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Employee health benefits guide for small business owners: The basics

Let’s suppose you are a small business owner with 50 full-time employees that are paid at market value and bring in an average salary of $50,000 a year. You also understand how integral happy and healthy employees are to your business’ success. That’s why, this year, you’re going to offer your hardworking and loyal employees health benefits.

The question you’re asking now is, where do I begin?

On the other hand, maybe your small business has 20 full-time employees, and you’re beginning to hear some rumblings that your employees are thinking of leaving if they don’t get some affordable healthcare options.

Similar to the first scenario, you just aren’t sure where to begin.

These are dilemmas many small business owners face, so don’t worry if you’re confused. Between dense language and ever-changing rules, it’s easy to lose sight of what is required of small business employers, in relation to employee health benefits. In this article, we’ll give you an overview of what you can expect when it comes to group health insurance plans, how you can find the right plan for you and your employees, and how to implement an employee benefits package.

Where to start

A quick Google search will help give you a roadmap to begin your healthcare journey. You want to first make a list of a couple of key points that you’ll need to know before you really start to investigate adding small business healthcare benefits for your employees.

  1. Make a list of the types of benefits you want to include. If you’re unsure where to start, consider your own healthcare needs over the past few years, or others in your circle of family and friends. What are some of the challenges they faced in regards to their health and the cost of healthcare? This will hopefully enable you to narrow your thinking down and give you a good place to begin.
  2. Determine if you want to do the work on your own or work with a healthcare insurance broker. The best way to make this decision might be to consider how much free time you have to do the research. Getting health insurance for your small business is a time-consuming process with a lot of ins and outs. It will take time to get it all squared away. Think about whether you truly have the time, in addition to all of your other responsibilities related to your business.

Once you’ve considered these two issues, you’re ready to really start doing the work on employee health insurance.

Know the rules about offering health insurance

When it comes to healthcare benefits for employees, the rules for small businesses are actually pretty straightforward. You’re required to offer your employees health insurance if you have 50 or more FTEs (full-time employees). Additionally, the health insurance you offer must be considered “affordable” for your employees. In nuts and bolts, that means that the health insurance benefits must not cost employees more than 9.86 percent of their annual income. In general, that’s not a hard bar to clear.

If your company falls into the above category, then you’ve got your marching orders. However, if your company is structured differently, then you’ll need to make other considerations. For example, if you only have 20 full-time employees, you aren’t required by law to supply your employees with health insurance benefits; however, if you do, you’re eligible for a tax credit.

Here is an overview of how a small business can qualify for a tax credit when offering employees health insurance:

  • Have 25 or fewer FTEs
  • Offer health insurance to all full-time employees
  • Pay your FTEs an average of $50,000 a year
  • Pay at least 50 percent of the health insurance costs

If you meet all of these above requirements AND purchase your employee health insurance plan through the Small Business Health Options Program (SHOP) Exchange, your business will qualify. The SHOP portal was created as a result of the Affordable Care Act, and is maintained by the federal government. Your total tax credit could equal up to 50 percent of the health insurance employee premiums you’ve already paid.

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