What type of health coverage is right for your small business? What tools and resources are out there to help you navigate your options?
Small business owners have more options than even a few years ago to help them decide what type of health coverage to provide for their employees.
Whether it's group or individual, employee-paid or voluntary, many come with perks like tax credits.
Today, more insurance providers cater to small businesses with specialized software and licensed brokers dedicated to the SMB workforce.
ACA, SHOP, and Criticism
Under the Affordable Care Act (ACA), employers with 50 of fewer employees must provide health insurance to their full-time employees and dependents up to age 26.
There are penalties for not doing so. Good news for the employees, but it doesn't mean that small businesses haven't encountered issues with the ACA, also known as "Obamacare", or loved navigating the options, often without any professional guidance.
On a Zane Benefits blog that covers HR and benefits, Christina Merhar cites the findings from the opinion poll by Kaiser Family Foundation (KFF) on Obamacare, which it has been conducting since 2010. As of the March 2016 poll, the public's opinion of Obamacare was as follows:
- 47 percent unfavorable
- 41 percent favorable
- 13 percent don't know
The government Small Business Health Options Program (SHOP), available to businesses with 50 employees or fewer with anytime-enrollment, has also been criticized. As Michael Stahl, Senior Vice President, HealthMarkets, pointed out in his Entrepreneur article, SHOP was meant to help small business lower costs and stay competitive, "but it hasn't gained the momentum the ACA has."
The main issue was the enrollment delays because of technical difficulties. Plus, employers have complained that SHOP's tax credit system is difficult to navigate.
Related Article: 13 Genius Tax Write-Offs You Need to Take Advantage Of
Employees Want and Need Health Insurance Coverage
In conjunction with National Small Business Week, Lincoln Financial Group shared benefits-related survey results from companies with fewer than 100 employees.
Unsurprisingly, the study has found that "employees working for small businesses are generally offered fewer benefit options than those at larger organizations, underscoring the unique challenges small-business owners face when it comes to remaining competitive, attracting and retaining talent, and protecting their businesses."
Here are some more findings from the report, titled "Special Report: M.O.O.D. (Measuring Optimism, Outlook and Direction) of America on Employee Benefits." While the basic medical coverage is widely available in organizations of all sizes, the gap between small and big business widens when it comes to vision, dental, and other "add-ons":
- 96 percent of all employees and 89 percent of small-business employees indicated they are offered medical coverage
- 74 percent of employees at small businesses are offered dental insurance, compared with 91 percent of employees working in companies of all sizes
- 72 percent are offered a retirement plan, compared with 89 percent total
- 66 percent are offered vision insurance, compared with 84 percent total
- 62 percent are offered life insurance, compared with 81 percent total
- 52 percent are offered disability insurance, compared with 74 percent total
- 87 percent and 83 percent of small-business employees say it's important for their employer to offer dental and vision insurance, respectively
- Almost 70 percent of employees at small businesses say that workplace benefits have influenced their decision to join a company in the past
- More than 50 percent of small-business owners are between the ages of 50 and 85, "making business continuation strategies critical for owners, their partners and their families."
Related Article: Should You Buy In to a Company's Health Insurance Plan?
Designing and Managing Small Business Health Plans
In her Forbes article, Kelly Phillips Erb, points out: "The reality is that many small businesses still do provide health care for their employees, either out of a sense of responsibility or out of a desire to attract quality candidates (or both)."
You have other options, too, like allowing your employees to purchase individual coverage, to give them more choices, and to cut your own business expenses. Small business owners have many of the same choices the self-employed have, plus perks like tax credits. The money you spend on health coverage for your employees is tax-deductible.
Tax Credit and Tax-Deductible Health Insurance
Erb writes: "If it doesn't make good fiscal sense for you to provide health insurance coverage for your employees, or if the coverage you do provide is less than ideal, consider setting up an additional health benefits plan.
A Section 105 plan is named after the section of the Tax Code that allows tax-free reimbursements for expenses incurred for medical care."
One of the Obamacare perks is a tax credit for employers. As Erb explains, to be eligible, "an employer must contribute at least 50 percent of the total premium cost or 50 percent of a benchmark premium cost and coverage must be obtained through the SHOP Marketplace." Tax credits are also available retroactively all the way back to 2010, she notes.
How to Select a Health Insurance Plan for Employees
Here's what you should consider, to find the coverage you need, and to manage it after you've purchased it. To determine what you want, what your employees want, and what you can afford, ask yourself:
- Who will be covered by the plan? Is it just you? Your family? All of your employees and their dependents? This is important, because you may end up choosing a group plan or go with individual coverage. Ideally, the group plan would cater to everyone's various medical needs. Also, some employees may be already covered through family members and may choose to opt out of yours.
- How much can you afford? For group insurance, most states require that employer covers about 50 percent of the monthly premiums, so factor it in when you look at your bottom line.
- What do your employees want? Discuss with your employees their preferences: Would they rather pay higher deductibles, or higher monthly premiums? The federal privacy laws prevent you from asking about your employees' medical needs and pre-existing conditions, but they can still volunteer input on what's most important to them, whether it's low co-payments, low deductibles, low monthly payments, comprehensive coverage, choice of doctors, choice of facilities, and convenience.
Shopping Around for a Small Business Health Plan
When you're ready to choose a plan, get a quote and personalized advice, preferably from a licensed agent/broker. The resources section below offers a number of guides, software solutions, and providers. It will guide you through a world of health insurance options where there are a vast number of companies and a lot of confusion..
You can compare-shop online, if you're comfortable self-guiding, to get a quote that takes into consideration the size of your business and the rates in the area you live in. The quotes and recommendations are automated, so if you don’t trust the algorithm get a real person in customer support, or a broker.
Enrolling and Managing Your Plan
If you legally operate a business, you will be legible for the plan you've chosen automatically. Under the ACA, eligible employees cannot be declined for coverage regardless of pre-existing medical conditions, and those won't affect group health insurance rates.
Keep up with the changes in monthly premiums, dates for open enrollment, the most current list of employees covered, and stay educated on the federal law and tax changes. If your business grows considerably you may want to add more plans to choose from.
Related Article:Is Your Job Killing You? How to Stay Healthy at Work
Health Coverage Resources
Here's just a sample of top websites and insurance providers that would let you compare carriers, look at the plans available in your area, sample rates, and get a free quote, with emphasis on your small-business needs:
Health coverage guides and other resources for small businesses:
- Health Coverage Guide
- Small Business Employee Benefits and HR Blog
- Health Insurance for Entrepreneurs: A Buyer's Guide for Self-employed and Small Business Owners
- IRS Small Business and Self-Employed Tax Center
Below is a short list of top HR software that includes medical benefits and targets small and medium businesses (a longer list is available here):