If you’re a small business owner or manager and you would like to find out what it might cost you to provide employees with Medical and/or other insurance, we’re here to help. We’ve developed a useful guide for employers about how to set an insurance benefits program for your employees.
Setting Up Group Health for Your Business
1: Getting Started
The first thing you need to consider is how you want to shop for and compare plans. Do you want to do it on your own? Do you want to buy coverage through the Small Business Health Options Program (SHOP) created by the Affordable Care Act (ACA)? In California, that would mean going to the Covered California public exchange. Have you thought about purchasing insurance directly from an insurance company? Or do you want to work with a broker?
You might think that shopping for benefits directly with an insurance company will save you money. However, that is not necessarily the case. Using a broker is often a better choice. Engaging a health insurance broker offers several advantages to employers.
- Market knowledge/expertise: If you’re like many business owners and managers, you have enough things to be concerned with running your business. You are probably not an insurance expert, nor do you have any interest in becoming one. Reaching out to a local licensed insurance professional is often a good idea. Your broker will know your market, the companies that offer coverage in your area, and the health care providers that are part of each health plan’s network.
- Impartial advice: Your broker is committed to working with your best interests in mind – and delivering unbiased information. Using a broker, you’re able to narrow your options more quickly and find the product or program that is a better fit for you, your business, your employees, and your budget.
- Accurate policy comparisons: Researching and comparing plans is essential. But do you really know what to focus on? Using a broker ensures you get the right plan to match your needs – and those of your employees – at the most competitive price.
- Personal service: Not every plan type (HMO, PPO, etc.) is right for every business. A broker can help you sort things out. Plus, your broker may be able to identify opportunities for reducing your risks and increasing options for employees – without increasing your costs. Your broker will also know of any special promotions offered by insurers. That could include an underwriting promo or other limited time offer.
Using a broker doesn’t cost you more (than buying insurance directly). In fact, it could save you both time and money.
2: Things to Consider
What plans are available?
In today’s talent marketplace, rarely will one health plan work for you and all of your employees. Benefits are not like clothing. It’s not a “one size fits all” world. Employees are individuals and each has unique needs. That is especially true if you have workers from different generations. You want to be sure you have a variety of options from which you and each of your employees can choose.
Do you plan to offer HMO coverage? PPO options? A Health Savings Account that works with a High-Deductible Health Plan? Or will you offer employees a roster of choices (with a mix of plans)? Having more choices is preferred by most employees. However, your options may be limited if you choose a single insurance carrier.
Some carriers focus on HMO plans. Others on PPOs. If you choose the Covered California exchange, you could have access to three insurers, depending on where your employees live. One option is Sharp Health Plan, which operates only in the San Diego area. The other two Covered California options are Blue Shield of California and Kaiser Permanente.
If you choose a private health exchange, like CaliforniaChoice from CHOICE Administration, you may be able to offer coverage from as many as seven insurers – with dozens of plan options including HMOs, PPOs, and HSAs.
With CaliforniaChoice, you or one of your employees might select a PPO plan from Anthem Blue Cross because of a particular doctor or hospital in the provider network. Another employee who rarely visits the doctor might choose an HMO from Kaiser Permanente, Health Net, or UnitedHealthcare. A third employee might select an HSA-compatible plan. Whatever you and your employees’ needs may be, it’s your choice.
You also get to choose whether employees have access to one, two, three, or four ACA metal tiers. Each tier offers a different percentage of shared costs for employees. This can significantly increase the number of plans, doctors, and specialists available.
What’s best for your group?
That can depend on many things. Those include the ages of your employees, whether you offer coverage for dependents, where employees live, and other variables. It can also be influenced by your budget and how you share the cost of coverage with your workforce.
You may want to offer employees other benefits, too. Some carriers or programs include access to other benefits. For example, the CaliforniaChoice program includes options for Dental, Vision, Chiropractic, Acupuncture, and Life and Accidental Death and Dismemberment benefits.
3: The Potential Effect of the ACA Mandate
The ACA employer mandate (also known as the employer shared responsibility provisions) requires Applicable Large Employers (ALEs) to offer affordable, minimum value health insurance to at least 95% of full-time employers.
Your ALE status is determined annually based on the number of full-time workers that you had during the prior calendar year. If you had fewer than 50 full-time workers, including full-time equivalent employees, you are not an ALE and are not subject to the employer mandate. For more information, visit the IRS web page to determine your ALE status.
If you are an ALE and you fail to follow the ACA mandate, your business could face penalties. KFF, formerly the Kaiser Family Foundation, published an infographic on ACA penalties in 2024. For information on decreased employer mandate penalties in 2025, read PeopleKeep’s blog.
4: Tax Benefits of Offering Benefits
If you contribute to the premiums for your employees and/or their dependents, you can deduct those costs. For most businesses, those premium contributions are 100% deductible as an ordinary business expense. You can deduct them from your federal income taxes as well as state income taxes.
You may also be eligible for a deduction if you are in a business partnership, part of a Limited Liability Company (LLC), or a shareholder with two percent or more of stock in an S corporation. Ask your tax advisor for details.
If you fund a Health Savings Account (HSA) for your employees, those contributions are typically tax deductible, too. Annual contributions are set by the IRS. For 2025, HSA contributions are limited to $4,300 for self-only health insurance coverage. The family coverage contribution limit is $8,500. For those ages 55 and older; an additional $1,000 is permitted as a catch-up contribution.
5: Searching for a Broker
If you don’t already have an employee benefits broker, CaliforniaChoice makes it easy to search for one online. Just visit the “Find a Broker” page of MyCalChoice.com. Click on the “Get Started” button and fill in your business information. It’s that simple.
An Important Advisory
Federal and state tax laws are complex and subject to change. We strongly recommend that you consult with a tax professional concerning your specific tax situation. CHOICE Administrators is neither a tax expert nor a financial advisor.
