A lot of small business owners believe that providing employee benefits is something only big corporations can afford. We’re here to help bust that myth.
Health Insurance is the most sought-after benefit and there are so many options when it comes to offering it to your employees.
Option 1: Group Health Insurance Program
The most TRADITIONAL way to provide health insurance is to get quotes and start a Group Health Insurance program (aka employer-sponsored program) for your company. This will typically involve a health insurance broker or contacting an insurance company directly to apply for a group plan.
You will almost ALWAYS need at least 2 employees on the plan to qualify for having one of these plans. This plan works well if you have more than a few employees as the more employees you have can help reduce the cost of the plan.
We recommend working with a broker if you are looking for this type of coverage. You will have lots of options in this category as the employer if you have enough employees. However, if you have a small team, you may face challenges finding an affordable option. Most insurance companies will quote your business based on the demographics (census data) of your company, which means if you have employees in higher risk demographics, it can drive up costs for all employees.
If you choose to go with any group plan, you will select a few options for employees, and they can decide what option works best for them. When done this way, you can control the upper limit of the costs. You can also determine what you are willing to contribute if you choose to. It is not required for you, as the employer, to contribute anything to health insurance, but you might decrease participation if you don’t. If you do choose to contribute, it must be equitable across your employees; you can’t contribute differently for one employee vs. another.
Option 2: PEO
Many small businesses who have less than 5-10 employees, unfortunately, don’t get great quotes and get standard quotes from health insurance brokers. You might want to consider a PEO (Professional Employer Organization) as an option to explore offering health insurance. A PEO is a great option because PEO’s already have negotiated contracts in place for insurance, and they can act as your broker to get quotes.
In addition to help providing health insurance, a PEO can offer payroll, tax compliance, and HR support.
Watch as Hannah dives deep into PEOs:
Option 3: HRA
HRAs (Health Reimbursement Accounts) are great alternatives for employers who want to provide equitable health benefits for their teams. HRAs allow certain qualified health expenses (copay premiums or copay reimbursements) to be paid back to employees in a tax-free way. Employers simply set up an HRA with a qualified provider (we use Take Command Health) and set their employee spending limits, then the employee can submit for reimbursement each month – tax free!
A big mistake small businesses make is paying out health insurance in cash, which ends up being taxable income to the employee. Using an HRA allows the reimbursement amounts to be a business expense for the business AND non-taxable for the employee. HRAs are a win-win for both parties.
HRAs also allow the employee to choose how they wish to use their reimbursement amounts. They can choose which healthcare plan is right for their families, and they can use the amount for other qualified healthcare expenses. Employees appreciate the wide range of choice with this option.
Watch as Hannah gets into HRAs for Small Business: What Small Business Owners Need to Know
Option 4: HSA – SUPPLEMENTAL
HSAs (Health Savings Accounts) are not a solution to providing health insurance on their own. They are a supplement and do not have to be contributed to. HSAs can be a great add-on benefit if your employees want to select an HSA-qualifying high deductible health insurance plan. You can save a lot of money on monthly premiums with HSA eligible plans, and some employees prefer them.
Being able to provide health insurance (among other benefits) to your employees is a positive for both your employees and you. It sets your company apart from others during the hiring process and keeps existing employees happy.
Read: Employee Benefits 101