Written by: Jeff McDonough, Director of Human Resources, Union Savings Bank
If you’re a small business owner in Connecticut with fewer than 50 employees, then you’ve probably considered whether or not you should provide an employee benefit package including health insurance. It’s a tricky subject. The short answer is it is ultimately up to you to decide what’s best for your business. But we’re here to help. We’ve got the tools and resources you need to make an informed decision.
Let’s start with the basics. Business owners with fewer than 50 employees are not required to provide employer health insurance to their employees. When considering health insurance for small business owners, also keep in mind that whether or not you offer health insurance to your employees, it is important for small businesses to make their employees aware of their obligation to seek health coverage under the Affordable Care Act. Employees also need to understand that they have access to guaranteed coverage in the individual market. If you are considering providing health care but don’t know when to start, don’t worry. You can buy small business health insurance plans at any point.
Generally, in estimating health benefits for small business, the smaller the company is, the more expensive the health insurance will be. This is simply because larger companies with more employees have more of a buffer to absorb individuals’ higher health care costs, while smaller companies have fewer employees and cannot absorb the costs as easily. Insurance companies use experience rated prices to determine the premiums business owners pay for employer health insurance. If there are a couple of employees with higher health care costs, a smaller business will feel that expense more acutely than a larger company.
Now this does not necessarily mean you should not provide health care to your employees. Depending on the industry your small business is in, providing an employee benefits package including health care can be a competitive advantage. On the other hand, not providing it can be a competitive disadvantage. Offering healthcare benefits can help attract higher quality talent and keep current employees happy. This, in turn, helps decrease turn over and the time and costs associated with it. Take a good look at other similar-sized businesses in your industry to determine if providing health care is an advantage you need in your market.
Health benefits for small business do not have to be an all-or-nothing proposition. For example, you can pay for a percentage of the health care costs. You can also offer employer health insurance to your workers only, without extending the offer to their families and dependents. In 2017, the average annual premium for an individual plan was almost $7,000 and close to $19,000 for a family plan.
If the costs of employee health benefits for your small business are too high, you have other options. Purchasing an individual health care plan is often expensive, so offering employees the ability to join a small business health insurance plan offered through your company, but with the employee picking up a large portion of the cost can still save employees’ money. Almost 50% of small firms that offer family coverage pass along the entire cost of those plans to the employee. Keep in mind that if you do offer health insurance, it must be explained to your employees that they may be eligible for government subsidies if the coverage provided by you is deemed unaffordable under the law. You could also offer higher wages to help offset the cost for employees who pay their own health insurance.
With insurance costs rising, it’s important to encourage your employees to live healthy lifestyles. It’s also important to find the right insurance broker to help you make the best decision for your small business. Do some research and look for a broker located in your geographic area who specializes in health insurance for small business owners. Brokers can help you decide exactly what kind of employee benefits plan you should offer or which alternatives to health care benefits will make your business competitive.
As a small business owner, you don’t have all day to shop around for the right employer health insurance plan or the right broker. Luckily, the Small Business Health Options Program (SHOP) is another great tool to help you determine which health care option is right for your business and find the right broker. The SHOP Marketplace allows you to search for and compare options based on your state, and it takes into account your full-time employees and tax credit to find the right SHOP plan for your business.
To enroll in a SHOP plan, you must have one to 50 full-time employees. If you have fewer than 25 employees, however, you may qualify for the Small Business Health Care Tax Credit. If you meet all of the requirements, you can receive up to 50 percent of the costs you pay for premiums on your employee benefits. This credit favors smaller businesses, offering the highest credit to businesses with fewer than 10 employees making an average of $25,000 or less.
Deciding if you should provide employer health insurance, how much you should provide and what alternatives you should consider can seem daunting. Understanding what is best for small business management – including your employees, assessing what your competitors are offering, and connecting with an insurance broker will help you on your way to making the decision that best suits your small business.
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