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Betsy Wise
By: betsy_wise
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Small Business Health Insurance: What You Need to Know

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Some business decisions are easier to make than others. Small business health insurance tends to fall into a gray area because many business owners don’t know how it works. Accordingly, you may be unaware of how to purchase health insurance, the costs you’ll pay, and the risks for not having a business health policy to cover your employees.

So, get ready to find out answers to your questions about small business health insurance. When you finish reading this article, you’ll have sufficient information to decide whether you should get health insurance sooner or later. 

What is small business health insurance?

It’s a single policy issued to a business providing medical coverage for the business owner and full-time employees. Policies are issued regardless of the employees’ health status. Employers may offer to pay the entire premium on behalf of the employee or a portion of it. 

Dependents such as spouses and children are usually eligible for coverage under the group plan. 

Owners can even decide to offer health coverage to part-time employees. However, if they offer coverage to one part-time person, they must offer insurance to all part-time employees. 

When is a small business required to have health insurance?

Under the Affordable Care Act, any business that employs 50 or more full-time employees (30 hours per week or 130 hours per month) is required to offer health insurance. If you don’t offer coverage, your business can be penalized. 

You can also pay penalties if the coverage you choose doesn’t pay at least 60% of covered health care expenses or premiums aren’t affordable.

 For more information about small business health insurance, review this information at HealthCare.gov.

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What are your health insurance options?

The risks of not having health insurance

Undeniably, making this decision seems tough; however, knowing the risks involved sheds light on why having small business health insurance is a good idea. 

  • Giving up tax credits

When purchasing a group health insurance policy, you may qualify for credits of up to 50% of what you pay toward employees’ premiums. The Small Business Health Care Tax Credit has a few requirements. As a side note, smaller companies with 10 or fewer employees who average $25,000 in annual wages receive bigger credits than larger companies.

  • Giving up tax deductions

One of the common tax deductions for businesses is paying health insurance premiums for employees. This type of legitimate business expense reduces taxable income thereby decreasing the total amount of federal income tax you owe.

  • Paying stiff penalties

As noted above, businesses pay penalties when not having small business health insurance for 50 or more full-time employees.

For example, if you had 100 full-time employees and failed to offer small business health coverage, you would pay a $2,320 penalty for each employee (minus the first 30 employees). Keep in mind, the total penalty of $2,320 is divided by 12 and applied for each month you don’t offer health insurance. In this example, If you didn’t offer health insurance for 12 months, your total penalty would be $162,400.

  • Putting your business at risk

Being a business owner without having medical insurance is never a good idea. You could jeopardize your business’s future when bills pile up and you have no way to pay them. Medical Insurance covers the majority of expenses so whatever isn’t covered is manageable.

  • Contributing to unhappy employees

When you don’t offer health insurance, you send a message that you don’t care about your employees’ emotional, financial, and physical welfare. Remember, happy employees work harder, stay longer, and contribute to the success of your business. Furthermore, employees who pay for their share of premiums with pre-tax money have more available cash to spend.

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How to get health insurance for small businesses

You can contact a local agent who sells group health insurance policies or popular online providers like Humana, Blue Cross/Blue Shield, Aetna, and others. 

Your employees’ health needs and your business’s budget will help guide you as to which policy to choose. You may want to offer small business health insurance with lower premiums and higher deductibles when you have healthy employees and vice versa when a majority of employees have health issues. 

Some types of policies may include HMO (health maintenance organization, PPO (preferred provider organization), and POS (point of service) plans that have different copays and coinsurance payments.

After determining the type of policy you need, there are flexible buying options from which to choose.

  • You can purchase insurance through SHOP (Small Business Health Options Program). Both health and dental insurance are available and you can choose to let your employees pick from one or multiple plans. 
  • There are plans available that offer tax advantages like Health Savings Accounts, Health Flexible Spending Arrangements, and Health Reimbursement Arrangements.
  • The U.S. Department of Labor offers association health plans so businesses can band together by industry and locality to provide the best health care coverage for businesses and employees. 
  • You may want to consider offering short-term health care insurance to individuals transitioning from one type of coverage to another. Employees would need this type of coverage when waiting for your business’s group coverage to start or when a dependent no longer qualifies for their parents’ plan. You would not qualify for tax credits for short-term insurance but you could deduct any expenses you pay on behalf of an employee.

How much does business health insurance cost?

In a 2018 eHealth study, the report showed that the average small group health insurance plan costs $409 per month for each person with deductibles of $3,140 per year. Compare those numbers to individual plans with an average cost of $440 per month and a $4,578 annual deductible. 

Small business health insurance is usually more economical because the costs are spread out within the group. With more money coming in to pay premiums, insurance companies have more funds to cover health care expenses.

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Be that as it may, other factors influence how much a business and employees pay for health insurance. For example, employers can offer policies that cover certain diseases and potential injuries related to hazardous industries which may cost more. Moreover, adding dependent coverage increases costs whether the business owner pays for their coverage or the employees. 

Other costs include HR software to track which employees are enrolled in your group health insurance plan and having a secure filing system. 

Just so you know, HIPAA (Health Insurance Portability and Accountability Act) requires that you keep employees’ medical information private.

What other types of insurance does a small business need?

Camino Financial is ready to help

Whether you’re purchasing small business health insurance or needing more information about small business loans, Camino Financial is here to help you make good choices. We do that by providing cutting-edge information to help your business grow.

We encourage you to subscribe to the Camino Financial Newsletter to receive more management tips and ideas and become a member of our growing community. Our newsletter is one of many ways we stand behind our motto, “No Business Left Behind” to ensure that every business has a chance to succeed.

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