Putting a Premium on Health Insurance for Your Employees

In its 2014 Small Business Health Care Survey, the National Small Business Association reported that 70 percent of the 780 small companies it surveyed offer health insurance to their employees.

If you’re a small business owner who’s grappling with the question of whether or not to make health insurance available to your workers, there are a number of issues to be considered in making your decision. Perhaps the most important is an understanding of what federal law requires.

Coverage Not Required

Under the Affordable Care Act, better known as Obamacare, businesses with 50 or fewer full-time equivalent (FTE) employees are not required to offer health coverage to their workers.

Businesses with more than 50 employees must either provide health coverage or pay a penalty, often referred to as the “employer mandate,” that is spelled out under the Employer Shared Responsibility provisions of the Affordable Care Act.

Tax Credits for Some

Employers with fewer than 25 FTE employees may qualify for tax credits of up to 50 percent of their insurance plan’s cost if they contribute 50 percent or more toward employees’ self-only (not dependents) premiums.

As the following article notes, to learn more about the changes under the Affordable Care Act, check out “Requirements for Group Health Insurance Plans by Company Size.

Other Issues to Weigh

Apart from the requirements of federal law, small business owners have a number of other issues to consider in deciding if they will make health insurance coverage available to their workers.

Near the top of the list is the business’s ability to afford paying for employees’ health insurance.

The NSBA survey found that the average monthly per-employee cost of health insurance premiums was $1,121, as of November-December 2013. That is almost double the average monthly per-employee cost of $590 in 2009.

Benefits of Offering Coverage

Against the considerable costs of providing health coverage for your employees, you need to carefully weigh the benefits that are likely to accrue to your business if you do offer health insurance.

Guide to Health Insurance Options for Small Business,” published by Cover the Uninsured Week Small Business Working Group, takes a look at some of advantages of offering health insurance.

The guide, prepared with help from the Healthcare Leadership Council, points out that offering health insurance helps small companies to attract and retain high-quality workers. Retention of key employees is an important benefit, because the U.S. Department of Labor estimates that recruitment and employee turnover account for roughly 30 percent of total salary costs for small businesses.

Helps Boost Productivity

The guide also cites evidence showing that insured employees are healthier and happier, which is reflected in a higher level of productivity and a decrease in absenteeism.

Another big plus for employees is the knowledge that health insurance protects them from the catastrophic financial losses that often accompany a serious illness or injury.

The NSBA survey, conducted in late 2013, showed that most of the small business owners surveyed still had little to no understanding of how they will be affected by the Affordable Care Act.

Few Plan to Use SHOP

This lack of familiarity with Obamacare’s regulations and benefits may account for the fact that less than 10 percent of the survey’s respondents said that they planned to purchase group health plans from the Small Business Health Options Program, or SHOP. And the survey was taken before the Obama Administration announced that it was going to delay the official opening of SHOP until Nov. 15, 2014.
Rather than purchase their coverage on SHOP, roughly 75 percent of the survey’s respondents said they plan to purchase health insurance through their existing brokers.

About the Author: Don Amerman is a freelance author who writes extensively about a wide array of business and personal finance topics.

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