Small Business •
November 18, 2013 at 7:00 AM •
Written by: Christina Merhar
Many small business owners think that offering health insurance is beyond reach. But, with new options today it is easier than many small businesses think.
The benefits of offering health insurance to employees are generally agreed upon:
Offering health insurance helps attract and retain high-quality, key employees. The U.S. Department of Labor estimates that, on average, recruitment and employee turnover in small businesses account for 30% of salary costs.
Evidence shows that insured persons are healthier. Better health increases worker productivity, which can enhance the business's overall performance.
Health insurance provides employees and their families with protection from catastrophic financial losses that can accompany serious illness or injury.
6 Fast Facts on Small Business Health Insurance
Lack of information may keep some small business owners from exploring health insurance options for their employees and/or themselves. Here are six facts on small business health insurance to get you started.
#1: Financial Benefits
Many businesses benefit economically from providing health insurance to employees and their families. Health insurance helps many small businesses:
Recruit high-quality workers
Reduce staff turnover
Reduce the cost of absenteeism
Limit disability and workers’ compensation claims
#2: The Most Valued Fringe Benefit
Employees consider health insurance to be, by far, the most important fringe benefit. In 2014 nearly all Americans will be required to have health insurance or else pay a fee. So even if a small business decides not to offer the traditional health insurance, they can offer health benefits in the form of a healthcare allowance to help employees pay for their personal policies.
#3: Tax Advantages
There are tax advantages when you offer health insurance to employees. The tax benefit vary depending on the exact type of benefits offered, but generally speaking:
The contributions your business makes are fully tax-deductible as a business expenses.
Employees may make their premium contributions on a pre-tax basis through payroll.
Self-employed persons may deduct 100% of the cost of their premium from their adjusted gross income.
#4: Access to Discounted Pricing
Health insurance coverage gives you, and employees, access to the price reductions that health insurance companies negotiate with doctors and other health care providers.
#5: New Options for Small Business Health Insurance
In the last several years, new health insurance options have emerged that give businesses - especially small businesses - more control over the cost of health insurance. The number one reason that over half of very small businesses (1-9 employees) don't offer health insurance is cost. These alternatives reduce the cost of offering health benefits. These alternatives to traditional health insurance include Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), association-sponsored plans, and defined contribution health plans (i.e. an employer-funded healthcare allowance paired with personal health insurance). Out of these, defined contribution is becoming the most popular because it allows a small business to "name it's price" for health benefits and have controlled liability over the lifetime of the benefits.
#6: The "Employer Mandate" Does Not Apply to Businesses with Fewer than 50 FTE Employees
The "Employer Mandate" (offer traditional health insurance by 2015 or pay applicable penalties) is only for employers with more than 50 FTE employees. Many small businesses are relieved to learn this provision of ObamaCare does not impact their health insurance decisions.
Because of this and other health reform opportunities for small business owners, experts predict that up to 60% of educated businesses plan to transition to alternative health insurance solutions including defined contribution.
If you're a small business, what are your questions about health insurance? Leave a comment.
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