Under the Affordable Care Act, if you have more than 50 employees, you're required to offer health insurance under the law. For small businesses with fewer than 50 employees, providing health insurance to employees is optional, but it's a great way to attract new talent, keep productivity up, turnover down, and make your staff happy.
The health insurance marketplace can be pretty confusing. Here's what you need to know to find the right plan and maximize tax savings, and why you should.
How Health Insurance Benefits Your Small Business
Worried if your small business can afford to provide health insurance? Although it is a valid concern, the cost can be offset by tax credits and other benefits you’ll reap.
Benefits of providing health insurance include:
- Tax credits: If you purchase a plan through the Small Business Health Options Program (SHOP) Exchange, you’ll get a tax deduction. Use the SHOP Health Care Tax Credit Estimator to figure your tax benefit.
- Additional tax benefits: You can deduct employee benefits, including health insurance costs.
- Boost productivity: Workers who are healthier and less stressed tend to be more productive and happier at work, which leads to the added benefit of higher customer satisfaction.
- Reduce employee turnover: Employee churn is expensive. Finding and onboarding new employees, and loss of productivity while you’re short-handed can really add up. How are people lured away? By jobs with better benefits. In a 2018 America’s Health Insurance Plan (AHIP) study, 56% of respondents indicated health coverage remains a key factor in their choice to stay at their current job.
- Recruit better talent: Only 55% of small businesses with fewer than 100 employees offer health insurance, according to the Bureau of Labor Statistics. A survey by AHIP found that health insurance makes a big difference in accepting a job or keeping one.
- You need it: Small business owners often put their own health and welfare last. Did you know that if you own a registered business, some states allow “groups of one” to purchase group coverage? Health insurance means financial security for both you and your employees.
Before talking to small business insurance providers, you’ll need to gather some information. In addition to your business information, payroll records, and Standard Industry Code (SIC), you’ll need demographic information about each of your employees. This includes names, ages, number of dependents, and the zip codes where they live. This information is used to evaluate risk and determine costs.
Types of Health Care Insurance Plans
Categories of health insurance plans include:
- Provides integrated care with focus on prevention and wellness.
- Participants must choose doctors who work for or contract with the HMO.
- Does not typically cover out-of-network care except in an emergency.
- May require participants to live or work in its service area to be eligible for coverage.
- Higher deductible and lower monthly premiums
- Participants pay less if they use network doctors, hospitals, and other health care providers.
- POS plans require a referral from your primary care doctor to see a specialist.
- Participants pay less if they use the network of participating health providers.
- You can use doctors, hospitals, and providers outside the network for additional cost.
- Coverage is limited to care from providers in the EPO’s network (except in an emergency).
The best plan for your business depends on budget, number of employees, and employee demographics. For example, if most of your employees are young and healthy, an inexpensive health plan that covers catastrophic health events and offers minimal basic care might be a good choice, while older employees may require frequent care for common chronic illnesses.
Finding a Plan
Finding the right small business insurance plan can be time consuming and challenging. It will help to figure out how much you can afford and what best meets your needs and the needs of your employees. While you can just call around to insurers, there are better ways to approach the search for a provider:
Start With SHOP
The Affordable Care Act (ACA) mandated the creation of health insurance exchanges in every state. Each state manages health care in its own way, but the law specifies that they must provide a marketplace for individuals, families, and businesses. SHOP offers a great deal of information and helpful advice, and signing up for health insurance through the ACA offers tax incentives.
Meet With Insurance Brokers
If finding a good plan, complying with regulations, and filing mountains of paperwork seem daunting, you can avoid the time and hassle by hiring a licensed insurance broker to do the heavy lifting for you. If you’re new to this, the expense may be well worth it. An insurance broker will do the paperwork and find the best options for your business. They work on commission, and only get paid when you purchase a plan. Insurance brokers should never demand a fee up front; it’s a good indication of a shady practitioner.
Join a Purchasing Alliance
Purchasing alliances or organizations are mini healthcare insurance marketplaces where small businesses can leverage the lower costs of group policies by partnering. With the purchasing power backed by a big pool of participants, your employees will get a wider choice of policies at a lower cost—but you’ll miss out on the government tax incentives offered by SHOP.