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Small Business Employee Benefits and HR Blog

Should Our Small Business Offer Health Insurance?

November 26, 2014
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Health insurance is a critical aspect of a business - not only for the employee, but also for the employer. Nearly all small business owners consider offering health benefits to cover themselves, their family, and their employees. After all, health benefits are a powerful tool to recruit and retain quality employees.

You may be asking yourself “should our small business offer health insurance - or some type of health benefits - to our employees?” Here are a few suggestions to make your decision a little easier.

Should Our Small Business Offer Health Insurance?

Benefits of Offering Health Insurance

It’s no secret that when individuals are job searching, the health benefits package is usually pretty important to them. As such, it is beneficial for you to offer health insurance in order to recruit and retain employees. If you choose not to offer anything to employees, your small business may be passed over by highly-talented candidates.

Getting Started - What to Consider

So, you’ve decided that you want to offer health insurance - where do you start? First, identify your goals and budget. Here are some questions to get you started.

  • Who will the health benefits program cover? (ex: all employees, or only certain types of employees such as full-time managers?)

  • What is your health benefits budget? (how much can you afford?) Know your budget beforehand.

  • What type of benefits do employees (and/or your family) value the most? Ask them for their feedback.

  • Who will manage the health benefits program? Once you have decided on a plan, will you hire someone, or add the responsibility to an employee?

  • What are your health benefit goals? Write them down and keep them handy.

Tip: For free worksheets on evaluating health benefits, see this health benefits planning workbook.

What Health Insurance Options do I Have?

Once you have a good idea of what you and your employees want, it’s time to take a good look at what is offered to small businesses. Are there options? You bet. Two of the main options for small businesses are group health insurance and defined contribution allowances. Each one is different and has its benefits.

Group Health Insurance: If this is the route you want to take, you can contact a group health insurance broker to help you with plan selection and quotes. 

Defined Contribution Allowances: This alternative to group health insurance is designed to reimburse employees tax-free for individual health insurance. This approach saves businesses 20%-60% on healthcare costs. And, individual health insurance is better for employees because of greater choice, portability, guaranteed-issue, and access to the health insurance tax credits. If this is the route you want to take, contact a defined contribution provider

It’s best for you to compare the two options in order to know what is best. Really, it comes down to what is going to benefit you, your business, and your employees.

Now when you ask yourself, “should our small business offer health insurance?” you know the options that are out there. Once you have made a decision, you can use your health benefits as a recruiting tool to bring in top-talent workers and help retain the ones you already have.  

What type of health benefits do you offer to your employees? What do you like/dislike about your offering? Comment below and join our discussion.

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