How to Offer Your Employees Health Insurance as a Small Business Owner

As a small business owner, you know every dollar counts. There is no scope for any extravagance or wastage. When it comes to your employees’ well-being, you want to provide them with all the benefits that would help them. Health insurance for small business employees is a good way to ensure their welfare and it can be done in a cost-effective and efficient manner without burning a hole in your pocket. In today’s competitive market, a good health insurance for small business that provides health benefits for small business employees has become one of the important ways to attract and retain top talent . In this article, we will explore how small business owners can offer business health insurance to their employees.

In this article we’ll cover:

• Does a small business owner need to offer health insurance?
• Methods to offer health insurance
• Contribution requirements and tax considerations
• What to look for when comparing plans
• Overview of health reimbursement arrangements (HRAs)

Do I Have to Offer Health Insurance?

Let’s answer the most common question small business owners have related to health insurance for small business employees, “Do I even have to offer health insurance?”

The IRS breaks businesses down into two categories based on the number of employees you have: those with fewer than 50 full-time employees (or full-time equivalent employees) and those with more than 50 full-time employees (applicable to large employers). If you have fewer than 50 full-time employees, you do not have to offer health insurance for small business employees, aka your employees. If you have 50 or more full-time employees, you are considered an applicable large employer, and you do have to offer business health insurance to your employees.

Keep in mind that certain states like Hawaii still require an employer to offer health insurance for small business staff regardless of business size. This means that you additionally need to dig into your local state’s rules and regulations regarding health insurance.

Even though the Affordable Care Act (ACA) does not require companies with fewer than 50 employees to offer coverage, providing health benefits for small business staff is still a good choice as it can help attract and retain skilled workers. Moreover, group business health insurance can be bought at a discounted rate.

Offering health insurance for small business employees is a good way for employers to show their staff that they care about their personal well-being and the well-being of their families.

Methods to Offer Health Insurance for Small Business

There are a few methods to offer health insurance for small business employees that employers should focus on: finding a health insurance agent or broker via the ACA website, healthcare.gov, getting a quote from health insurance carrier websites, or joining a Professional Employer Organization; more commonly referred to as a PEO. Although this work can be done by yourself, turning to an agent, broker, or PEO allows you to tap into the expert knowledge who will already understand health insurance coverage options (more on that below). Let’s look at each method:

Find a local agent or broker via ACA

The ACA website offers a free tool to help small business owners find a local agent or broker to help them explore health insurance for small business. Getting the help of an expert can simplify the entire process and ensure businesses select the best coverage.

Get a quote via Carrier Websites

Small business owners can head directly to individual carrier websites to explore business health insurance plan options, pricing, coverage details, and initiate the process of obtaining health insurance. Each process is slightly different; whether the carrier directs to you an independent agent or broker (meaning the agent or broker can represent multiple carriers at once to offer you rates from each) or a company sales representative (meaning the rep can offer you rates only from the carrier they represent), here’s how you can get started with some popular small business health insurance carriers:

• Anthem Blue Cross Blue Shield – request a quote
• United Healthcare – request a quote
• Humana – request a quote

In addition to these carriers, other popular health insurance companies for small businesses include Aetna, Kaiser Permanente, and Cigna.

Join a Professional Employer Organisation (PEO)

What exactly is a PEO and why would a small business owner consider joining one? A PEO is full-service human resource outsourcing, also known as co-employment. As a small business owner, if you join a PEO, you can offer business health insurance to your employees via the PEO. It can be a tricky dynamic to understand at first, but your employees become co-employed by your company and the PEO provider.

Since the PEO provider already has these offerings established, you can simply tap into their existing infrastructure to offer a range of employee benefits.

A PEO also executes various administrative tasks for the small business such as payroll and benefits administration, tax filing, compliance, talent services, and more. Essentially, with a PEO, a small business can shift critical HR tasks to the PEO which can help a small business owner focus on the business.

Contribution Requirements and Tax Considerations

Although the ACA does not specifically state an amount that small business owners are required to contribute, some health insurance carriers or states require the small business to cover at least 50% of the premium for employee-only coverage. This means that there is no requirement for family coverage. However, this is a good opportunity to reiterate that offering health benefits for small business employees can help improve retention.

The ACA offers small businesses tax credits to help offset the cost of insurance. Your business may qualify for the Small Business Health Care Tax Credit which could be worth up to 50% of the costs you pay for your employees’ premiums (35% for non-profit employers). To be eligible, businesses must:

• Have fewer than 25 full-time equivalent (FTE) employees
• Pay an average employee salary of $56,000 per year or less
• Cover at least 50% of your employees’ premium costs
• Offer Small Business Health Options Program (SHOP) coverage to all your full-time employees

For a closer look at this tax credit, including a tax credit estimator and details on how to qualify if no SHOP plans are available in your area (because you need to offer insurance via plans from the SHOP marketplace), FAQs, and more, visit the official ACA Small Business Health Care Tax Credit website.

What to Look for When Comparing Plans

Choosing health insurance for small business requires carefully reviewing the available coverage to make an informed decision. There are a lot of options that can make the process confusing, which is why speaking with a local agent or broker can be beneficial as they will help guide you through the process. Agents and brokers typically receive a commission from the business health insurance carrier, so their service is free for small businesses. However, some businesses might find a more hands-on approach is a better fit for their operation.

There are many health insurance carriers that offer many different types of plans with a range of health benefits, monthly premiums, deductibles, and coverage. Some factors to consider include:

• Known-insurance company with a good reputation: Selecting a plan from a known business health insurance carrier that your employees are familiar with is important. Part of a health insurance carrier establishing a good reputation is having an easy claims process, customer service, and positive online reviews.
• Types of plans: Determine if the policy options include options for HMOs, PPOs, EPOs, or HSA-qualified. Plans should have access for both individuals and families.
• Premiums: The premium is how much the policy costs. The policy for health insurance for small business needs to be affordable to the employees and the company itself. Some companies decide to pay all or a large portion of the costs for employees because this can help attract and retain talent.
• Deductibles and copays: Consider how much the deductible is (how much your employees will have to pay out-of-pocket before insurance kicks in) as well as co-pays (costs the employee pays at the time of service). Many plans have different high deductible and low deductible options.
• Coverage limits: How much coverage is provided by the plan? For example, what is the maximum coverage provided and the coverage for each type of service, such as specialist care and preventative care?
• Physician coverage: Employees might already have preferred physicians and ideally you want them to be in-network. At the very least, understand how large the pool of in-network physicians is. If employees have preferred healthcare or medicare providers, be sure they are in-network.
• Exclusions: Pre-existing conditions might be excluded from certain plans. Be sure to consider all eligibility requirements and any exclusions and how they will impact the health care coverage you provide.

It can be hard to decide what plan to pick. We already established the benefits of going through an agent or broker. Additionally, another tactic to help you decide which plan to go forward with is to survey your employees and ask them what they want. Receiving employee feedback can help clarify the general direction you should take.

Overview of HRAs

A Health Reimbursement Arrangement (HRA) can be an alternative to traditional business health insurance. When considering a group health insurance for small business for your employees, health reimbursement arrangements can be an additional benefit to help with healthcare costs. An HRA can be used as an alternative to group health insurance for employees who might not qualify for insurance benefits through a traditional health insurance carrier.

HRAs are an employer-funded health benefit used to reimburse employees, tax-free, for their health insurance costs, including health insurance premiums, out-of-pocket medical expenses, or a combination of the two.

When you offer coverage via a policy from the health insurance marketplace or directly from the health insurance carrier, you are purchasing a one-size-fits-all plan that might not work for all employees. The HRA empowers each employee to purchase individual health insurance that works best for them and their family.

Final Thoughts

When it comes to employee satisfaction and retention, offering health insurance for small business staff is an important step. It holds true whether you are an established business or a new one. With a plethora of options available – from traditional business health insurance to exploring HRAs, ensuring your employees have access to quality healthcare will only boost the workplace morale and attract skilled workers. So, small business owners must check their options carefully and consider consulting experts to simplify the process.

FAQs about Health Insurance for Small Business

1. Why is health insurance for small businesses important?

In today’s time, offering health insurance for small business has become a key factor for attracting and retaining top employees. Offering health benefits for small business shows that you care about your employees’ well-being while also improving job satisfaction. Additionally, small business owners may qualify for tax credits, making business health insurance a smart financial decision.

2. How can small business owners find affordable health insurance?

To find affordable health insurance for small business employees, you can compare quotes from multiple providers, consider joining a PEO, or even explore the Small Business Health Options Program (SHOP). Many providers offer small business loans now to help finance business health insurance without straining cash flow.

3. What tax benefits come with health insurance for small businesses?

Small businesses that offer health benefits for their employees may qualify for the Small Business Health Care Tax Credit, covering up to 50% of premium costst. Additionally, small business loans available now can help offset initial costs, ensuring your business remains financially stable while offering employee coverage.

4. What factors should I consider when selecting a health insurance plan for my employees?

You need to evaluate the insurer's reputation, plan types (HMO, PPO, etc.), premiums, deductibles, coverage limits, network of healthcare providers, and any exclusions to ensure the plan meets your employees' needs and your budget.

5. What’s the difference between group health insurance and Health Reimbursement Arrangements (HRAs)?

Group health insurance provides a standard business health insurance plan for all employees, whereas an HRA allows employers to reimburse employees for their individual insurance costs. HRAs offer flexibility and may be more budget-friendly for businesses with diverse employee needs.

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