As Open Enrollment for health insurance gets underway, small business owners may be pleasantly surprised to find that they actually have more options available to them than larger businesses. Small businesses with fewer than 50 full-time employees are not required by the ACA to supply health insurance to their workers. But it’s still a good idea to do so, since offering employee benefits like health insurance helps to attract and retain the best workers.
The bad news is that small businesses have noticed that the cost of group health insurance has nearly doubled since 2009. The good news is that many small businesses are eligible for tax credits to offset high premiums, and some creative thinking by a skilled accountant can help small business owners find other solutions as well.
For businesses with fewer than 25 full-time workers, tax credits may cover up to 50 percent of group health insurance premiums paid by the employer. These tax credits are only applicable to plans purchased through the SHOP marketplace, so the first step for small business owners is to consult with an insurance broker who specializes in SHOP plans. This will help the business owner to discover whether the business is eligible for these tax credits, and what the bottom-line cost for the company will be.
Another option is to offer employees reimbursement for purchasing their own plans on the individual market (Covered California). The business is not eligible for tax credits this way, but it’s a good way to offer employees a valuable benefit while promoting a healthy workplace. For small businesses who have discovered group health insurance is now too expensive, even after tax credits, switching to a reimbursement plan rather than simply dropping employee health insurance may appease workers.
Small business owners should obtain detailed and accurate estimates of the cost of group health insurance after tax credits, and compare them with the cost of offering an employee reimbursement plan. There is no one-size-fits-all answer that will work for every small business, but creative thinking and careful accounting can help small businesses find the health insurance solutions they need.