Does a small business owner have to offer health insurance to their employees?
As a small business owner, this question must have visited you several times. As per the Affordable Care Act (ACA), small businesses operating with employees fewer than 50 are under no obligation to offer health insurance to their workers.
But should a small business owner consider providing health benefits to their employees? The answer is a massive “yes.” Here, we discuss what qualifies as a small business, what health insurance requirements they have, what benefits a group health insurance program has to offer, and the types of health insurance options that are available.
What Qualifies As A Small Business?
As per the Small Business Administration (SBA), a small business is one that:
Has an employee count below or between 100 to 1,500.
Generates an income that is below or between $750,000 - $35,000,000
Although the SBA has its own standards in place for small businesses, their methods are typically not deployed across the board. For instance, as per the ACA, you have a small business if the number of people you employ is below 50. On the other hand, the IRS goes off individual laws to qualify a business as “small.”
Surprisingly, up to 99.9% of companies, or 33.2 million companies across the U.S., are small businesses.
Small Business Health Insurance Requirements
As per the Affordable Care Act, sponsoring employee health insurance is not mandatory for small businesses with employees under the count of 50. Nor are small businesses obliged to shell out a no-coverage penalty to IRS.
However, this doesn’t imply small businesses shouldn’t offer health benefits. Why? Let’s let the surveys do the talking – the first one conducted in 2020 revealed that health insurance appeared on top of the most desired work benefits list among employees. Another survey disclosed that 92% of employees consider benefits as a critical element for their overall job satisfaction.
This brings us to the question, what benefits does health insurance bring to a small business’s table?
Benefits of Offering Health Insurance
Aside from promoting employee well-being, a group health insurance offer brings substantial value to a small business’s table. Here’s why:
It Makes the Business Stand Out
One of the reasons 56% of small business owners provide health insurance to their employees is because it helps their business stand out as a responsible and empathetic leader. With group insurance, employees only have to pay for their premiums but have their basic needs covered.
Attracts and Retains Talent
An offer that includes health insurance coverage acts as an appealing incentive for employees. It not only helps hire the best talent but also plays a role in fostering employee loyalty.
Helps Save Money
In many cases, a small business helps reduce the tax load for employees. This is thanks to the pre-tax benefit that comes with employer-sponsored health insurance. When an employee’s tax burden is reduced, they naturally take a higher income home.
Makes Way for A Healthy Workforce
Employees tend to take fewer sick leaves when they have access to several healthcare resources. This naturally erases disruptions to their work routines and helps them remain more productive.
Types of Insurance Available for Small Business
Almost half of all employees are employed by small businesses, making them the backbone of the U.S. economy. In other words, the responsibility of ensuring all 61.7 million employees have access to health insurance falls on the shoulders of small businesses!
If you’re decoding the pros and cons of providing health insurance to your workers and trying to understand what type of insurance you must offer, here are a few options to navigate:
You can either offer a level-funded plan or a fully-funded plan.
You can take a broker’s assistance or navigate the health insurance plans yourself.
You can consider the Small Business Health Options Program (SHOP) – a health insurance marketplace created under ACA for small business owners – to “shop” for health insurance plans.
You can join a PEO or professional employer organization to obtain health insurance
You can tap into customizable, yet highly affordable health insurance plans offered by our team here at CIIG.
Lowering Costs Associated with Health Insurance
Sure, healthcare is expensive. But there are several ways you can lower the costs associated with providing health insurance to your employees.
Although fully-funded plans are the most common health insurance plan type, their costs simply cannot be accommodated by relatively smaller businesses. For this reason, most small businesses opt for self-funded plans instead.
In the case of self-funded plans, the employer sponsors the health insurance instead of the insurance carrier. In other words, here, it is your business that takes the responsibility to pay for employees’ claims, so you pay less when the claims demand less and more when the claims demand more. To protect your business against claims that may overwhelm your budget, you can acquire even more protection using a level-funded health plan.
How to Qualify for Health Insurance Tax Credit?
You can look at the amount of credit you receive as a sort of sliding scale. On this scale, small businesses typically get more tax credit. A business receiving an average income lower than $26,000 and an employee count of less than 10, for instance, would be eligible for the highest tax credit.
What if your business doesn’t owe tax during a specific year? In this case, you still have the option of carrying your tax forward (or back) to other tax years. If you do decide to offer a group health insurance plan, you can easily calculate and make a credit claim by filling out the IRS Form 8941.
Where To Find Small Business Health Insurance?
Having weighed the best health insurance options for your growing team, the next step would be to kickstart the insurance process. This is where CIIG comes in to help you get a health insurance plan which can be tailored to suit your employees and your business without draining your bank account. Take the first step by contacting us now!