If your business has more than 50 employees, you are required by law to provide employee health insurance due to the Affordable Care Act (ACA). If you have fewer than 50 employees, you will need to make the decision to offer health care benefits to your employees. we examine each important decision point to help you make the right decision for your business.
Are you legally required to provide health insurance to employees?
If you have more than 50 full-time and part-time employees, you are required by law to provide group health insurance to your employees. If you fall into that category, you’ll need to make sure you cover at least 95% of your full-time employees and their dependents. full-time employees are those who work more than 30 hours per week.
If you have fewer than 50 employees, you are not required to provide such benefits, but we recommend that you at least consider it. A strong benefits package can go a long way in attracting and retaining talent, and the government also provides various incentives to help make this easier. If you are interested, we recommend you buy, which we detail below.
How does employee health insurance work?
Employee health insurance plans are commonly known as group insurance plans. Group health insurance is a single plan that provides coverage (usually) for all employees. plans are generally paid monthly, and those monthly premiums depend on your location, the number of covered employees, and the ages of your covered employees.
In addition, there are different types of insurance plans. The four most common types of plans are:
Each plan will have a monthly premium, a deductible that must be met before the plan goes into effect, and copays that the covered person may have to pay for specific services.
We strongly advise you not to instantly choose the cheapest plan available without looking into the details. Those plans are usually cheap for a reason. we took the time to go through the process of finding a group insurance plan and found that many of the cheaper plans also had significant drawbacks, including -n-network providers that were far away, providers that were only open during normal business . hours and more. As cumbersome as it may be, you’ll want to carefully review the details of each plan and network.
How much does health insurance usually cost?
The Kaiser Family Foundation found that, on average, employers pay $5,700 per employee for individual coverage plans and $14,000 per employee for family coverage plans per year. Insurance premiums have been outpacing inflation year after year, so you’ll need to keep that in mind as well if you plan to offer long-term health insurance benefits. In addition, the Bureau of Labor Statistics (BLS) reports that health insurance benefits account for approximately 8% of total employee compensation in the United States.
Employers are not required to pay 100% of employee premiums. In fact, only 27% of small business workers are in a plan where their employer pays the full monthly premium. According to the IRS, employers with more than 50 full-time employees must “offer affordable health coverage that provides a minimum level of coverage to their full-time employees and their dependents.” the minimum level of coverage is generally defined as 60% of health care costs for the standard population. You can also use the employer coverage tool to determine if your plan qualifies.
You can claim what you pay for your employees’ monthly premiums as business expenses. This means that the monthly premiums you pay are 100% tax deductible at both the state and federal levels.
In addition, small businesses may qualify for the Small Business Health Care Tax Credit, which can allow up to 50% of your health care expenses to be claimed as a credit. To qualify, your business must meet the following conditions:
Tax deductions reduce your taxable income and may lower your tax bracket. the amount of money you save depends on your tax bracket. tax credits, on the other hand, directly reduce the amount of tax you owe on a 1:1 basis. If you owe $10,000 in taxes and receive a $1,000 tax credit, you will only owe $9,000 in taxes.
ways to save on employee health insurance
Paying for group insurance can be daunting, but there are a few ways you can creatively lower those costs.
Share the costs with employees: Providing health insurance benefits to your employees is not an all-or-nothing effort. most employers share premium costs with employees. common ways to save here are to have employees pay higher premiums or shift employee costs to the copay level and negotiate lower premiums with your insurance provider.
Create your own group health insurance: If you think your employees are quite risk-averse and healthy, you may want to consider creating your own group health insurance. Instead of signing up for health insurance, you set aside part of your own budget for emergency health care services. This means that the risk of paying high health care costs falls on you as the employer. this can save money in the short term, but it only takes one expensive health care bill to blow the entire budget.
where to find health insurance plans
First, we recommend that you assess what benefits your employees are seeking. If a high percentage of your employees, for example, are looking for strong dental benefits, you’ll want a plan that emphasizes that. If your employees want minimal, inexpensive insurance that they would only use for emergencies, that’s also helpful to know.
The Benenson Strategy Group reported that of the 1,000 employees surveyed, the majority said they would opt for better health insurance over a 10% pay raise. In other words, it’s a big problem for employees.
After evaluating your wants and needs, you can now enter the insurance market with a complete list of the services you want to cover and your budget, two of the most useful initial filters.
small business health options program (store)
shop is a federal marketplace for small business owners looking for health care plans. each state maintains its own store market, but they are all similar. To qualify to use the store, businesses generally must meet the following requirements:
Employers have the opportunity to choose from three levels of health insurance based on price and coverage. once a level is selected, employees can go to the store on their own and can select their own individual plan based on the level selected by the employer.
private health insurance market
You can also find health insurance through private health marketplaces. the quality and availability of plans will vary depending on your location, but we recommend exploring them as well to choose the best option for your employees. here are the four largest private exchanges:
Similar to purchase, employers select a predefined contribution, which designates which plans employees have access to from which to choose. employees then select the individual plan they would like, and the employer receives a single, complete bill for each employee. the market would normally provide administrative support services such as call centers and online support.
use a health insurance broker
If you don’t have time to manually compare plans side by side, you should consider hiring a broker. You can find a trusted broker through friends and colleagues or through the store. A good broker should be able to clearly break down the most challenging aspects of choosing a health insurance plan, such as the value of different networks or the quality of various providers.
professional employer organization (peo)
Individuals are separated from traditional insurance companies and often take advantage of their large economies of scale to provide cheaper HR services to small businesses and start-ups. People like JustWorks often provide health insurance benefits at the same or lower rates than traditional health insurance providers.
options for freelancers
If you’re self-employed, consider the health insurance marketplace that’s available to those without employees. you’ll likely get tax credits based on your income and household size to help lower costs.
The benefit of the Health Insurance Marketplace is that with one application, you’ll be able to see the tax credits and plans you qualify for. Like most other marketplaces, the Health Insurance Marketplace also groups its plans based on tiers.
common terminology to know when shopping for health insurance
We have consolidated the most common terms and phrases used by health care providers.
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