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Small Business Employee Benefits and HR Blog

The Worst Advice We've Ever Heard About Small Business Health Insurance

As a small business owner, you've probably heard a lot of advice about small business health insurance. Much of the advice is excellent. But some advice is outdated or just plain wrong.worst_advice_small_business_health_insurance

How do you cut through the clutter to get to the good advice about small business health insurance? 

Here's the worst advice we've heard about small business health insurance. We also recommend using the expertise of an educated, licensed health insurance professional.

Worst Advice #1: Your business is too small to offer health benefits

Many small businesses are told (or believe) they are too small to offer health benefits. This advice used to be rooted in truth.

Before new small business health insurance options such as as "pure" defined contribution health plans, if a small business could not offer a traditional small group health insurance plan (because of cost or minimum participation requirements) then there weren't a lot of options.

Now, if a small business wants to contribute any amount to employees' health insurance expenses, they can afford defined contribution allowances. With defined contribution allowances the business can contribute any amount to the reimbursement plan.

Worst Advice #2: Your business just got off the ground... You're too new to offer health benefits

Many new businesses and startups are told (or believe) they are too new to offer health benefits. To wait until you have an office manager or HR manager. To wait and see how the business plan develops. Similar to #1, this advice is rooted in the old-school way of group health insurance.

Better advice would be to set up defined contribution allowances at a sustainable amount, and expand the benefit offerings as the business grows. This approach helps startups and new businesses achieve an important goal - recruiting and retaining key employees. And, this type of approach does not require a dedicated HR staff member. The plan can be administered by the owner or office manager in 5 minutes per month online.

Worst Advice #3: Group health insurance is the only (or best) option

Many small businesses researching how to offer health benefits are told that group health insurance is the only - or the best - option. This advice is usually offered by folks unaware, or uneducated, about new small business health insurance alternatives.

These new solutions, such as defined contribution allowances, help small businesses achieve their employee benefit goals - but allows them to do it within their budget and on their terms.

Worst Advice #4: You will pay a penalty if you don't offer health insurance

Many small businesses are told that under the Affordable Care Act (ACA), they will pay a penalty for not offering group health insurance. For employers with fewer than 50 full-time-equivalent (FTE) employees, this advice is false.

But unfortunately, this misconception is widespread. One survey found that 56% of small businesses are confused about the employer mandate.

See this FAQ: Does My Small Business Have to Provide Health Insurance?

Worst Advice #5: As a small business, health care reform doesn't apply to you

Lastly, many small businesses are told that health reform doesn't apply to them. Even though small businesses are not subject to the ACA employer mandate, there are new reporting and compliance requirements that employers of all sizes need to comply with.

These requirements vary by company size and type of health benefits offered (if any). For example, see this health reform cheat sheet for small businesses.

What's the worst advice you've ever heard about small business health insurance? Leave a comment below.