doctor speaking with patient
With more employees wanting health insurance to be included in compensation packages, small business owners are faced with challenges — from compliance to financial restrictions. — Getty Images/SARINYAPINNGAM

In 2019, healthcare costs are expected to average $14,800 per employee. This includes premiums and all out-of-pocket costs. Many large companies will cover up to 70% of employee healthcare costs, but this can be unsustainable for most small businesses.

But forgoing employee health insurance altogether is a losing strategy since, overwhelmingly, employees want health insurance benefits. This could make it hard for your business to retain qualified employees in the long term.

Small business health insurance is a complex topic and you’ll want to ensure you are finding a solution that meets the needs of your business and your employees. Here are three things you need to know about small business health insurance in 2019.

It’ll be harder for small businesses to access Association Health Plans

Association Health Plans allow several small businesses and self-employed individuals to obtain healthcare coverage together, as though they were one large employer. This gives small businesses greater negotiating power and allows them to find less expensive options.

In June 2018, the Department of Labor eased the definition of “employer” under Section 3(5) of the ERISA. This made it easier for many small businesses to get Association Health Plans and sidestep many of the regulations imposed by the ACA.

However, in March 2019, a federal judge struck down this ruling. More than ten states had already challenged the ruling, saying it let employers evade important consumer protections.

The Department of Labor can appeal the ruling, so it’s unclear exactly what will happen going forward. However, it will likely be much more difficult for many small businesses to access these types of plans in 2019.

Most employers are confused about ACA compliance

The ACA has been around for a while now but a recent study showed that many employers are still confused about compliance requirements.

Here are some of the main findings of the study:

  • 90% of employers don’t know how long they have to respond to an IRS penalty notice.
  • Many employers struggle to collect data on employee healthcare benefits.
  • Most employers are skeptical about how long the ACA will last and how rigorously it will be enforced.

The ACA’s requirements still apply and the IRS will begin mailing Letter 226-J penalty notices to employers that do not comply with the ACA’s employer mandate. Employers who fail to educate themselves on their reporting duties are at risk for fines and penalties.

You may qualify for the Small Business Health Care Tax Credit

The ACA can be a touchy subject for many small business owners. However, one of the benefits is that the ACA offers a small business health care tax credit to certain small businesses.

Employers are credited for 50% of all employer-paid premiums and non-profit employers can receive a 35% credit. However, there are three guidelines you must meet to qualify for the tax credit:

  • Your business must have fewer than 25 full-time employees.
  • The annuals wages paid to employees must be less than $54,200, which is a $1,000 increase from 2018.
  • Health insurance premiums must be paid through a “qualifying arrangement.”

To obtain the credit, you’ll have to choose a qualified health plan from the SHOP marketplace first, and employers can only claim this credit for two consecutive years.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Published May 06, 2019