No business is required by law to offer health insurance to its employees. However, it may be in a company’s best interest to ensure its employees have access to group benefits.
Under the Affordable Health Care Act, large employers with more than 50 full-time employees are mandated to either offer qualified, affordable health benefits or pay a substantial tax penalty. While the mandate and tax penalties do not apply to smaller companies with less than 50 employees, these companies may want to offer group benefits to remain competitive, attract top talent, and for certain tax advantages.
Many employers are concerned about the costs of providing health coverage to their employees and how to fit those costs into the business budget. Our knowledgeable agents at Lowdermilk & Associates in Greenwood Village, Colorado can custom-tailor a plan so your company can help your employees obtain the coverage they need.
What Is the Cost of Providing Health Insurance to Employees?
The costs of providing health insurance group benefits to employees depends on several factors, including:
Type of plan (HMO, PPO, etc.)
Network of providers
Demographics of employees
To provide group health insurance to its employees, a business purchases a plan to cover all eligible employees and their dependents. Premiums are typically split between the employer and the employees.
An alternative strategy is for the business to set the amount it will contribute towards employees’ health insurance. Employees purchase individual policies, and the company reimburses them for their premiums up to a specified amount. This amount can be set at an amount a business is able to afford. This strategy, known as the defined contribution model, offers predictability as to cost and access to quality health insurance coverage for employees.
Advantages of Providing Health Insurance Group Benefits to Employees
Offering group benefits including quality health insurance coverage has several advantages for employers:
It helps attract and retain top talent.
Businesses may get a tax deduction for employer contributions to group benefits including health insurance, life insurance, and pension plans.
Employees will often accept a compensation package with better group benefits in lieu of a higher salary, which can save the company money.
Business owners may be able to get personal benefits through group benefits plans for lower rates than if they were purchased privately.
Offering health insurance increases preventative care, improves employee health and morale, and decreases absenteeism, which is good for business.
For employers with 50 or more full time employees, providing health coverage to all workers is necessary to avoid the mandated Employer Shared Responsibility (ESR) penalty of $2,000 per month per uninsured employee, not counting the first 30 full-time employees. A company with 52 full-time employees that does not offer health insurance would have to pay a monthly penalty for 22 employees (52 minus 30), for a whopping $44,000 payment.
No matter the size of your business, there are advantages to ensuring that your employees have the group benefits and health insurance coverage they need. For assistance in developing the best strategy for your business, meet with an experienced agent at Lowdermilk & Associates in Greenwood Village, Colorado.