Small Business Health Insurance: 4 Things You Need to Know
As the owner of a small business, you’ve probably acquired a lot of job titles. Manager. Salesperson. Marketer. Problem solver.
That’s a lot for one person to handle! So when it comes time to learn the intricacies of the small business health insurance options available, it’s no surprise that many business owners start looking for a lifeline.
We want to be that lifeline. Let’s start with the basics.
Do small businesses have to pay for health insurance?
Employers with less than 50 employees are not required to offer health insurance to employees. State and federal laws apply to varying degrees — again based on factors including the number of employees, the type of business and whether an insurance company is providing the coverage. That being said, many businesses choose to offer health insurance because they believe that health insurance coverage is a valued employee benefit that attracts and retains top employees.
Insured small group plans must meet certain benchmarks, represented by these four tiers:
Platinum plans are the most expensive to the employer and pay as much as 90% of employee medical expenses.
Gold plans pay 80% of employee medical expenses.
Silver plans pay 70% of employee medical expenses.
Bronze plans pay 60% of employee medical expenses.
How many employees do you need to qualify for group health insurance?
Some states define a small employer group as those that have 1-50 employees, but most states require companies to have at least two employees to qualify for group coverage.
States and insurance companies often have strict documentation requirements for companies with less than 50 employees to prevent fraud. In the past, some states that allowed sole proprietors to purchase group coverage were often referred to as states that guarantee coverage for "business groups of one,” but the Affordable Care Act eliminated this option and redirected sole proprietors to the open marketplace.
How much does small business health insurance cost?
There are myriad options for small businesses who wish to offer options, but have limited budgets. A lot of small business owners delay the process until they reach a critical mass, but starting small actually simplifies the health insurance underwriting process, which is the process insurers use to weigh potential health risks against potential costs of premiums.
To buy insurance in the state or federal marketplaces, employers must cover at least 50% of the costs (as discussed in the tiered options above). Average insurance premiums in 2018 were $6,896 for single coverage and $19,616 for family coverage, according to the NCSL.
There are, however, over 1,000 plans for each carrier in the marketplace, on top of alternative options such as health savings accounts, self-funded plans, and debit card products. A partner like Hudson Benefits can leverage its carrier relationships and industry knowledge to quickly sift through those thousands of plans to zero in on the best fit for your company.
Why is it important to offer small business health insurance?
Small business health insurance helps grow your business.
Increased Productivity. When your employees have better access to quality healthcare, they are able to stay well and be more productive, which benefits everyone.
Tax Benefits. There are tax credits for small businesses who help employees’ pay premiums, while being a 100 percent tax deductible business expense. If your company is incorporated, your insurance costs are deductible, too. Additionally, your employees can opt to have their healthcare insurance premiums withheld from their payroll checks pre-tax, increasing their take-home pay’s bottom line.
Better Talent. Attract and retain top talent by offering a more attractive benefits package.