Health Insurance Considerations for Small Businesses

Many small business owners want to do right by their employees and offer health insurance, but deciding which benefits to offer employees and what form to offer them in can be a challenge. As a business owner, you have two general options available to assist your employees with health insurance: individual policies or a group policy.

Allowing your employees to find individual policies could be the most economical option for both your business and employees. For 2022, the ACA (Affordable Care Act) marketplace provides tax subsidies which allow many low-earning Americans, and those with families, free or very inexpensive health insurance. Additionally, there are off-market / private plans available in many states which offer national PPO’s to qualified individuals at rates well below their counterpart ACA plans. For these individual policies, an employer has flexibility to determine a contribution amount for each employee. Deciding on the best individual plan could be confusing for your employees, so having a small business specialist on hand to walk them through their choices is crucial to this option’s success.

Your other option is providing health insurance through a group plan. The ACA provides small businesses with options for providing health insurance, which includes SHOP plans (Small Business Health Options Program) and HRAs (Health Reimbursement Arrangement).  SHOP plans are not available in all markets, typically require minimum participation of 50-75% of employees, and are often much more pricey than the individual options. Employers are required to contribute at least 50% of the monthly employee premium, but are not required to contribute anything toward the family rate. HRA’s offer more flexibility in employer contributions, as long as it is consistent per employee, and employees can use those contributions to pay individual premiums. 

The SHOP and HRA options may provide tax benefits to the employer, but may not be the best for your employees. If an employer offers SHOP, the employees cannot qualify for any ACA tax credits – not even for their family members’ insurance. Additionally, funding an HRA offsets the employee’s marketplace subsidy, which may mean that the employee will receive no financial benefit from the employer contribution. Unless the small business funds the majority of the individual and family coverage, these plans can be a significant disadvantage to the employees.

All these options and factors make deciding on the best health insurance for your business and employees difficult. As a small business health insurance specialist, I am happy to help you demystify your options and ensure you’re picking the best alternative. If you choose the individual option, I can work with your employees to help them decide on the best plan for themselves and their families. Give me a call today!

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