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 Affordable Care Act, all businesses 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 fewer 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 pay off 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 your employees, the good news is that you have options. This section will break down a few options you 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 forths 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 fewer 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
If 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 business’s 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 subject 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, businesses 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 penalties by the Federal Government.
About Financing Solutions Business Line of Credit
Financing Solution’s business line of credit costs nothing to set up, nothing until used and when used, is inexpensive. The credit line requires no collateral and no personal guarantees.
Organizations will set up the small business line of credit in advance so that if there is ever any cash flow issues, you will have a cash backup plan. The time to set up a credit line is when you don’t need it so that it is ready to be used, just in case.
If you would like to see if your organization would be approved and for how much, please feel free to fill out the no-obligation, 2-minute line of credit application here.