Small Business Health Insurance: Benefits, Types, Costs and Considerations

Do employers have to offer health insurance? 

From a legal standpoint, U.S. employers aren’t generally required to provide health insurance to their employees. However, several factors – such as where your business is located and how many employees you have – may cause your business to be an exception.  

For example, the Affordable Care Act (ACA), commonly known as Obamacare, requires employers with an average of 50 or more full-time employees, including full-time equivalents, to offer affordable and adequate health insurance plans to their full-time employees and their dependents or risk potential penalties.Massachusetts – have implemented their own laws that require companies with as few as 11 employees to provide employee health care options. 

Check the specific requirements in your state as laws regarding employee health insurance can vary widely from place to place.  

What are the benefits of offering health insurance? 

Offering health insurance to your employees can benefit your business in many ways:   

• Attract top talent: Since health care is the #1 benefit Americans want in a job, providing healthcare is a great way to attract high-quality future employees. 

• Improve productivity: Employees are more likely to address health concerns when they have access to health care, which in turn, can lead to improved physical health, better mental health and increased productivity in the workplace. 
• Receive tax benefits: When you offer employee health insurance, you may be able to deduct health insurance premiums paid on behalf of the employees as a business expense.  
• Boost employee morale: Providing your employees with access to health care can make them feel valued, appreciated and generally happier within their job. 

How important is health insurance for employees? 

With U.S. health care costs at an all-time high, health care coverage has become increasingly important for employees nationwide. According to a recent poll commissioned by the Protecting Americans Coverage Together (PACT) campaign:  

• 96% of Americans believe it’s important for a job to offer health insurance. 
• 80% of Americans believe health insurance is more important than any other benefit (including sick time, vacation time and retirement plan options). 
• 89% of Americans prefer to receive health coverage through their employer rather than any other means. 
• 97% of Americans agree that “quality health coverage is an important way for companies to retain their valued employees.” 

What are the types of health insurance for small businesses? 

Small businesses have several options when it comes to choosing health insurance plans for their employees: 

1. Preferred Provider Organization (PPO): PPO plans provide members with a broad network of health care professionals that offer services at a discounted rate. However, PPO plans also allow members to see doctors outside their network as needed.  
2. Health Maintenance Organization (HMO): Unlike PPO plans, HMO plans don’t allow members to seek out of network services, but they typically offer lower premiums and deductible costs. Additionally, they require members to receive a referral from a primary care doctor before seeing any type of specialist.  
3. Point of Service (POS): POS plans combine features of both PPO and HMO plans. While POS plans do allow members to visit specialists out of network (like PPO plans), members must receive a referral from their primary care doctor before doing so (like HMO plans) 
4. High-Deductible Health Plans (HDHP): HDHP plans have lower monthly premiums, but higher deductibles and out-of-pocket costs. Qualified High-Deductible Health Plans are often paired with a Health Savings Account (HSA), which allows employees to save pretax dollars to pay for qualified medical expenses.  

Small business owners should consider costs, coverage, network, flexibility and legal requirements when selecting a plan, and we recommend you speak with a professional to find the best option for you and your business.  

What is the average cost of health insurance for small businesses? 

In 2021, the average yearly employer contribution for one single-coverage employee was $1,643. However, the average cost of health insurance for small businesses can vary depending on where your business is located, how many employees you have, what type of health insurance plan you choose and whether your business is eligible for tax breaks through the Small Business Health Care Tax Credit.  

Is offering health insurance a lot of work? 

Although providing employee health insurance requires a fair amount of time and effort (especially in the beginning), most small business owners find it pays off sooner rather than later. However, it’s important to consider your bandwidth as a business owner and determine if you have adequate availability to complete the following insurance-related tasks: 

• Plan selection: Choosing the right health insurance plan requires thorough research to ensure it meets the needs of your business and employees. 
• Enrollment: You may need to collect and submit employee information, set up payroll deductions and provide plan information to your employees during enrollment. 
• Compliance: There are many legal requirements surrounding health insurance, so compliance-related tasks – such as providing certain notifications to employees and maintaining accurate records – will need to be completed. 
• Ongoing administration: Handling changes in coverage, answering employee-related questions and paying premiums are all examples of ongoing administrative tasks you may need to manage as the owner of your business.  

Offering health insurance may require some work for small business owners, but with the right resources and support, it’s typically very manageable.

How do I select the right health insurance provider?  

Choosing the right health insurance provider can be a complex decision. To ensure you select the best provider for you, your employees and your business, consider the factors below:  

• Network: Look for a provider that offers a network of health care providers that’s convenient for your employees. For example, if you have employees in different cities or states, check to see if the provider has adequate doctors and hospitals in each area.  
• Cost: Each provider will have different premium, deductible and copayment costs, so it’s important to select a provider that offers affordable options for you and your employees. 

• Plan options: Make sure the provider you choose offers a variety of plan options to meet your employees’ needs. Consider factors such as types of plans, levels of coverage and cost-sharing features.  
• Customer service: Select a provider that offers various forms of customer support (a responsive customer care team, detailed training materials during setup, easy access to plan information and resources, etc.).  
• Compliance: Make sure the provider you choose complies with legal requirements, such as the Affordable Care Act (ACA) & Employee Retirement Income Security Act of 1974 (ERISA) regulations.  
• Claim Fulfillment Rate: Research the percentage of claims each provider fulfills to ensure you don’t select an insurance company who will refuse to pay for your employees’ appointments, medications, and procedures.  
• Reputation: Consider the provider’s reputation and history of serving small businesses. Look for reviews and recommendations from other small business owners and industry experts. 

Quality Health Insurance with SurePayroll

Quality health care insurance is an important benefit for you and your employees. Finding the right health insurance for your small business shouldn’t be a chore.  

SurePayroll, a Paychex company, can help you find top-rated health insurance coverage at a price built for small business. Contact our Insurance Agency and: 

• Consult a knowledgeable account executive to help you find a health insurance plan that fits your business size. 
• Compare top-rated insurance carriers and benefit providers with a free, personalized insurance quote for both group and individual/families. 
• Partner with a national benefits agency with over two decades of support for more than 106,000 clients. 
• Get access to comprehensive, easy-to-use tools, information and resources to help you comply with new health care reform requirements, including evaluation and review of options for group health coverage, employee notifications and tax credit filings. 

Call 877-266-6850 today or click here to learn more about health care solutions and insurance options at SurePayroll.