It probably goes without saying that most small business owners want to do all they can for their employees. This is true for several reasons, but the overriding incentive for owners, of course, is to retain and attract good employees.
Despite the common, often media-perpetrated, myth of the cold-hearted and tight-fisted business owner, most founders of small businesses are former employees. As such, they have an inherent understanding and appreciation for what workers need and desire from an employer.
And surveys have proven time and again that, more than most any other category of perks and benefits, employees want affordable health coverage.
SMALL BUSINESS HEALTH INSURANCE 101
There are a few basics that business owners new to the role, or who are just now considering health plan offerings, might need to know.
First and foremost, under the Affordable Care Act (ACA), smaller businesses with fewer than 50 employees are not legally required to offer health insurance to employees. Conversely, larger businesses with 50 or more employees are legally required to provide affordable health insurance.
The ACA defines “affordable” health insurance as coverage in which the employee’s annual cost is no higher than 9.78 percent of their annual income. By not offering health insurance an employer with 50 or more workers is subject to a penalty of $2,320 per full-time employee, excluding the first 30 employees.
For small business owners with fewer than 50 employees (including full-time equivalents, or FTEs) health insurance coverage will generally be purchased in the small group market.
THE MAIN CONSIDERATIONS WHEN PURCHASING GROUP HEALTH COVERAGE
As a small business owner, you will need to consider several factors regarding small business health insurance, and the four main points are: coverage, number of employees, employee premiums, and shopping for coverage.
Coverage. If your company is eligible for a small business health insurance plan, coverage is generally guaranteed to be issued by an insurance company. In other words, neither you and your dependents, nor your employees can be denied coverage based on pre-existing medical conditions. This means that all eligible employees and their dependents can enroll in the new plan regardless of any medical condition.
Number of employees. To qualify for small business health insurance coverage, you must have at least one employee on your payroll. In California, owners are generally counted as employees, which means that sole proprietorships with one employee fall into this category, as do partnerships without any employees.
Employee premiums. As an employer, you are required to pay at least 50 percent of the monthly health insurance premiums for your employees. The minimum percentage may vary depending on your state or insurance company.
How to purchase coverage. As a small business owner, you can shop for health insurance coverage at any time, without waiting for your current plan to expire or for the next open enrollment period. There are several ways for owners to purchase insurance, including buying from providers directly or using a broker.
HOW SMALL BUSINESS OWNERS CAN BENEFIT BY OFFERING HEALTH BENEFITS
The benefits derived from offering employees health insurance coverage plans are both tangible and intangible.
Among the intangible, or unmeasurable, benefits employers can have is a stronger level of job satisfaction as well as greater company loyalty among employees. Directly related to this is a stronger position for attracting and recruiting desirable candidates for job openings.
While you cannot attach a number or a unit of measurement on these things, numerous surveys and studies have continued to underscore the value that employer-sponsored health coverage holds for workers.
Tangible benefits from offering health insurance for your workers include potentially far more affordable coverage for you as the owner and your dependents.
In addition to possibly lower health coverage costs for owners, those with companies that have fewer than 25 full-time employees (FTEs) may additionally qualify for tax credits if they purchase a plan through the Small Business Health Options Program (SHOP) Exchange, an insurance portal created by the ACA.
You don’t have to offer it to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.
To qualify, however, you must meet the following requirements in addition to having less than 25 full-time employees. You must:
- Offer health insurance to all full-time employees
- Front at least 50 percent of the premium cost
- Pay salaries of less than $50,000 per full-time employee, on average, each year
If you qualify, you can receive a tax credit for up to 50 percent of your contributions toward employee premiums, which can significantly reduce the costs of providing health benefits to your employees.
And ensuring that your employees have affordable, quality health insurance coverage can reduce costs that arise from lowered productivity and absenteeism stemming from employees being sick.
As an article from the Harvard Business Review has pointed out,
“Employer-sponsored health plans and wellness programs drive demonstrable business results, reducing costs and producing higher returns:
- A study at one firm reported a 13.5% increase in employee well-being led to an average reduction of 5.2% in medical costs per employee per year.
- For every dollar spent on employee wellness, medical costs fall $3.27 and absenteeism costs drop $2.73—a sixfold return on investment.”
J.C. LEWIS INSURANCE CAN HELP WITH YOUR COMPANY’S HEALTH INSURANCE
At J.C. Lewis Insurances Services, we understand that you want to provide your employees with the best benefits package that you can offer. But we also understand that there are many factors and considerations involved when choosing a health coverage plan.
As a family-owned and operated California health insurance agent licensed to do business in California, we specialize in medical insurance plans for small businesses, and Medicare.
At J.C. Lewis Insurance we want to be your insurance partner.
We can tailor our recommendations to your particular needs since we are licensed with most major carriers in California. And, with J.C. Lewis Insurance Services, you save time and money, and we can quickly define your particular needs and recommend the best products and prices to meet those needs.
When you’re choosing medical insurance for you and your employees you are likely to have several questions and concerns. That’s great because we welcome your questions about health coverage insurance, and you can be confident that JC Lewis Insurance Services will help you find the right solution.