Do Small Businesses Have to Offer Health Insurance?

Medical care costs in the U.S. have risen significantly, and most employees seek jobs offering health insurance benefits. It’s no surprise that most companies use health insurance coverage to recruit more employees. However, while you might want to recruit and retain employees, your company may not have the financial ability to secure a health insurance plan.

As a small business owner, understanding and managing the dynamics of health insurance can be a bit challenging. Luckily, there is no requirement for small employers to offer health insurance coverage for their employees. However, the case is different for employers running large organizations. This post will discuss what you need to know about health insurance for small businesses.

What Type of Businesses Have to Provide Health Insurance?

Whether or not a company has to offer health insurance benefits to its employees depends on the business type and the number of full-time equivalent employees. If your company has less than 50 employees, you don’t have to offer health benefits. You also don’t have to worry about the tax penalties, and you can provide health benefits voluntarily, to retain or attract employees.

What Does the Affordable Care Act Require for Businesses?

It’s important to understand that there are no laws requiring organizations to offer employees health coverage. However, the Affordable Care Act requires businesses with 50 or more full-time employees to provide health insurance coverage or receive a penalty of $2750  annually per employee (2021) after your first 30 employees which are exempt.

For most organizations, it’s straightforward to determine the number of full-time employees. However, in organizations with several seasonal or part-time employees, the calculation can be a little complex. The health coverage is offered on an annual basis, which means if your company had more than 50 full-time equivalent employees in the previous year, you’re rendered a large employer.

To avoid paying the $2750 penalty per employee (2021) after your first 30 employees which are exempt, employers with more than 50 employees should meet health care coverage and affordability requirements. The coverage should also offer health benefits to the employee’s dependents below 26. However, the coverage doesn’t have to extend to the spouses or stepchildren of the employee.

Should Small Businesses Offer Health Insurance to Employees?

Even though there are no penalties imposed on small businesses that don’t offer health insurance coverage, several advantages come when you offer benefits. Here are a few:

  • Retaining and attracting employees- Everyone wants to work in a company where they don’t have to worry about paying hefty costs due to increased medical bills. Providing health insurance benefits helps you attract and retain top talent in your businesses.
  • It gives your business a competitive edge- Although not many small businesses have embraced the idea of offering health insurance coverage to employees, your company can be among the few, making it more appealing to investors and customers.
  • Build a healthier workforce- If you want your employees to deliver quality, ensure their health is top-notch. Once their medical needs are taken care of, they will feel more motivated and become more productive.
  • Saves you money– Offering health insurance coverage for employees tends to be cheaper than individual plans. The insurance premiums are exempted from tax which significantly reduces your total tax obligations. Your business may also qualify for the Affordable Care Act’s health care tax credit for small businesses.

Get the Best Health Insurance Coverage for Your Employees

Whether to offer health benefits to your employees or not can be a challenging decision, especially for small enterprises. However, looking at the bigger picture, providing health insurance will offer tremendous benefits to you and the workers.

At DesignTM Health, we can tailor health insurance coverage for your employees to help you realize the multiple benefits it brings to small organizations. Contact us today to learn more about our unbeatable employee benefits packages.

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