HEALTH INSURANCE OPTIONS TO CONSIDER FOR SMALL BUSINESS

by: Remie Longbrake | published: August 13, 2023

For a small business, navigating health insurance can seem confusing at first glance. There are many options available for insurance plans and many rules to sort out.

If your company lacks a human resources department, figuring out health insurance can become part of your job as an owner. You will need to educate yourself on small business health insurance options and everything you need to consider before purchasing a plan.

Providing medical coverage might be one of the best things you ever do for your company and employees alike. Learn more about how it all works with this insurance guide for small businesses.

Because every company’s needs are unique, finding the right plans can take some time. This is why every small business owner interested in providing health insurance should know the requirements they must meet and the advantages of providing health insurance.

When deciding on what health insurance plan, consider the following:

1. Options Available

Every small business looking to offer health care to their employees should familiarize themselves with the various options out there. Different types of insurance and network types impact the amount of coverage and costs to employees.

There are plan and network types to be aware of. Some options allow employees to visit nearly any healthcare facility or doctor. Others restrict the network and allow people to only use providers within a specific network.

2. Cost of Insurance

Another consideration for small businesses is the costs of insurance. Factor in both your small business’s budget and your employees’ budgets. Small businesses that provide health insurance to their employees have both monetary and time costs.

Monetary costs will change depending on the following factors:

The type of insurance you offer
The benefits you provide
If you cover employees and dependents
Monthly premiums
Third-party help

For small businesses, time is money. Many owners neglect to consider the costs of their time spent on health insurance. The following tasks will contribute to time costs:

Finding a health insurance plan
Searching for providers
Learning your employees’ needs
Setting up the insurance carrier plan
Educating employees on the plan
Maintaining the plan

Owners should also consider their employees’ expenses. The following are factors that contribute to employees’ costs:

Premiums: Employers typically deduct these from these employees’ paychecks. It is a fixed price similar to a monthly subscription.
Deductions: Each policy has a deductible which refers to the amount that an employee pays before insurance benefits.
Out-of-pocket expenses: Before choosing what plans to offer your employees, consider the expenses that insurance will not cover and employees will need to cover on their own such as copays.

3. Your Employees

Before choosing a health insurance plan for your small business, you need to review the criteria for eligible employees, which can vary by state.

Some insurance plans require you have a certain number of employees to enroll. Small businesses often must have up to 50 or up to 100 employees for most insurance plans.

For employees to get coverage, they often must work full-time hours and be W2 employees. Most 1099 contractors and part-time employees are not eligible for health insurance through their employer.

Some insurance plans also require employees to pass a waiting period before receiving coverage. This probationary period usually lasts about 60 days.

4. Locations

Companies of all sizes are more likely to have employees operating from all over the world for days past. The influx of remote work means not everyone on your team lives in the same state as you. This can make health insurance options complicated.

Before choosing a health insurance plan for your employees, you should consider their locations and the best plans for people who live in other states.

Some businesses choose to provide health insurance stipends or health reimbursement arrangements (HRAs) for employees. Both options have a fixed monthly allowance that helps to reduce administrative confusion.

5. Taxes

Different health insurance plans for small businesses have different tax implications. The following are considerations for taxes when a business provides their employees with qualified health plans:

Tax exemptions: With some insurance plans, employer contributions are tax-exempt. This can lower tax payments and, in some situations, eliminate them entirely.

Deductions: The funds business owners contribute to their employees’ insurance plans can sometimes be considered a business expense.
Tax credits: A small business healthcare tax credit helps business owners by covering up to 50% of the premiums paid. To be eligible for this tax credit, you must have 25 full-time employees and pay at least 50% of employee premium costs.
Payroll taxes: Employees who pay for health insurance with their income before taxes reduce their taxable income. This leads to lower business payroll taxes for small business owners.

Is an employer required to provide health insurance?

According to the Affordable Care Act (ACA), businesses with 50 or more full-time employees must provide health benefits with minimum essential coverage. However, small businesses do not have the same obligations. Instead, smaller organizations with fewer than 50 full-time employees do not have to provide their workers with health insurance.

While many small businesses are not required to offer health insurance to their employees, many choose to provide benefits to give back to employees and accommodate their wants and needs.

In closing

Although there is a price to insure your employes, going without can prove to be more costly in the long run. We want our employees to be healthy and happy and a great way to do that is providing proper health insurance to them.

The information presented is for informational purposes only and should not be considered advise for your specific circumstances.