Doctor talking to patient
From affordable options to tax breaks, offering health insurance to your small business's employees does not need to break the bank. — Getty Images/wutwhanfoto

The benefits you offer your employees have a big impact on your ability to attract and keep talent. Health insurance can be a major part of your compensation package. It can also be complicated and difficult to navigate. Employer-provided health insurance is a complex and constantly changing subject. To help you find the right health insurance plan for your employees, we’ve got answers to five of the most commonly asked health insurance questions.

1. Are small businesses required to offer employees health insurance?

The Affordable Care Act (ACA) dictates which employers must offer employees health insurance. If you have fewer than 50 “full time equivalent,” or FTE, employees you are not required to offer employee-sponsored health insurance.

So, what is an FTE, and how do you count them? If you have both full- and part-time employees, determining your actual FTE number will require a little math. Fortunately, there’s a calculator for that. Keep in mind, while part-time employees figure into the equation, providing insurance to them is not a requirement, even if you offer it to full-timers.

2. Where can I get affordable small business health insurance?

The ACA defines affordable insurance as a job-based plan of which the employee’s share costs less than 9.56% of his or her household income. Where does an employer buy this insurance? Start at Healthcare.gov. If your FTE calculation came to less than 50, you can shop for affordable health insurance on the federal government marketplace called SHOP (Small Business Health Options Program). Once there, you can consider plans from the bronze, silver, gold or platinum benefit levels.

You must meet requirements to purchase through SHOP, the big one being your obligation to offer coverage to all full-time employees. Once you determine your eligibility, you can obtain cost estimates on the various plans available and an understanding of how premiums are decided. If your state has its own marketplace (eleven states and the District of Columbia do) the federal website will direct you there.

If all of this shopping is exhausting, you might consider a personal shopper. There are SHOP registered agents and brokers qualified to help you navigate the marketplace.

If providing traditional employee health insurance is going to break the bank, you can still provide a benefit to help your employees get insured.

3. Are tax credits available to pay for employee health insurance?

The goal of the ACA is to insure more people. Part of that effort is tax assistance aimed at encouraging small businesses to get employees covered. Employers with fewer than 25 workers may be eligible for a tax credit of up to 50% of their premiums. The excess cost not covered by the credit is a legitimate business deduction. If a business doesn’t owe any tax for a year, it can carry the credit over. There are requirements, of course, but determining eligibility is quick and you can estimate your savings with HealthCare.Gov’s tax credit calculator.

4. What if a small business can’t afford employee health insurance?

If providing traditional employee health insurance is going to break the bank, you can still provide a benefit to help your employees get insured. A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) allows employers who don’t offer group coverage help their employees pay for minimum essential coverage and other health care expenses. This is a 100% employer-funded option. You give your employees money which they use to pay for insurance they get elsewhere. They can shop on HealthCare.Gov (where they might be eligible for a Premium Tax Credit).

Be aware, QSEHRA payments are paid tax free — which means there are rules and regulations, including reporting requirements and administrative work for the employer. Still, if you’ve made a business decision to not offer health insurance, a QSEHRA might be an option.

Note that, for companies with more than 50 employees, this option does not mean you are meeting the government requirement of providing health care insurance.

5. How does a small business actually purchase employee health insurance?

While HealthCare.gov is a great resource, you cannot purchase insurance there. For a SHOP plan, you must go through a broker (who represents the buyer) or an agent (who represents one or more insurance companies).

The fact that you can’t purchase directly from the marketplace is not necessarily bad news. An insurance professional can help you make the decisions required to put an insurance plan in place. Will you offer dental as well as medical? How much of the cost will you cover? How long will the waiting period for new employees be?

In addition to guiding you through these and other choices, you can call on an agent or broker to also educate your employees about their insurance coverage, allowing you more time to spend running your business.

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 April 10, 2019