Should Your Business Offer Health Insurance?

Benefits of Offering Health Insurance
Photo by Hush Naidoo Jade Photography on Unsplash

Many Americans depend on their employers for health insurance; however, not all businesses are legally required to provide it. The Affordable Care Act states that companies with fewer than 50 employees are not subject to this condition.

Notwithstanding that your business may not be required by law to provide health insurance benefits to employees, you should still seriously consider it.

There are several benefits your business can derive from providing health insurance to employees. We will go through some of these benefits and help you understand how you can go about setting up group insurance for your business.

How Health Insurance For Employees Works

Health insurance plans for business employees are usually in the form of group plans. As the name suggests, these plans provide coverage for multiple people (in this case, employees) through a single plan.

These group insurance plans are typically paid monthly. Factors that affect cost include location, number of employees, and age.

There’s a variety of health insurance plans out there. However, the four most common ones include:

  • Exclusive Provider Organization (EPO)
  • Health Maintenance Organization (HMO)
  • Preferred Provider Organization (PPO)
  • Point of Service (POS)

Benefits of Offering Health Insurance

Tax Benefits

If your business offers health insurance to employees, you can claim 100% of the amount spent on monthly premiums as a business expense. In essence, the cost of the insurance to your business is entirely tax deductible. So, you can reduce your tax bracket by providing health benefits to your employees.

Depending on the scale of your business, you might be eligible for the Small Business Health Care Tax Credit. This tax credit allows your business to claim up to 50% of healthcare expenses as credit.

Notably, your business is only eligible for this tax credit if you have less than 25 full-time employees and pay an average wage of $50,000 annually.

An additional requirement is that the business covers at least 50% of workers’ health insurance premiums. Finally, the group health insurance coverage must be through the SHOP marketplace.

Attracting Top Talent

Health insurance can also be an effective recruitment strategy to ensure you get the best talent. To hire the best employees, you must take steps to stand out as an employer, and employee health benefits are a great way to do this.

This sentiment is shared by many, as one study found that 66% of small business owners offer medical employee benefits to recruit and retain the best employees.

Health benefits are also typically a top consideration for individuals in the labor market. For instance, a 2017 study found that 33% of people have turned down a job for lack of benefits.

Similarly, another study showed that up to 88% of candidates would consider forgoing a high-paying job for a lower-paying one that provides better benefits.

Essentially, if you are serious about securing the best employees that can accelerate the growth of your business, providing health insurance benefits is undoubtedly worth it.

Improving Productivity

In more ways than you think, health insurance benefits significantly impact your employees’ productivity. Health insurance gives your employees the support they require during illnesses and emergencies.

It means they can recover quickly and return to work, resulting in fewer absences from work due to sickness.

Insurance benefits contribute to the stability of your business. Stability is especially a key consideration for small businesses that are still growing. If your employees are unhealthy, they are likely to retire or quit early. It would, of course, result in expensive employee turnover.

Such an outcome may be disruptive for your business as you would have to spend time and money hiring and training new employees frequently.

Choosing Health Insurance Plans

Knowing how to choose health insurance plans for your business might be a challenge. However, there are some factors you can consider when choosing your insurance plans. For one, it’s essential to know what benefits most of your employees require. It would guide you while selecting the most suitable policy for your business.

Here are some options you can explore when picking an insurance plan:

Small Business Health Options Program (SHOP)

SHOP is the federal health insurance marketplace for small-business owners. The SHOP marketplaces are maintained by every state and are all identical. The general requirements to use SHOP include:

  • 1-50 employees
  • Health care benefits are provided to all employees who work over 30 hours a week
  • 70% of employees enrolled
  • Have an office or employee in the state

With SHOP, employers can select one of three tiers of health insurance based on price and coverage. After a tier is selected, employees can access SHOP and choose an individual plan based on the tier.

Private Health Insurance Marketplaces

Your business can also leverage the various private health insurance exchanges to find a suitable plan. Of course, the options available to your business will vary based on location. It’s advisable to shop through the exchanges available to you to choose the best plan for your employees.

Typically, the business would select a predefined tier of insurance that determines the plans employees can consider.

Health Insurance Brokers

Evaluating and comparing individual insurance plans may take a lot of time and effort, so you can opt for hiring an insurance broker. An insurance broker would have the expertise to help your business sift through the various insurance plans and choose one suitable for your employees.

You can get trusted insurance brokers through SHOP or on the recommendation of other business owners.

Professional Employer Organization (PEO)

PEOs generally provide HR services to smaller businesses. However, some PEOs can also help companies with health insurance benefits, sometimes at cheaper rates than traditional service providers.

Wrapping Up

Considering the points mentioned above, offering health insurance benefits to your employees can be advantageous. It can serve as a way to ensure employee satisfaction and productivity while being cost-effective through tax deductions and tax credits.

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