There are currently almost 28 million small businesses in the United States, making these companies with 50 or fewer workers the largest employers in the nation. If you are one of the managers of these small businesses, then you should know the latest on employee health plans in case you want to cover your workforce and avoid any unnecessary legal entanglements.
In recent years, one of the most important laws regarding employer health plans has been the Affordable Care Act, popularly known as Obamacare. The ACA imposed a new set employer health plan requirements on businesses with more than 50 employees, i.e. offer a subsidized health plan to your employees or face a fine. However, the ACA has less to say about small businesses, allowing owners more freedom about if and how you insure your workers.
Under the Affordable Care Act, you are not required to offer health insurance to your workers if you have less than 50 working full time for you. There may not be a legal requirement, but 59 percent of small businesses do offer health insurance, often as a way to lure and keep workers.
How Small Business Plans Differ from Larger Company Plans
If you own a small business, you should be happy to know that government regulations often favor you, at least regarding insuring the health of your workers. Not only is there no requirement to insure your workforce if you have less than 50 employees, but if you do decide to implement an employee health plan, you don’t need to subsidize it like larger companies must (to make it legally “affordable”).
However, you should know that in general, small businesses are likely to pay more to insure workers than big businesses because they lack the buying power to obtain more favorable deals. On average, small businesses paid 8 to 18 percent more for comparable health plans. So you may not need to chip in to assist your employees pay for their health coverage, but it may cost your employees more in premiums.
Under the Affordable Care Act, small business group health plans come in several tiers: bronze, silver, gold, and platinum. The higher the tier, the more comprehensive the coverage, but premiums also go up. All group plans must include Essential Health Benefits that cover services like immunizations, preventive care and maternity care. Employees cannot be declined coverage due to a preexisting condition, but plans may vary based on age, geographical location and smoker status.
If the group plans in your area do not meet your business’ needs, then as a small business, you have the option of allowing your employees to get a private health plan. If you would like to assist your employees join a health plan, you can set up a premium reimbursement plan that helps pay for part of their premiums.
A premium reimbursement plan is an especially good idea if you have less than 25 employees who average less than $50,000 in annual income because you may qualify for a Small Business Tax Credit. This tax credit can be up to 50 percent of your contribution to your employees’ premiums.
One final consideration is that insurers are not allowed to spend more than 20 percent of premiums on non-medical expenses like salaries, advertising or bonuses. If they exceed this limit, they are legally obligated to refund the difference. That means you could get a refund check from your insurer; in 2012, almost 17 percent of all small businesses got such a check.
Why You Should Insure Your Workforce
For many entrepreneurs, it is a simple decision to cut all unnecessary costs including expensive health insurance, but savvier small business owners understand that there are some powerful reasons to cover your workers. Yes, insurance is pricey and produces additional administrative duties, but enticing a higher quality of workers and keeping them loyal to your company is often worth the extra costs.
In survey after survey, employees rate health insurance as the most important job benefit. The most qualified talent will be looking for this benefit from potential employers, and if they don’t find it, they will move on to one that does.
There are also some important financial incentives for employers to cover workers. A large portion of your premium contribution is tax-deductible. Also, 7.65 percent of premium contributions is eliminated from your payroll tax burden. Finally, the amount you must pay for workers compensation premiums is also reduced.
You may also want to consider the hidden benefits of insuring workers. According to a poll by MetLife, 60 percent of companies that insured their workers noticed a rise in worker productivity. It appears that employees who are less worried about their medical bills are happier, and that translates into greater worker efficiency. Furthermore, insured workers are more likely to see a doctor if a health condition that may interfere with their job arises.
How to Insure Your Workers
If you decide to offer health coverage to your employees, you should be aware of these options. Every state has a Small Business Health Options Program (SHOP) exchange which offers group health plans in bronze, silver, gold or platinum tiers. While bronze covers 60 percent of medical expenses, platinum covers 90 percent.
Although you may want to offer your workers only the lowest premium plans, you may want to consider more cost-effective plans that can promote higher job satisfaction. If your employees encounter a medical emergency that they can’t pay for, it may disrupt your business operations as much as your workers’ lives.
Finally, if you aren’t happy with the options on the SHOP exchanges, you may want to consider a reputable insurance agent or broker like Boost Health Insurance. Many of these highly qualified insurance professionals have a great deal of experience with group health plans. They can provide you with important advice on what to look for in a plan, and many may have access to specialized plans that may be perfect for your small business.