Do small businesses have to offer health insurance? How will we afford to pay for employee premiums? How can we make sure we’re getting a return on our investment?
These questions — and dozens others like them — are natural for business owners to ask. Figuring out health insurance can be stressful under any circumstances, but it’s even more so when you’re signing up your small business for the first time. You need to parse Affordable Care Act regulations, find a plan you and your employees both like and do this all while sticking within your budget.
If you’re making your debut into offering health insurance, here’s a guide to the challenges you’re likely to face.
Small Business Challenges
Small businesses in particular face some unique challenges when it comes to offering health insurance.
Rising health insurance costs are arguably the biggest obstacle to offering a plan. In 2017, the average annual premium for a family health insurance plan was $18,764, according to the National Conference of State Legislatures. If you decide to cover an employee’s full health insurance expenses, that’s almost as much as paying an additional salary.
Also, when you run a small business, your HR support can be quite limited. It might just be you alone who has to figure out workplace benefits for your employees — on top of all your other duties. And not only do you need to find the right plan and set things up, but you also need to teach your employees about their benefits so that they enroll. If your employees don’t understand what you’re offering, they may not appreciate or even use your benefits.
Overcoming the Challenges
When it comes with dealing with costs, there isn’t an easy answer. Keep in mind that you do not need to cover 100 percent of the premiums for your employees. You can split the costs with them or even have them cover the full premium. The more you pay, of course, the more your employees will appreciate the plan.
Anything you pay toward employee health insurance premiums is tax-deductible. And if your business has fewer than 25 full-time equivalent employees and pays at least 50 percent of each employee’s health insurance premium, you could qualify for an additional Small Business Health Care Tax Credit. This credit can offset taxes worth up to half of what you pay for employee insurance premiums.
For finding the right plan and explaining benefits, consider working with an experienced insurance agent or broker in your area rather than figuring out everything by yourself. They will be familiar will all the plans available to you and can help you understand if one is better for your unique goals than others.
And after you sign your business up for the plan, your broker can teach your employees about the plan design and help them with their enrollment paperwork. It’s a win-win, since you save time and your employees learn about their insurance package from a professional.
Recognizing the Value of the Investment
So, do small businesses have to offer health insurance? The Affordable Care Act does not require small businesses with 50 or fewer full-time equivalent employees to offer a health insurance plan. Given the challenges, it’s understandable if you have concerns about launching one.
But health insurance may be the most important workplace benefit you could offer your employees.
When it comes to choosing a new job or staying at an existing position, 87 percent of workers say health insurance is extremely or very important to their decision, according to a report from the Employee Benefit Research Institute. Workers overwhelmingly rated this as the most valuable workplace benefit.
In today’s strong economy, finding quality employees is rarely easy. Offering health insurance gives you an edge against other small businesses that do not.
By taking advantage of the available tax breaks and getting help from an insurance agent or broker, you’re more likely to find a solution that works even on a limited budget. Of course, stewarding your initial investment after you’ve made it comes with its own new challenges, so don’t forget to keep a long-term view.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
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