A big question asked by lots of employees and job seekers of their current or prospective employers is, “What kind of benefits do you offer?” Many Americans get their health care coverage through their own employer’s insurance plan or a spouse’s group health insurance policy, but for small businesses (those with fewer than 50 employees), offering health insurance benefits can be a tricky proposition.
As a small business owner, I am fortunate to be able to provide health insurance policies for both my staff and myself. However, because I am also an insurance broker, I see the difficulties facing small businesses from two sides. Health insurance can be expensive, and providing benefits to your employees while maintaining your business’s bottom line is a tough balancing act.
In the past year, I’ve worked with several clients who have had to deliver bad news to their employees. Plan options have been reduced, premiums have been increased, and eligibility and participation rules are narrower. And just like how creditors and lenders are more careful about who they will give credit to in this uncertain economy, insurance carriers are also tightening their requirements.
If you’re a small business owner with fewer than 50 employees, be prepared to have to do a little research. Assessing your and your employees’ needs can help you find a small business health insurance policy that makes everyone happy.
Why should you provide health insurance?
You’re more likely to attract quality employees to your small business if you provide the kind of benefits they can find at larger corporations. A group insurance plan is a big draw for employees. It is usually much cheaper and easier for employees to get coverage under a group health insurance plan than to get individual coverage for all the members of their family. If you’re held back by financial restraints, keep in mind that the money you pay toward employee health insurance premiums may be tax deductible. And remember that a happy and healthy employee is a more productive employee.
How can you qualify for small business group health insurance?
To quality for a group health insurance policy, you may have to be registered as a business in your state. Depending on the status of your corporation, different tax documents may be required by the insurance company. Businesses must usually prove payroll and the number of employees through quarterly payroll tax forms, or a W2, Schedule C, or K1.
How many employees will be covered under the health insurance plan?
A small business owner must have at least the owner and one employee on the payroll to be eligible for an employer-sponsored plan. The payroll employee must be paid via W2; an employee paid via 1099 is considered a contractor and is not eligible for enrollment.
The employer selects the health insurance plan and then the employees can choose whether or not to enroll. With fewer employees, and depending on carriers in your state, you may have a harder time getting coverage. Where I live in New York, for example, some carriers refuse to cover a “group of one,” which is when a business has only two employees and one turns down coverage.
How much are you willing to pay?
Employers usually aren’t on the hook for the total bill. Typically, an employer covers at least 50 percent of each employee’s monthly premium and may also contribute to dependent premiums. The employee pays for the remainder.
How much are your employees willing to pay?
Depending on your employees’ healthcare needs, costs can vary greatly. Lower deductible plans will have higher premiums, but they might be worth it if your employees anticipate needing regular checkups. If a lower premium is more important to your employees, a high-deductible, or catastrophic coverage, plan might be more appropriate. Privacy laws prevent you from asking specific questions about your employees’ medical situations, but you can gauge what they value most in a potential health insurance policy.
Answering these questions about your business and the needs of your employees can help you start putting together a small business group insurance plan. This might be tough work; the insurance market is a complicated place these days. Talk to a licensed insurance broker in your state who can help you figure it all out and find you an option that best fits your needs.