How to Pick the Best Small Business Health Insurance
How to Pick Small Business Health Insurance
- Determine your budget and the premium percentage you’d like to cover
- Gather information about your business and employees
- If you’re self-employed, consider an individual plan or (in some states) a group plan of one
- Get plan options using a broker, PEO, purchasing alliance, or SHOP exchange
- Choose a plan type, such as HMO, PPO, or POS
- When comparing plan options, consider your employee demographics and health needs
Figuring out small business health insurance can feel like one of the most difficult and stressful parts of running your own business. Everyone should have health insurance coverage—but the rules and available options are hard to understand.
As a small business owner, you might feel like you’re at a particular disadvantage because you don’t have the backing of a huge HR department to help you. And that’s reflected in the numbers. According to the Bureau of Labor Statistics, 88% of employers with more than 500 employees offer health insurance, but only 55% of employers with fewer than 100 employees offer it.
There’s obviously a gap between health insurance coverage and small businesses. Understanding health insurance is the key to eliminating that gap. Make things a little easier on yourself by reading this all-in-one guide to searching for and choosing the best small business health insurance plan for yourself and your employees. Know what questions to ask, what your small business health insurance plan options are, and the costs. This infographic summarizes the key points, and you can dig into the details below.
Why Get Small Business Health Insurance at All?
When you have a small business, it’s good to be mindful of all your expenses and make sure you stay within budget. With that in mind, it’s totally reasonable to wonder if small business health insurance is really all that important if you’ve got just a handful of employees. The answer is overwhelmingly yes. Small business health insurance is one of those things that works for you and retains your competitive advantage.
Here’s why you should get small business health insurance:
1. It’s the Law If You Have 50 or More Employees
If you’ve got 50 or more full-time employees, then you are legally requiredto provide affordable health insurance under the Affordable Care Act. “Affordable” health coverage means that employee’s annual cost can be no higher than 9.86% of their annual income in 2019 (9.56% in 2018). Not offering coverage subjects you to a penalty of $2,320 per full-time employee, excluding the first 30 employees.
2. Group Coverage Is Better for Employees
An individual health plan offers coverage just for yourself or for your family. Small business group health insurance has certain advantages over an individual health plan.
Group coverage is insurance that businesses purchase and offer to eligible employees and their dependents. Although group plans usually need to have at least two members, some states allow “groups of one” as well, so check out your local rules to make the best choice.
The insurance company will gather some basic demographic information about the group members—like age, geography, and so on—before explaining your plan options. Usually, group health coverage is more affordable for employees and offers more extensive coverage. You can split the premiums with employees or cover the entire premium, depending on your budget.
3. You’ll Receive Tax Credits
Purchasing small business health insurance for yourself and your employees can help you qualify for tax credits. To qualify, you must purchase a plan through the Small Business Health Options Program (SHOP) Exchange, which is an insurance portal created by the Affordable Care Act.
You can qualify if you meet the following requirements:
- Have fewer than 25 full-time employees, or the equivalent based on working hours
- Offer health insurance to all of your full-time employees
- Pay salaries of less than $50,000 per full-time employee, on average, each year
- Front at least 50% of the premium cost of the small business health insurance
Your tax credit will vary depending on those aspects of your business, but you can receive up to 50% off your contributions toward employee premiums. That significantly reduces the cost of providing benefits for your hard-working employees.
4. Receive Other Tax Benefits
Beyond the SHOP tax credit, you’ll also be able to write off the health insurance premiums you pay as tax deductions, saving even more money. Small business owners can save a lot by deducting expenses, and health insurance premiums are one of the most common small business tax deductions out there.
Plus, with just a bit of extra paperwork, you can set up your small business health insurance so that your employees can pay their portions of the premium with pre-tax money. They save cash, which makes them happier and more satisfied with their jobs: win-win.
5. Improve Job Satisfaction and Recruiting
Health insurance is a big deal for people on the prowl for a new job—and offering small business health insurance, even though you’re not a big corporation, shows how much you value your employees.
To be sure you’re attracting the best and brightest talent for your small business, consider investing in health insurance. Studies show that small business health insurance plans increase employee loyalty and decrease turnover. In a Harris poll, 86% of workers said that receiving comprehensive medical benefits would influence them to choose one job over another that didn’t. While the Affordable Care Act (or “Obamacare”) has made some serious strides toward improving personal, family, and business health insurance, there are a lot of misconceptions around it.
5. Healthy Employees Are Productive Employees
Employees without small business health insurance are less likely to get yearly checkups or visit the doctor when sick. This ultimately leads to a decrease in productivity when they get even sicker and have to take more time off from work. By focusing on saving money to the detriment of their health, these employees are hurting your bottom line.
6. Get Job Security as a Self-Employed Person
If you’re a self-employed individual without any employees, then health insurance is still a necessity. Health insurance helps you protect yourself, your dependents, your financials, and your business against potentially disastrous illnesses down the line. Depending on the state you live in, you may or may not qualify for small business health insurance. (We’ll cover this in a little bit.) Regardless, though, you need to make sure that you’re covered, either with an individual health plan or a group health plan.