Health insurance coverage is perhaps the single most important benefit a business can offer. Healthy workers are happier workers, and surveys suggest that health plans have become more vital than ever for both attracting and keeping employees. In 2015, 57 percent of employers offered health benefits to at least some of their workers, accordingto the Kaiser Family Foundation.
Whether you're launching a new business or expanding an existing one, it's critical to understand your obligations under the Affordable Care Act (ACA)—better known as Obamacare—to provide health care coverage. A working knowledge of the ACA will help you comply with the law, take advantage of potential tax benefits, and choose the best options for your business and employees.
The ACA is more than a thousand pages long, and a comprehensive accounting of the law's requirements for small business and startups would necessitate a book, not a blog post. But there are three key questions that should guide your research and decision-making as you consider health benefit packages for your employees.
Does your business have to provide health insurance coverage?
This is health care policy 101, but it bears repeating: the ACA does not require small businesses (or startups) with fewer than 50 full-time equivalent employees to offer health insurance—although the individual mandate does require your employees to have health insurance coverage.
Approximately 96 percent of employers in the United States fit in this small business category, according to the U.S. Small Business Administration.
However, If you have more than 50 full-time equivalent employees, you must offer affordable health insurance coverage that provides "minimum value" to your full-time employees and dependents or potentially face a penalty. Additionally, all businesses with 50 or more full-time employees must also report to the Internal Revenue Service (and your employees) the type of coverage you have or have not provided during the prior calendar year.
For businesses approaching the 50-employee mark, the decision to cross that employment threshold represents a major investment.
Do your employees already have health insurance?
Even if your business doesn't have 50 employees, you might still be considering offering health insurance coverage as a way to attract top talent and reward existing employees. But before you make any decisions, you should first survey your employees about their existing coverage or lack thereof. Your employees may already have health insurance plans that they’re satisfied with or be covered by a spouse's' plan.
If you have 50 or more employees, you'll of course need to provide health insurance plans that meet minimum value requirements. But you should still talk to employees about their current coverage and general health care needs. This will help you select the best carrier and / or plan(s).
How much should you expect to spend on group health insurance plans?
- The demographics of your employees
- The location of your employees
- Your insurance carrier
- The type of plan you choose (ex: PPO, HDHP)
- The network of providers
- Your contribution percentage
Employer-provided health premiums are generally split between the business and employees. In 2015, the average premium for single (i.e. self only) coverage was $521 per month, or $6,251 per year. The average premium for family coverage was $1,462 per month or $17,545 per year, according to the Kaiser Family Foundation.
As a business owner, you are free to set the percentage split at your discretion. Some businesses pay a larger portion of the premiums to attract and retain talent, while others increase employees’ share to help manage costs. Covered workers contributed on average 18 percent of the premium for single coverage and 29 percent of the premium for family coverage, according to KFF.
Whatever option you choose, your employees' plans must cover at least 60 percent of the total cost of medical services covered by the plan for a standard population, and its benefits must include substantial coverage of inpatient hospital and physician services, among other benefit mandates such as a prohibition on annual or lifetime dollar limits for any essential health benefits that are covered by the plan, if the plan is purchased in the large group market. If coverage is being purchased in the small group market, a host of additional benefit mandates exist.
As stated at the beginning, no single blog post or even blog series can guide you through the process of offering health insurance. You should research the issue before taking any action and consider reaching out to a human resources advisor or lawyer for guidance. (None of the suggestions above should be construed as legal advice!) It's important to make sure your plans meet ACA requirements to avoid costly penalties and HR nightmares.