Health Insurance Options for California Small Businesses
If you have a small business, running your company is your top priority, but you still need to consider health insurance for your employees. Offering benefits to your workers helps you retain a loyal workforce, even if you only have a single employee. Here’s what you need to know about sorting through the options and choosing the right health insurance for your small business.
Special Problems for Small Businesses
As a small business owner, you have special needs when it comes to offering benefits to your employees. Due to tighter profit margins and lower numbers of workers, finding coverage to fit within your budget is difficult. The much-needed bulk discounts available to larger firms are not available to your smaller companies. However, even small business owners like yourself can find affordable ways to offer insurance for their staff. With the right online resources, you can eliminate your excuses for not providing health insurance to your workers.
Here are six reasons your small businesses might be lacking health insurance, as well as how you can address each issue.
1. Not Enough Time
As a business owner, the majority of your time goes toward running your company. Not having enough time to find health insurance is a real problem, especially if you think you must go to an agent in person. While you may not have time during your workday to speak with an insurance agent in person, you cannot use the excuse of not having enough time to get insurance for your workers.
The internet offers several easy, fast ways to find and sign up for insurance for your workers. By checking out Health for California, you can use our intuitive form to get your workers coverage. If you have any questions, we quickly connect you with an agent who will address your concerns. Yes, finding and administering health insurance for your workers will take time, but it’s time well spent when you get happier, more loyal employees in return.
2. Not Enough Money
Offering benefits costs a lot of money, and those costs are on the rise. The price of covering just one employee under a group health insurance plan more than doubled in the last 15 years from $2196 to $6435. However, not offering benefits could hurt your chances of recruiting the talent you need. One survey found that a majority of job seekers, 88 percent, would give some or heavy consideration to a job with better insurance as a benefit.
The federal government recognized the difficulty small businesses would have in paying for coverage for their workers. That’s why small companies offering Small Business Health Options Program (SHOP) insurance, could qualify your company for a tax credit. Businesses offering SHOP with fewer than 25 full-time workers who average less than $50,000 per year each could get the Small Business Health Care Tax Credit. This tax credit may help ease the financial burden of offering health insurance to your employees.
Because benefits draw in the workers you need and help you keep the ones you have, you can’t afford to forego offering health insurance. With the ability to compare prices and shop for the lowest cost plan, you may not have to spend as much money as you would expect to. Thanks to the internet, comparing all aspects of plans, from coverage levels to prices, becomes more accessible than ever.
3. Not Enough Workers
If you have fewer than 50 workers, you do not have to provide health insurance to your employees, but benefits are critical to helping workers decide where to work. Not having more than 50 employees should not be an excuse to not look for insurance. You have several options available, even if you only have a single employee.
Businesses with up to 50 workers will need a certain number of them to accept the insurance you offer for a particular plan. To enroll in the Small Business Health Options Program, SHOP, you must have at least 70 percent of your employees to whom you offer health insurance to take the plan. If you cannot reach this level, you will not be able to be part of SHOP. However, you still have other options.
By looking through the small business health insurance options you have online, you can find the right way to offer your workers benefits, regardless of how many you supply coverage for.
4. Not Enough Options
Maybe you think you cannot find a single plan to fit the needs of all your employees. The good news is that you don’t need to take a one-size-fits-all approach. In fact, if you have fewer than 50 employees, you have multiple options to reimburse or help your workers pay for insurance plans of their choice.
Going online gives you numerous options you may have never thought about. Additionally, you can research how well-suited your business is for specific insurance offerings. If you cannot afford to offer group insurance to your workers, you still have the option of setting up reimbursement arrangements or savings accounts earmarked for health care. These choices let your workers purchase their own healthcare plans but still get the benefit of saving money on their medical expenses.
5. Not Enough Employees in a State
Today’s labor market is spread out across the country. Many small businesses have remote workers in different states. You don’t have to have all your workers in the same state to offer them insurance. Thanks to the vast resources online, you can find coverage for these workers, regardless of which state they live in.
If you have employees in multiple states, through offices or remote work, you can still offer them health insurance. The SHOP program allows you to purchase insurance from the state even a single worker lives in, as long as your business meets that state’s requirements for participation in SHOP. When choosing individual state coverage for your employees, you will need to prove that you meet the criteria for SHOP eligibility in every state.
Another option for out-of-state workers is bringing them under a group plan for all your employees. Such a policy will need to adhere to national or multi-state coverage networks and requirements. Choosing a single insurance plan for all your employees offers the simplest solution, but you may not be able to find a multi-state insurance plan to match the needs of your workers. If this happens, consider covering each individual separately or seeking an alternative means of helping your workers with their healthcare costs.
6. Not Enough Tax Knowledge
Yes, providing insurance for your workers will make your tax returns slightly more complicated. The type of insurance you offer, how many employees you have and the state you operate from all determine the kinds of taxes you pay. However, you could get a tax credit for offering health insurance to your workers.
The IRS makes it easier for employers to know which forms to file and what you must pay or the incentives you receive. Because you should not accept blanket tax advice from the internet, always consult with your tax professional about any specific questions you have concerning health insurance and your small business taxes.
What You Need to Know About Purchasing Insurance for Your Employees
Buying insurance for your workers requires you to check with numerous agencies to ensure you’re offering the required amount of coverage. Depending on your company’s size, you could get tax credits, but you won’t know about these unless you check with the IRS and fill in the appropriate information on your taxes.
Other information you need before purchasing health insurance includes your business size — but it’s not just employees who work more than 30 hours a week. The number of workers and their hours contribute to the number of full-time equivalents (FTE) employees you have. For every 2080 hours employees work, you have one FTE employee.
Having fewer than 50 workers gives you more options, but you may find it harder to pay for the coverage. More than 50 requires you to offer insurance, but you may qualify for lower rates.
Insurance Options Available
The size of your business and how many of your employees you will offer coverage to will determine the number of options you have. Generally, you have the highest number of options if you have fewer than 50 people. Regardless of how many workers you have, you can find the right coverage to fit your budget and the needs of your workers. The type of coverage you offer will help you take control of the financial side.
In general, you have five insurance options for your small business.
1. Association Health Plans
Whether you have one worker or more, small businesses and sole proprietors can join with other similarly sized companies to purchase health insurance at the lower rates larger companies get. Association Health Plans (AHP) also cover sole proprietors and their families.
By choosing an AHP, you can insure your workers with better plan options or lower prices thanks to the larger volume of the group from your region buying the plan. As with many other federally overseen health insurance programs, the plans cannot prevent your employees from joining due to existing health conditions.
2. Small Business Health Options Program (SHOP)
If you have between one and 50 employees, you can use SHOP. This system is for businesses smaller than the ones the Affordable Care Act (ACA) exempts from having to provide insurance for their workers. Under SHOP, you must offer coverage to all your full-time employees, and 70 percent of those workers must sign up for coverage.
With SHOP, you have the flexibility to offer your workers several options or just one. If you have a wide range of ages among your staff, offering multiple insurance options ensures your employees can choose the coverage level they need. Older workers may want more comprehensive plans than younger employees. If your workforce consists of a small group of healthy young workers, offering one low-cost plan may suffice to save you and the workers money.
If you have a small business with extremely healthy, young workers, you may want to self-insure. This option can save you money, but it also means you bear the risk of paying the medical costs of a worker who has an accident or severe illness. Depending on the self-insurance you provide, you may even need to pay a fee to the IRS, which helps fund the Patient-Centered Outcomes Trust Fund.
Many small- and medium-sized businesses embrace self-insurance. In fact, 13.5 percent of companies with fewer than 100 employees self-insure. To protect your business from losses, you may need stop-loss insurance, which covers you if you must pay out a significant amount.
You can make your job easier by using a third-party administrator (TPA) to make coverage decisions to benefit all those on the plan. Some insurance companies provide a similar service under the heading of administrative services only (ASO). With the help of a TPA or an ASO, running the administrative side of self-insurance becomes much more accessible.
4. Health Savings Accounts and Flexible Spending Arrangements
Health Savings Accounts (HSAs) allow contributions from the employer or the worker. The funds in HSAs can pay for deductibles, copayments or other medical expenses not covered by insurance. These accounts provide the employee with an individual, untaxed fund for covering medical costs. These accounts pair with high-deductible insurance coverage. HSAs follow you, regardless of your employment status, and their funds never expire.
Flexible Spending Arrangements (FSAs) have funds that the employee must use the same year. With FSAs, employees have funds withheld from their paychecks before taxes to go directly into their FSAs. However, employees have a limit of contributing $2650 per year to each FSA. If the employer chooses to allow to do so, employees may carry over up to $500 to their FSAs for the following year — but generally, these plans require workers to use the funds or lose them.
5. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
The QSEHRA is a way for you to help your workers pay for health insurance of their choice. This type of coverage is reimbursement for employees’ premiums. To ensure their tax advantages from using funds from the QSEHRA remain intact, employees must sign up for minimum essential coverage (MEC). Unlike FSAs and HSAs, employees cannot contribute to HRAs.
A health reimbursement arrangement has no limit for employer contributions, and the government does not tax the funds as long as the employee uses them for eligible medical expenses. At tax time, employees do not need to report their HRA funds. These funds also deduct from their gross income, so workers reduce their tax responsibility. Employees cannot contribute to their HRA, however.
Get a Quote
If you have a small business with between one and 100 employees, get a free quote from Health for California. We make it easier to find and purchase health insurance for California small businesses. Our forms make it easy to sign up, and you can quickly find the lowest-cost plans or get the right balance of service and cost for your workers.
Start today to provide your employees with the health insurance benefits they deserve by getting a quote for affordable group health insurance.