How to Plan for Healthcare as a Small Business Owner
3 min read •
30 sec brief
While it's not required to provide your employees with health insurance as a small business, knowing what you can provide can be beneficial. We break down how you can research the right health plans for your small business.
As a small business owner, finding affordable healthcare is probably high on the list of company concerns. On top of your own family's plan, you may have employees that want to be covered by company insurance. Companies with fewer than 30 employees pay an average of $409 per person for insurance premiums, according to a 2018 eHealth report. Still, over half of small businesses offer a group health insurance plan to try and attract and retain the best employees. Here are some things to consider before choosing your company's health care plan.
How much health insurance actually costs
You may be reeling from the sticker shock of health insurance premiums, but these premiums aren't the complete picture of how much health insurance will cost your business. The first thing to consider is cost-sharing. Are you planning to split the cost of insurance premiums with your employees? Forty percent of companies share the cost equally, according to eHealth.
Also, your company may qualify for small business tax credits. The Small Business Health Care Tax Credit may cover up to 50% of your employees' health insurance premiums. You may qualify if you have fewer than 25 full-time employees with an average salary of $50,000 or less.
You should also explore small business tax deductions. Your employees’ health insurance premiums are considered a deductible business expense. You can also deduct the contributions you make to your employees' health savings accounts (HSAs)—which can help them offset qualified out-of-pocket costs.
Even if you don’t provide a group health insurance plan, you may still offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)—a.k.a. a small business health reimbursement account. These plans allow you to help employees pay for their health care costs, including monthly insurance premiums. You can learn more about QSEHRAs here.
Where to shop for health insurance plans
When it comes to health insurance plans, small business owners have several options. If you prefer to do it yourself, you can start by calling a bunch of health insurance companies directly for quotes. This may be the most difficult and time-consuming option.
You may also shop for plans through the Small Business Health Options Program (SHOP), the government’s online exchange for small businesses. You can use the website to compare plans and prices, estimate how many full-time employees you have, and review tax credit information.
If you're looking for some extra guidance, SHOP offers a tool to connect with local insurance agents, brokers, and assistors by plugging in your zip code. Another way to narrow down your options is through trade or professional organizations. Depending on your industry—and your professional affiliations—you may have access to discounted group health insurance plans. You may have a lot more leverage with other small businesses than you would on your own.
Be proactive with health insurance
It may feel overwhelming to choose the right health insurance plan. After all, your decision may impact your family, employees, and prospective employees for years to come. But the sooner you begin, the more time you will have to compare plans, and the less confusing the selection process may be.
About the author
Kate Dore is a Nashville-based freelance personal finance writer and Candidate for Certified Financial Planner™ Certification. She teaches financial literacy with Junior Achievement and serves as Director of Public Relations for the Financial Planning Association of Middle Tennessee. Her work has been published in Business Insider, Financial Planning Magazine, and Simple Money Magazine.
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