Top Tips for Small Businesses Regarding Health Insurance
As a self employed small business owner, ensuring that your employees feel covered and protected at your company is crucial. No employee should have to worry about being provided proper healthcare from their job. As an employer, it can be confusing knowing where to begin, and what you are obligated to provide.
This article will give an overview of what is expected from small business employers and give health insurance plan options for your company
Am I Mandated to Provide Health Insurance?
According to the the Affordable Care Act, all business with 50 or more employees must offer health insurance that’s affordable. In order to see if your business qualifies, you must examine how many full-time employees you have. Full time equivalent employees (FTE) can be determined by using the formula (Total hours worked by part-time employees each week / 30) + # of full-time employees = Your FTE number).
If you have 49 or less employees, you are not mandated under the Affordable Care Act to provide a health plan for your employees. However, as a business owner, providing proper care for employees enhances the quality, reputation, and culture of your small business. Getting great employees is key to strengthening a business, but keeping your employees is just as important to ensure longevity. Investing in your business and employees can payoff tremendously in the end.
Some of the benefits that can come will providing healthcare include getting small business health care tax credit, enhancing job satisfaction and retention, maintaining healthy employees, and protecting yourself as well as any dependents you may have.
Small Business Health Insurance Options
Whether you are mandated or choosing to provide health insurance for you employees, the good news is that you have options. This section will break down a few options you have have including HRA’s, small group insurance, and self-funded plans.
HRA stands for health reimbursement arrangement, and describes employers reimbursing individual health insurance premiums and medical expenses on a pre-tax basis. Employers similar go to their doctor’s office and have pay for their visit, and then submit a claim to get reimbursed for their expenses (tax-free). Instead of your business being on a group plan, this alternative saves your business all the external paperwork and back and fourths that can be associated with them. You can make reimbursements without having to pay payroll taxes in addition to getting tax credits. There are different HRS’s such as group coverage options, and qualified small employer health reimbursement arrangements (QSEHRA). It is important to research what will benefit your small business the best. However, some of the benefits associated with an HRA include:
- Maximized Benefits
- Convenient for both employee and employer
- Tax Deductions
- Budget Control
- Covers expenses like copays, deductibles, and prescription drugs
2. Small Group Health Insurance Plans
Small group insurance can be a popular option for small businesses with 50 or less employees. As a small business owner, you would be responsible for purchasing a health plan, and then offer it to your employees. There are many things to keep in mind when purchasing a plan such as whether or not you want a PPO (Preferred Provider Organization), HMO (Health Maintenance Organization), or POS (point-of-service plan/ hybrid). In addition, health insurance premium costs are usually split between yourself and your employee. Some of the pros and cons associated with small group insurance include:
- Easy to find and compare different plans and insurance companies
- Familiar to employees
- Open enrollment
- Benefits package
- Guaranteed employee benefits
- ACA friendly
- Shared cost between employers and employees
- Healthcare plan with bronze, silver, or gold plans with a range of monthly premiums and deductibles.
- Health insurance coverage is less Individualized (aside from having tier options)
- Can be expensive for both parties (high deductible health plans)
- Not all will include family/dependents
I you are interested in pursuing this option, you can compare different plans using the small business health options program (SHOP Marketplace) or use healthcare.gov as additional resources to discover options for you.
3. Self-funded Plans
Self-funded plans have become a more popular option for small employers due to all the associated insurance costs with private plans. These plans can be cheaper upfront, but the risk is assumed by the employer for healthcare costs and healthcare expenses. Under a self-funded plan, employees health insurance would be dependent on their employer. Typically, a business owner would set up a trust fund or a health savings account that would be directly designated to paying their businesses healthcare costs. Although this can seem like a high risk plan there are benefits such as:
- High flexibility for small business owners
- Can be more cost effective in relation to costs per employee
- No associated fees
- Individual coverage
- Not subjected to health insurance premium taxes which can be 3%-5%
The Kaiser Family Foundation has reported that 56% percent of small firms and 99% of large firms offer health benefits to at least some of their workers. This higher number suggests that it is common to provide your small business employees with healthcare coverage. Employees invest their time and effort into you, and you should do the same in return. Consequently, business that do not comply with the Affordable Care Act, have to pay a penalty fee to the IRS. This gives you all the extra motive to get health coverage in order to avoid penalty by the Federal Government.
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