Unlike businesses with 50 or more employees, the Affordable Care Act does not require small businesses to offer health insurance to their employees. Still, you might consider adding a health benefits package to keep your employees happy, healthy, and dedicated to their jobs.
Here are five questions you should ask to determine if health benefits are right for your business:
Do your employees need health coverage?
Before you start looking too much into providing coverage, you should ask your employees outright if they’re interested in employer-provided coverage. While it’s true that the law now requires everybody in the U.S. to have health insurance (with a few exceptions), your employees may have found coverage elsewhere that they’re happy with. They may have bought an individual policy through healthcare.gov, for example, or added themselves to a spouse’s plan.
On the other hand, your employees could be uninsured or disappointed by their current plan. Talk with them and find out if they’d be interested in getting health benefits through work.
How much can you afford to spend on health insurance?
With employer-provided health coverage, the costs are usually split between the business and employees. As a business owner, you can pay anywhere from zero to 100 percent of your employee’s premiums.
However, it’s generally expected for the employer to pay at least 50 percent. The average cost of a group health plan was about $6,000 in 2014, according to a Kaiser Family Foundation study. This means you’d be paying at least $3,000 per employee.
If you purchase health insurance through the Affordable Care Act small business exchange, however, the costs are significantly lower. The average costs are closer to $4,000 per employee according to Fit Small Business, making your tab come out to $2,000.
Will you be boxing employees out from subsidies?
If your employees purchase health insurance themselves through healthcare.gov, they can apply for a subsidy on their health insurance costs. To qualify, they have to earn below 400 percent of the poverty level, which is $46,680 in 2014, (or $95,400 for a family of four). This subsidy can be a huge help. Fit Small Business found that a family of four with a household income of $50,000 can save up to 60 percent on their premiums.
The kicker is that if an employee has coverage available from their employer, then they are automatically disqualified from receiving a subsidy. Even if they turn employer coverage down, the fact that it’s available means they can’t receive a subsidy.
Before purchasing a group plan, you should figure out out how many of your employees qualify for subsidies and how much they could save. If the majority of your employees qualify, you probably don’t want to offer a group plan that will box them out.
Will a one-size-fits-all plan work for your employees?
Are your employees diverse in age? Do any of them receive treatment regularly, or are they anticipating childbirth or any other major medical procedures? These are all factors that will affect the type of health plan they need.
Employees with a chronic condition, for example, would probably prefer a health plan that covers more of their expenses even if they have to pay a higher premium each month. Employees that are healthy and do not anticipate lots of treatment, on the other hand, would probably be okay with paying more out-of-pocket in exchange for a lower monthly premium.
If you’re purchasing a single group plan for your workers, then you have to take all of this into consideration. If your employees all want different things, it might not be worth buying a group plan. Or, you might be interested in buying a group plan where employees can choose from a range of policies.
Could your employees handle purchasing health insurance on their own?
As you can probably now see, there’s a lot of potential advantages to employees purchasing health insurance on their own. They get to choose a plan that works best for them and can apply for a subsidy that could cut a significant chunk of the costs. If this is something that interests your employees, you might prefer to give them a stipend, rather than offer a group plan, so they can buy insurance on their own.
Does your business offer health insurance to employees? What impacted your decision? Let us know in the comments.
Marc Prosser is the publisher and co-founder of Fit Small Business, a "how to" publication for small business owners. Prior to starting Fit Small Business, Marc Prosser served as the Chief Marketing Officer of FXCM (NYSE:FXCM). During his eleven year tenure as CMO, the company grew from under 10 people to over 500 employees located throughout the globe.
