Navigating health insurance as a small business owner can feel overwhelming, but providing coverage is an essential part of attracting and retaining employees. Whether you're just starting to explore options or need to clarify specific points, this small business health insurance FAQs guide is designed to help you understand the key aspects of offering health insurance to your team.
Am I required to offer health insurance to my employees?
This depends on how many employees you have. Small businesses with fewer than 50 full-time equivalent employees are not required by law to offer health insurance. However, if you have 50 or more full-time employees, you must offer affordable insurance or pay a penalty under the Affordable Care Act (ACA).
Even if it’s not required, providing health insurance can still be a competitive advantage, helping to attract and retain top talent, enhance job satisfaction, and promote a healthier workforce.
What are the benefits of providing health insurance?
Again, while providing health insurance may not be required for your small business, it can provide you with multiple benefits. It helps attract and retain top talent, as 46% of employees report health insurance influenced their decision to accept a job, and 56% of U.S. adults say it's a key reason they stay with their employer.
Offering health plans can also boost productivity by ensuring employees can address health issues promptly, reducing sick days. Additionally, health insurance expenses are tax-deductible, and businesses may qualify for tax credits, making it a cost-effective way to support employee well-being while complying with regulations.
What health insurance options are available to my small business?
There are a variety of health insurance options your small business can choose from.
Small Group Health Insurance
Small group health insurance is designed for businesses with fewer than 50 employees (or up to 100 in some states) and offers a range of coverage options. These plans are often more affordable due to group purchasing power and typically cover employees, and sometimes their spouses and dependents.
Individual Coverage Health Reimbursement Arrangement (ICHRA)
ICHRA allows employers to provide tax-free reimbursements for employees' individual health insurance premiums and medical expenses, offering flexibility for employees to choose their own plans. It has no participation requirements and can be used as the sole health benefit or alongside other programs, making it a cost-effective option for businesses of all sizes.
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
QSEHRA is a tax-free reimbursement program for small employers with fewer than 50 full-time employees, covering qualified medical expenses, including individual insurance premiums. Unlike ICHRA, QSEHRA has a maximum allowance limit but no minimum, making it a flexible and affordable option for small businesses, even if employees aren’t enrolled in their own health insurance.
Self-funded Health Insurance
If traditional healthcare options lack the flexibility you need, consider a self-funded health insurance program where the employer directly covers employees' healthcare costs. While it can be cheaper than traditional plans, there's a risk of higher-than-expected claims, but smaller businesses can manage this by using stop-loss insurance to limit financial exposure.
Health Stipends
Health stipends provide employees with a fixed monthly amount to use on health insurance or medical expenses, either upfront or through reimbursement. While they offer flexibility and can cover a wide range of healthcare costs, stipends are taxable, don’t meet ACA employer mandate requirements, and are subject to payroll and income taxes.
How do I choose the best option for my small business?
Choosing the best health insurance plan for your small business involves understanding your specific needs. Start by evaluating your budget—compare costs like premiums, deductibles, and co-pays to ensure you're getting the best value for your investment. Consulting with a benefits professional will help you find plans that fit both your budget and business goals.
Next, consider your employees' needs and preferences. Conduct surveys or research to understand what kind of coverage is most important to your team, especially if you have diverse employees, such as remote workers. A plan tailored to your workforce will be more appreciated and utilized.
Lastly, ensure the plan is user-friendly for both you and your employees. Look for a provider that offers easy-to-use technology for enrollment and management, along with the flexibility to scale as your business grows. Consulting with a benefits expert can help you find a plan that aligns with your needs and supports your business’s success.
Navigating health insurance for your small business may seem complicated, but with the right approach, it can become a valuable asset for both you and your employees. By understanding these small business health insurance FAQs, you can create a benefits package that supports a healthy, happy workforce while keeping your business competitive.
Please let us know if you have any questions. We understand that local companies have unique needs that most national firms don’t consider or struggle to identify. This leaves your people with a less effective, one-size-fits-all benefits plan. However, our ability to cater to the needs of our clients comes from decades of client partnerships. This perspective allows us to fully address unique needs and generate creative benefits plans.
You shouldn’t have to worry about just being a number, offering a generic plan, or getting the unique support you need. Call us today.
This Benefits Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.