that fits the needs (or budget) of your small business, there are options to simplify your health benefits — that add more value than giving your team extra cash.
Enter ICHRA, the pre-tax fixed health benefit that aims to make health benefits easier for smaller companies in Ohio.
Need some tips on navigating ICHRA pre-tax fixed health benefits? Contact StretchDollar here or get started and be done with your benefits in 10 minutes.
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