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.