According to a Kaiser Family Foundation study, approximately 50 percent of businesses with between three and nine employees offer health insurance benefits to their employees.
This ratio increases to 71 percent for businesses with between 10 and 24 employees, 85 percent for businesses with 25 to 49 employees, and 99 percent for businesses with 200 or more employees.
Group health insurance is an incredible recruiting tool that can help attract and retain top talent. It can also save businesses and their employees money and present tax incentives to companies that qualify for tax credits. Healthy employees tend to be happier, resulting in a positive work environment and higher morale. Offering these benefits often makes employees feel valued and appreciated.
The benefits of group health insurance for small businesses may be undeniable, but it can still be challenging to navigate policies without guidance. Learn more about group health insurance for small businesses and what types of policies are available for employees.
How Group Health Insurance Works
Before purchasing a group health insurance policy, it is important to fully understand what options are available and the requirements for each plan. Most group health insurance policies have a minimum participation rate in place, usually around 70 percent.
The cost of group health insurance is shared by all participants, including the employer and employees. All parties can enjoy lower insurance rates as the risk is lower when more people are signed up under a policy. Employers can choose to pay for the bulk of their employees’ health insurance or put most or all of the cost of insurance onto their employees.
Once a business chooses a group health insurance plan, employees can either accept or decline coverage. Employees may also have the option to take basic coverage or pay extra for add-ons, such as dental or vision. Health insurance benefits are often extended to immediate family members at an additional cost, such as spouses, children and dependents.
To be eligible for a small business group health insurance plan, the business must be considered a “small business” in the insurance company’s eyes.
Small employers are generally defined as having two to 50 employees. Businesses with more than 50 employees are not generally considered “small.” In certain states, like California, Colorado, and New York, 2 to 100 employees is considered a small group.
Under a group health insurance plan, employees are usually responsible for paying a portion of their health insurance premiums.
The employer then pays a portion of health insurance premiums on behalf of the employees. Paying a larger portion of employee premiums is a great way to show workers that they are appreciated and valued.
Small Business Health Insurance Requirements
Most small businesses offer benefit plans voluntarily as a way to recruit new talent and retain loyal employees. However, there are some legalities surrounding group health insurance in the business world.
No law directly requires employers to offer health care coverage to employees. However, the Affordable Care Act (ADA) does impose hefty penalties for businesses that do not comply with their recommendations.
Under the ACA, employers with 50 or more full-time employees or part-time equivalency must provide health insurance to at least 95 percent of their full-time staff or face a penalty by the Internal Revenue Service (IRS).
Health insurance policies must meet certain requirements to comply with the ACA on coverage and affordability. Employers are also required to extend coverage to the dependents of employees, which typically include spouses and any biological or adopted children under age 26.
There are also other circumstances in which a small business may be required to offer group health insurance to employees, such as if an employment contract has this provision written or if an oral agreement was made.
Employers can also not offer health insurance in a discriminatory manner.
This means that a business cannot refuse to offer an employee health insurance based on color, race, gender, age, national origin, religion, pregnancy or genetic information.
Speak with an Insurance Expert Today
Today, businesses have access to a wide range of health insurance types, from preferred provider organizations (PPOs) and health maintenance organizations (HMOs) to HSA-qualified plans and indemnity plans.
It is important to become familiar with each type of health insurance to determine which is best suited for employees while also falling within the company’s budget.
Consider scheduling a consultation with an insurance expert to determine what type of group health insurance is the most cost-effective and appropriate option for the company.
For more information about insurance for small businesses or to speak with an insurance professional, contact the knowledgeable team at New City Insurance.