Health insurance and the Affordable Care Act (ACA) can be difficult to navigate – especially for small businesses. We understand and want to help. Here are five important facts you should know.
1. Employee Benefits Offer Tax Advantages to You and Your Employees
You are most likely familiar with the fact that you can claim a business deduction for the wages you pay employees. However, you may not be aware that other benefits can also be deducted, like health insurance.
Plan contributions you make on behalf of employees for health insurance, life insurance, and pension plans are usually deductible. (Check with your accountant and tax advisor.) Beyond that, you may be able to get better personal health insurance through a group plan at a lower cost than an Individual & Family Plan (IFP).
You can also offer employees a Premium Only Plan that reduces your company’s payroll taxes, lowers your workers’ compensation premiums, and increases your employees’ income.
Because your employees’ share of eligible insurance premiums is paid with pre-tax dollars, and they have lower FICA, federal, and state taxes on their paychecks, employees have more take-home pay – which makes them happier and, often, more productive.
If your business employs fewer than 25 full-time equivalent employees, and you contribute at least 50 percent of the premium cost for health insurance for each employee, you may be eligible for a Small Business Health Care Tax Credit. You can learn more on the HealthCare.gov website.
2. The ACA Is Still the Law
While a federal judge declared in December 2018 that the ACA is unconstitutional, an appeal is underway and the case could extend into 2020. In the meantime, the federal employer mandate continues for Applicable Large Employers (ALEs). That’s businesses with 50 or more full-time or full-time equivalent employees.
The mandate requires ALEs to offer “affordable” health insurance that provides minimum value to 95% of full-time employees and their dependents, including children through age 25. Businesses that do not offer qualified coverage are subject to penalties.
For smaller employers (with fewer than 50 full-time/full-time equivalent employees), there’s no requirement to provide employees with health insurance. However, smaller employers may still want to consider coverage for several reasons, which we will discuss.
3. Benefits Area Recruitment Tool
Health insurance is among the most-requested employee benefits according to multiple surveys by Monster, Glassdoor, and the Society for Human Resource Management. (SHRM). Employers – both large and small – recognize the recruiting value of offering health insurance when it comes to attracting new employees.
SHRM research last year found most employers offering health coverage shared the cost with their employees (83%). Less than a half-percent of employers ask their employees to pay the full costs of health care, while 18 to 29 percent do ask employees to pay for spouse, domestic partner, and/or children’s coverage. Here’s a summary of SHRM’s cost-share analysis.
|Shared by the organization and employee||Fully paid by the organization||Fully paid by the employee|
|Opposite-sex domestic partners||72%||5%||23%|
|Same-sex domestic partners||71%||5%||24%|
*Working less than 30 hours per week
Note: Percentages do not total 100% due to multiple response options.
Source: SHRM 2018 Employee Benefits
4. Insurance Is Appreciated by Employees
A 2017 survey by the Employee Benefit Research Institute (EBRI) found employee satisfaction with an employer’s benefit offerings is strongly linked to overall job satisfaction. Eight in 10 workers who ranked their benefits satisfaction as extremely or very high ranked their job satisfaction as extremely or very high. Similarly, nearly two-thirds who ranked their benefits satisfaction as extremely or very high ranked their morale as excellent or very good.
A good benefits program not only helps attract new talent; it can also motivate employees to stay in their jobs longer. Reduced turnover saves employers both time and money.
It may also explain why SHRM’s 2018 report on employee benefits found nearly three-quarters of employers (72%) increased their benefits offerings in the prior 12 months in order to retain employees. Fifty-eight percent increased their benefits to attract new employees.
Employee health coverage can also reduce employee absenteeism because of improved employee health.
5. You Can Offer Benefits and Control Costs
Cost of coverage is the number one concern for most employers. However, there is a way to offer your employees the health insurance they want, while controlling your benefits budget. It’s called Defined Contribution.
With Defined Contribution, you can select a Fixed Percentage or a Fixed Dollar Amount toward the cost of coverage for all of your employees. If you choose a Fixed Percentage, you can choose from 50% to 100% of the cost of a specific health plan or benefit. If you choose a Fixed Dollar Amount, you select what amount you want to contribute to your employees’ health insurance premium.
If an employee selects a health plan that costs more than you contribute, the employee simply pays the difference. Employees have the freedom to choose the health plan that’s right for them, and you’re still able to lock-in your benefits budget. At renewal, you can adjust your contribution or continue the same contribution for another 12 months.
Get Help from an Expert
An employee benefits agent can help you research your options and find the right health plan to fit your employees’ needs and your budget. If you do not have an agent, you can search for one in your area by going here.
California employers who want to provide health insurance benefits to employees have several considerations:
- How much will employee health insurance cost me?
- Should I pay for all or part of the cost of coverage?
- Do I provide coverage to full-time employees only, or should I include part-time workers and dependents?
- Is it better to offer a single health plan or multiple options?
Before we tackle these questions, it is important to first look at where your business stands under the Affordable Care Act (ACA).
Current ACA Regulations
Providing health insurance to employees is required under the ACA for some businesses. The ACA’s Shared Responsibility Provision (sometimes called the employer mandate) says Applicable Large Employers (ALEs) must offer minimum essential coverage that is “affordable” and provides “minimum value” to full-time employees and their dependents. Otherwise, the employer is subject to ACA penalties.
An ALE is an employer with an average of at least 50 full-time employees or full-time-equivalent (FTE) employees working at least 30 hours weekly. For more information on determining your ALE status, visit the HealthCare.gov website.
If you do not have 50 full-time or FTE employees, you are not required to provide health insurance coverage to your workers. However, you may still choose to do so to compete more effectively with other employers in your area. Click here to download the 2018 Employee Benefits: The Evolution of Benefits report released by the Society of Human Resource Management (SHRM).
After determining if your business is subject to ACA requirements, the question lingers on what you can expect to pay for your employees’ health insurance benefits. Many factors influence costs, including the number of people you employ, their ages, and employees’ home ZIP Codes.
Employee Health Insurance Costs
According to an analysis by the Kaiser Family Foundation (KFF), the annual family premium average last year for all employer-sponsored health insurance plans was $19,616 ($1,635 per month) according to the benchmark KFF Employer Health Benefits Survey. Of that total, the average employer cost was about $14,069 ($1,172.42 per month) or 72%, with employees paying the rest. These amounts were up about five percent from the prior year.
Keep in mind, you are not required to pay such a large share of the costs for your employees. The KFF numbers are based on a national comparison. California’s health care market is very competitive, and you have the ability to pay less.
You Decide What You’ll Pay
If you choose coverage from CaliforniaChoice, you control the amount you want to spend on employees’ health benefits.
You can choose a Fixed Percentage of 50% to 100% of the cost for a specific plan and/or benefit, or you can choose a Fixed Dollar Amount for each employee. Your employees then apply your contribution toward the cost of whichever health plan they prefer. If an employee selects a plan that costs more than your contribution, he or she pays the difference.
Using the annual family premium average mentioned above, if you chose a 50% contribution to coverage, your cost could be $9,808 ($817.33 per employee per month). This is 30% less than the national employer contribution average. At renewal, you have the option to adjust your contribution up or down – giving you complete control over your benefits cost for another year.
Deciding Who to Cover
If yours is a small business with fewer than 50 employees, you may offer coverage only to your full-time employees, or extend it to both full- and part-time workers. If it’s in your budget, you also have the opportunity to cover other family members, such as a spouse and dependent children. It’s your choice.
If you’re an ALE (with 50+ employees), you must include dependent child coverage (through age 25) for children of full-time or full-time equivalent employees. Under the ACA, a dependent does not include a stepchild, foster child, or a child who is not a U.S. citizen, nor does it include a spouse. (For more information, refer to the Q&A on the Healthcare.gov website.)
Single Health Plan vs. Multiple Options
When deciding on whether to offer your employees a single health plan or one with multiple options, it’s important to recognize that each of your employees is different and so are their health care needs.
One employee may rarely visit the doctor and want a lower cost Exclusive Provider Organization (EPO) plan. Another may have a chronic health condition and want to continue to see a specialist who is part of a Preferred Provider Organization (PPO) plan. A third employee who selects a High Deductible Health Plan (HDHP) may want to choose a HSA-qualified plan, which offers tax-advantaged medical savings for qualifying expenses before reaching the plan deductible. CaliforniaChoice gives them the ability to match their needs and preferences to the right health plan.
Changes Coming to California
On his first day in office, California Governor Gavin Newsom announced he would like to see California adopt an individual health insurance mandate. The ACA individual mandate penalty was reduced to zero in 2018, so individuals are no longer required to have health insurance or face a financial penalty in connection with their federal tax return. The effective date for any new state mandate is not known at this time, although it’s likely the state legislature would support such an idea. This is something to consider as you contemplate sponsoring health coverage for your employees.
Get Your Own Custom Quote
While it’s beneficial to know the average cost of small business health insurance, a detailed quote with numbers specific to your business will provide you with further insight into the plan that’s right for you. Your employee benefits agent can walk you through your options and provide you with a custom quote based on your budget and employee needs. If you are not currently working with an agent, you can search here for one in your area.
Whether you are considering health insurance for your employees for the first time, or planning to renew, rates are an important factor in the decision-making process. Here’s a look at what industry experts are forecasting for Small Group health insurance rates in 2019.
Annual Premiums on the Rise
In the fourth quarter of last year, CBS MoneyWatch reported employees should expect to see more of the same when it comes to health insurance in 2019 – more cost sharing in the form of increased premiums and higher deductibles. The Kaiser Family Foundation said in its 2018 Health Benefits Survey that annual family premiums rose for the eighth straight year. Since 2008, average family premiums have jumped 55 percent. That’s twice as fast as employees’ earnings and three times the rate of inflation.
More than a quarter of employees with employer-sponsored coverage have a plan with a deductible of $2,000 or more, up from 22 percent in 2017 and 15 percent in 2013. For companies with fewer than 200 employees, 42 percent have a $2,000 (or higher) annual plan deductible.
California Rates Also Increasing
California’s public health insurance exchange, Covered California, announced in the run-up to the individual 2019 Affordable Care Act (ACA) enrollment period that rates for 2019 increased an average of 8.7 percent statewide. In most parts of Southern California, the increase is nine percent, although Monterey, San Benito, and Santa Cruz counties face the highest increases: 16 percent on average. That compares to a 12.5 average increase statewide in 2018 and greater increases in other parts of the country – both for 2018 and this year.
What Does This Mean for You?
Your employees’ health insurance costs are influenced by a variety of factors:
- The number of employees at your business
- Whether dependent coverage is offered (and whether you pay for it or share the costs with your employees)
- Your plan design(s) – HMO, PPO, EPO, etc.
- Your selected ACA metal tier(s) – Bronze, Silver, Gold, or Platinum (or a combination)
- Employee and dependent ages
- Employees’ home ZIP Codes
The best way to control your costs is by choosing coverage that offers Defined Contribution, which allows you to choose the amount you want to contribute to your employees’ health insurance costs. You can select a Fixed Percentage (50% to 100%) of a specific plan and/or benefit, or you can choose a Fixed Dollar Amount for each employee. Each employee must receive the same amount.
From there, your employees apply your contribution to whichever health plan and benefits they prefer. If an employee selects a plan that costs more than your contribution, he or she simply pays the difference.
Other Money-Saving Tips
In the past, employers looking to reduce costs could raise employee deductibles or offer less-generous plans. However, for 2019, less than half are planning to make similar changes. In today’s talent marketplace, businesses need to offer competitive benefits packages in order to attract and keep their best employees.
As reported by the Society for Human Resources Management (SHRM), a Mercer study found more organizations are open to adopting new technology to manage medical expenses. One common strategy includes targeting specific health problems like diabetes with coaching and interactive glucose monitoring devices that transmit health data directly to a health care provider. Other strategies include tools to help employees match their health plan to their specific health needs, and using predictive analysis to identify opportunities to improve health plan performance.
A Health Savings Account (HSA) can also help employees with a High Deductible Health Plan. Funds in the HSA can go toward co-pays, co-insurance, and other out-of-pocket amounts. In 2019, the HSA limit is $3,500 for an individual and $7,000 for a family with a qualifying health plan (with a deductible of at least $1,350 for an individual or $2,700 for a family). There is no time limit on the use of HSA funds and they grow tax-free until withdrawn for eligible expenses, even if that’s during retirement.
More employers with fewer than 50 employees are now offering a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), which was created by Congress in 2016 as part of the 21st Century Cures Act. A QSEHRA allows employers to offer a monthly tax-free allowance to employees to purchase individual health insurance or use for qualified medical expenses. Go here to read an Accounting Today article concerning QSEHRAs.
Get Help from an Expert
As you navigate the complexities of your employees’ health insurance, it helps to speak with an expert. An employee benefits agent can provide critical information on how to manage your expenses. Click here to connect with an agent in your area.
CaliforniaChoice offers several distinct advantages to both employers and employees in California. When compared to health coverage from a single health insurer, CaliforniaChoice makes it easier for employers to control their costs, while still giving employees more health care choices. Add in the access to our Smart Decision Technology tools, which help employees find the right plan, discounts from Cal Perks and other programs, and the new no late fee policy, and it is easy to see why small businesses across the state are choosing CaliforniaChoice.
Let’s look at each of these – and how they make CaliforniaChoice a good choice for you and your employees.
Employer Cost Control
With CaliforniaChoice, your insurance carrier does not dictate your cost – you do. You determine the amount you want to spend on employees’ health benefits. You can contribute a Fixed Percentage of 50% to 100% of the cost for a specific plan and/or benefit, or you can choose a Fixed Dollar Amount for each employee.
Your contribution applies toward the cost of whichever health plan and benefits your employees prefer. If an employee selects a plan that costs more than your contribution, he or she pays the difference. When you renew your coverage, you have the option to adjust your contribution up or down – giving you complete control over your benefits cost for another year.
Greater Employee Choice
With CaliforniaChoice, you and your employees choose from eight outstanding health plans across the state:
- Anthem Blue Cross
- Health Net
- Kaiser Permanente
- Oscar Health
- Sharp Health Plan
- Sutter Health Plus
- Western Health Advantage
There are dozens of coverage choices available, including HMOs (Health Maintenance Organizations), PPOs (Preferred Provider Organizations), EPOs (Exclusive Provider Organizations), HSAs (Health Savings Account-qualified plans), and more.
Because we deliver access to so many health plans, we offer employees more doctors, specialists, and hospitals than any health program in the state. Another advantage is the variety of price points employees have when weighing their options.
You have the flexibility to give your employees coverage in a single metal tier, two metal tiers, or three metal tiers. The more metal tiers you select, the more price points from which your employees have to choose.
Smart Decision Technology
CaliforniaChoice makes it easier to find the right health care solution. We provide tools to help compare coverage and ensure the doctors and specialists you and your employees want are part of the plans you’re considering.
- Automated Choice Profiler: compare plans based on your current or anticipated health needs, including how often you visit the doctor, out-of-pocket costs, etc.
- Online Provider Search: find the doctors you want – and confirm they’re part of the provider network for your preferred plan
- Online Rx Search: see if the prescriptions you take are part of the plan you want before making your selection
- Online Enrollment: eliminates incomplete applications from employees and reduces your group’s overall processing time
Cal Perks Savings and Other Services
Beyond great health care, CaliforniaChoice includes valuable extras for you and your employees. The Cal Perks program is free and offers savings on movies, theme parks, hotels, and more. You can save on prescriptions, too, with the California Rx Card, which delivers discounts of up to 75% at 68,000 pharmacies nationwide – often reducing your cost to less than your Rx co-pay. The Business Solutions Suite includes savings on Vision, Dental, and Hearing services as well as COBRA billing services and no-cost setup for a Premium Only Plan.
Consolidated Billing – and No Late Fees
Whether you have a single employee or 100, you get a consolidated monthly bill for all of employees, regardless of which health plan and benefit type they select. If your payment is mailed late, don’t worry. CaliforniaChoice no longer charges a late fee. However, the company does give you the ability to manage your account easily online, including the option to sign up for Auto Pay.
Consult an Agent to Learn More
If you are interested in learning more about the advantages of CaliforniaChoice, or if you want to get a quote for your business, contact your employee benefits agent. If you do not already have an agent, we can help you find one.