Dental practices have five main options for health insurance:
1. Individual health insurance (with or without a defined contribution allowance)
2. SHOP Marketplace
3. Private exchange
4. Co-operative
5. Private small group plan
1) Individual health insurance (with or without a defined contribution allowance)
The first option is a relatively simple approach, yet it achieves results: allow employees to purchase individual health insurance coverage, either through the public marketplace or through a broker. Employees may select from any carrier and plan available, and eligible employees may access discounts on their premiums via the individual health insurance tax credits.
If the dental practice would like to contribute to employee's premium expenses, the practice can use defined contribution allowances to reimburse employees for the non-subsidized portion of their premium. (This is still allowed as long as the employer goes about it the right way.)
Additionally, defined contribution allowances can be allocated by job criteria (e.g., $300 per month to hygienists, and $200 per month to front desk team members). For many dental practices, this is the most cost-effective solution because the group can contribute any amount and, on average, individual policies cost less than small group plans.
Brokers are involved to facilitate the setup of the defined contribution allowances (usually via an online software provider), sell the individual policies to employees, and be consultants for the dental practice. The ideal business for this solution is a small group that has priced out of group health insurance, is not eligible for group health insurance, wants to offer health benefits for the first time, or that doesn't have the administrative capacity to administer a group health insurance plan.
Read more about individual health insurance and defined contribution here.
2) SHOP Marketplaces
The SHOP Marketplaces are state- or federally-run exchanges that sell small group health insurance policies. The SHOP Marketplace could be a good coverage option for dental practices with 50 or fewer employees, if they meet certain requirements. For example, in Massachusetts a dental office participating in SHOP must contribute at least 50% of the premium amount, dentists with one to five employees must have 100% of the employees enrolled, and dentists with six to 50 employees must have at least 75% enrolled.
For eligible small practices, the SHOP Marketplace gives access to the small business tax credits that are generally available only through the SHOP. Brokers registered with the Marketplace can help dental practices select and purchase the plan, just as brokers would with private small group plans.
3) Private health exchange
Like defined contribution, the term "private exchange" is one of the biggest buzzwords of the past few years. With a private exchange the owner of the dental practice gives employees a set contribution to use toward a menu of plan options. The plan options can be individual- or group-based. Private exchanges are a type of defined contribution strategy.
Brokers can offer a private exchange option to dental practices by working with a defined contribution or private exchange provider. Numerous entities, ranging from startups to new divisions of leading insurance companies, have been created to offer new private health exchanges, and companies like Walgreens are adopting this approach.
4) Co-op
Joining a co-op for health insurance is a more traditional approach for small groups. The idea is the co-op increases buying power and spreads the risk to a larger group. Each co-op is structured differently, and whether it offers better insurance rates than the open market or SHOP depends on regional insurance underwriting laws and the co-op itself.
5) Private small group plan
Purchasing a private small group plan is still an option for dental practices. Dentists may find more options and carriers to choose from on the private market as compared to the SHOP, where some states only have one or two plans to choose from. Read more small business health insurance trends here.
What is the future of health insurance for small businesses in the US?
The primary challenge of a traditional small group health insurance plan for dental practices is cost. As such, it is not surprising to hear that only half (54%) of small and medium-sized businesses do not offer traditional insurance.
This is why I would argue that individual health insurance with defined contribution allowances, and private exchanges paired with individual health insurance, are the best health insurance options for small groups in 2016.
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To learn more about employer-funded employee-owned benefits, download our annual report “Employer-Funded Individual Health Insurance.” Wise-up Wednesday is presented bi-monthly from the experts at Zane Benefits. One Wednesday a month features Human Resource issues, and the other Wednesday discusses health benefits.
