Family-run businesses are what drive our country’s economy. In fact, did you know that 60 million people work for themselves or for small businesses with fewer than 100 employees in the U.S.? So, it’s safe to say your family-run business is an important part of our economy.
But did you also know that 46% of all small and medium businesses (with less than 200 employees) don’t offer traditional employer-sponsored health insurance. That’s over 2.7 million employers. 56% of all micro employers (with less than 10 employees) don’t offer traditional employer sponsored health insurance. That’s 2.6 million employers.
And if you’re one of the family-run businesses who thinks health benefits are out of reach for your employees, here’s good news: they’re not out of reach.
Affordable, reliable, safe, health benefits for your employees do exist and can become a valuable part of your family-run business. In this article, we’ll talk about an affordable health benefit option for your family-run business - premium reimbursement.
Why Do You Need Health Benefits?
As you consider offering health benefits, consider the following primary advantages:
Peace of mind - You and your employees can know that, in the case of an accident, you’re covered. Many accidents can cause financial strains on your and your employees without the help of health insurance.
Preventive healthcare - Health benefits give you, your employees, and your families access to free preventive healthcare services. This includes cancer screenings, immunizations, and blood pressure testing.
Ability to recruit and retain top employees - Did you know that offering great health benefits is one of the best ways to recruit new employees for your family-run business? Plus, health benefits allow you to retain the employees you already have and value.
Ability to comply with federal regulations - In order for you and your employees to comply with the individual mandate, you need to have health insurance. By offering health benefits, both you and your family and employees and their families will be able to comply with the mandate.
Remember, offering health benefits isn’t just a way for you and your employees to comply with the individual mandate, but they’re a way to keep you, your employees, and your families safe and healthy. So, you must be asking yourself "How do I offer health benefits?" The answer - premium reimbursement.
What is Premium Reimbursement?
Premium reimbursement is where you reimburse your employees for their individual health insurance premium expenses. It’s a simple concept: You offer your employees a monthly healthcare allowance to use on individual health insurance, rather than contributing to a group health insurance plan.
Premium Reimbursement Benefits for Employees
Here are four primary benefits to employees:
Choice: Employees get to choose the health insurance plan that best fits their families' needs, including choices between multiple health insurance companies and plan designs.
Portability: Employees' individual health insurance is not tied to employment, meaning they are able to take their health insurance with them when they switch jobs.
Guaranteed-Issue: As of 2014, all employees are eligible for individual health insurance regardless of medical conditions.
Cost Savings: Employees reduce their healthcare costs by 50% or more. Most employees have access to tax credits through the Health Insurance Marketplace. If an employee qualifies for a tax credit, their cost of health insurance is capped at 2% - 9.5% of their household income, if their household income is less than 400% above the federal poverty line (that’s $95,400 per year for a family of 4 in 2014).
Premium Reimbursement Benefits for Employers
Here are three primary benefits for employers:
Recruiting & Retention: This solution allows employers to recruit and retain employees. In addition to the healthcare allowance, employees also receive the benefits of an individual health insurance policy (Choice, Portability, Guaranteed-Issue, and Cost Savings).
Fixed Cost: The healthcare allowance puts employers in full control of their health benefits cost.
Savings: Individual health plans cost, on average, up to 60% less than group health insurance. The employer's contribution to employees' healthcare goes further.
How to Incorporate Premium Reimbursement
Now that you know how premium reimbursement can be a useful health benefit to your family-run business, here are three simple steps to make it part of your health benefits.
Step 1 - Cancel your group health insurance plan (if you have one).
Step 2 - Give employees monthly "healthcare" allowances to spend on health insurance; this can be tax-free via a Healthcare Reimbursement Plan (HRP) or a taxable stipend.
Step 3 - Allow employees to purchase health insurance in the Health Insurance Marketplaces. They’ll receive premium tax credits that cap their health insurance costs as percent of income.
Step 4 - Reimburse employees on payroll. Employees purchase individual health insurance policies with their own money and submit a reimbursement request to your HRP Software Provider. The business reimburses employees on payroll.
Tip: Many family-run businesses choose to utilize Premium Reimbursement Software in order to avoid any costly mistakes and comply with federal rules and regulations.
Health benefits are an essential part of any business. And while you may be under the impression that health benefits are out of reach for your family-run business, offering premium reimbursement as a health benefit is a perfect way to recruit and retain employees and save money.
Do you think offering premium reimbursement as a health benefit is a good fit for your family-run business? Why or why not? Comment below.