Ask people what they want from a job and most will mention healthcare coverage. In fact, almost 40 percent of Americans consider it the most important benefit an employer offers. Our health affects every aspect of our lives, so it’s not a surprise that people consider an employer’s healthcare plan when considering their job options.
As a small business owner, you want to attract and maintain the best employees you can. A good way to do that is to offer healthcare as part of your overall benefits package.
The truth is, there are many variables that affect the cost of healthcare. Let’s take a look at some common expenses to give you an idea of what healthcare would cost the average business owner.
Healthcare Rules for Small Businesses
If your business has less than 50 employees, offering health insurance is optional in most states, except Hawaii.
If your business has 50 or more full-time employees (FTE), the Affordable Care Act (ACA) requires you to offer health insurance to your employees, and you have to provide proof to the IRS every year.
Businesses with 50 or more FTEs are also known as applicable large employers (ALE). ALEs can choose to offer affordable minimum essential coverage that provides minimum value to its FTEs (and their dependents) or potentially pay a penalty, called an employer shared responsibility payment, between $2,000 and $3,000 per employee when tax time rolls around. Refer to the Types of Employer Payments and How They Are Calculated page on the IRS website for more information.
Small Business Health Insurance Costs
The most expensive part of offering health insurance are the premiums that you and your employees have to pay. However, there are other expenses many forget about, such as, software to manage benefits in-house, or paying an outside company to do the heavy lifting, employee education, and other administrative work.
Here are some expenses to be aware of when offering health insurance:
In 2018, the Kaiser Family Foundation found that an average employer-sponsored health plan cost about $6,896 for single coverage and right at $19, 616 for family coverage. Employers contributed, on average, about 82% ($5,655) for individual coverage and about 71 percent ($13,927) for family coverage.
HR Software (workforce management software)
If you choose to use software and manage health benefits in-house, you’ll be looking at anywhere between $3 and $15 per employee each month to keep track of your employee’s benefits.
Ensuring your employees know how to utilize their health benefits is vital to keeping costs down in the long run. However, this is an added expense to make sure you factor in. Some healthcare providers will train your employees for no cost, while others may charge up to $500 for daily training sessions. Most times, you’ll have an option to provide training yourself.
As you can see, several factors combine to arrive at the end price for each small business.
Cost is Determined by the Type of Health Benefits You Provide
Many variables affect healthcare costs. From the type of plans you offer to the size of your employee’s families.
Also, if you decide to offer benefits such as Health Savings Accounts (HSA), Flexible Spending Accounts (FSA) or Health Reimbursement Arrangements (HRA), there may be additional criteria to meet. For example, to offer an HSA, your employees must be enrolled in a qualifying High Deductible Health Plan (HDHP).
It’s important to remember that premium prices vary greatly from state to state.
Remember that your cost is also affected by the percentage you choose or are required under the ACA, to contribute to employee premiums. Once you choose your provider and coverage types, you can get a solid number on what your cost will be.
Securing health insurance for your small business may seem daunting. To keep employee morale high and attract the best talent to keep you moving forward, a strong healthcare package will benefit you over time. It’s worth the effort!
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.