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 | |
| Full-time employees | 83% | 16% | 0% |
| Part-time employees* | 83% | 9% | 8% |
| Opposite-sex spouses | 77% | 5% | 18% |
| Same-sex spouses | 77% | 5% | 18% |
| Opposite-sex domestic partners | 72% | 5% | 23% |
| Same-sex domestic partners | 71% | 5% | 24% |
| Dependent children | 77% | 5% | 18% |
| Foster children | 74% | 5% | 22% |
| Nondependent children | 68% | 3% | 29% |
| Dependent grandchildren | 72% | 5% | 23% |
*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.
