What You Need to Know When Choosing Health Insurance for a Small Business

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The Affordable Care Act mandates that any business in the United States with more than 50 employees has to offer them an affordable healthcare plan. There is, therefore, a big market out there for individual and group healthcare plans that are designed to appeal to small businesses. The range of choice is good for competition, but it can make it difficult to navigate the market effectively.

Business owners whose businesses are too small to require them to provide affordable insurance under the ACA may want to know about what plans are out there, so they are prepared as their business expands. It’s always a good idea to have a specific plan in mind for when your employee count does creep over the magic number.

When you are choosing your health insurance, here’s what you need to keep in mind.

It’s Mandatory if you Have More Than 50 Employees

Any business that employs 50 or more full-time employees is legally obligated to provide them with affordable health insurance, as per the Affordable Care Act. In order to meet the definition of affordable as outlined in the ACA, a healthcare plan must cost employees no more than 9.86% of their annual income. Failure to comply with this part of the ACA can result in some hefty fines, $2,320 for each full-time employee affected (excluding the first 30 employees affected).

If your business currently employs less than 50 people, you are exempt from this part of the ACA. However, especially if you plan on expanding your business over the near future, you should start thinking about the healthcare plan you will choose well in advance of needing one. The better the health insurance you are able to offer, the more attractive your business will be to potential recruits.

Employees Prefer Group Coverage

You can secure health coverage for yourself and your family with an individual health plan. However, plans that offer group coverage come with a number of advantages over the individual health plans. In some states, group health coverage is available to individuals under a policy known as “groups of one”.

However, in most states, group coverage is only available to eligible employees and their dependents. Make sure that you check the options available in your state and what the local laws and regulations are.

If you approach a health insurance business for advice as to what plans are suitable for your business, they will begin by establishing some information about the demographics of your employees. There are a lot of factors that will affect the type of coverage they offer you. Naturally, the nature of the work your business does will dictate the risk involved in offering you coverage.

Other factors that will come into play include the average age of your employees and the geography of the local area. With so many factors involved, it can be hard to work out how much you should expect to be paying for insurance. Make sure that you shop around the local market to ensure you are getting a worthwhile deal.

Tax Credits

When you buy small business health insurance, you might be entitled to tax credits. In order to qualify, purchase your health insurance for small business through the Small Business Health Options Program Exchange. You will also need to meet the following requirements in order to qualify for tax credits:

  • Employ fewer than 25 F/T employees (or the equivalent in working hours as laid out in the ACA).
  • Offer all of your full-time employees healthcare coverage.
  • Pay an average annual salary of less than $50,000.
  • Are willing to pay at least 50% of the premium costs of the health insurance plan.

The above factors will all affect the level of tax credits that you are entitled to. However, they can amount to as much as 50% of the premium costs of your insurance plan. This significantly reduces the costs of offering your employee healthcare insurance, even when your business isn’t legally required to do so.

There are also a number of tax benefits beyond the SHOP tax credits available when you purchase health insurance for your small business. For example, you will be able to write off any health insurance premiums you are required to pay as tax deductions, enabling further savings. These deductions can represent significant savings for small businesses.

If you’re willing to complete a little extra paperwork, you can even set it up so that your employees are able to pay some of the premium costs with pre-tax money. The result of this is more money in your employee’s pockets and a happier overall workforce.

Improve Your Employees Job Satisfaction

Providing your employee with affordable health insurance will remove one of the most common everyday stresses for many Americans. It is a great way of showing your employees that you care about them and their wellbeing. This will foster the kind of loyalty that it’s difficult to buy.

If you want your business to attract the very best talent available in your chosen industry, you need to be able to show them that your business is the best place they could choose to work. Offering them decent health insurance will go a long way towards encouraging the most talented recruits out there towards your business over your competitors.

Improve Productivity

Happier employees are more productive employees. Knowing that their healthcare needs are covered will boost their overall job satisfaction and productivity rate. Workers who have health insurance are much more likely to get themselves regularly checked and, therefore, stay one step ahead of any potential illness or ailment. This means less time off work because of sickness.

When workers are sick, they are more likely to seek out the appropriate treatment if their healthcare costs are being covered by an insurance plan.

It’s also diligent to inquire whether the insurance policy includes addiction rehab for drug and alcohol abuse. Many policies will cover this,  but it’s important to read the small print just in case.

Make sure that you shop around and look at all the available options before you commit to a particular plan. Choosing the right health insurance plan for your small business could be game-changing for your success.

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