To function successfully, small businesses require a healthy workforce capable of managing day-to-day tasks. This might mean keeping yourself healthy, or it could include a group of employees. Thankfully, the Affordable Care Act (ACA) provided sweeping changes to how health insurance for small business owners works.
If you operate a small business with 50 or more full-time employees, you’re legally required to provide health insurance. If you read the fine print, your health plan must be “affordable,” meaning no employee spends more than 9.5% of their household income on premiums.
Even if you are the very definition of a small business, with fewer than 50 full-time employees, health insurance is a sound investment. It is a safeguard to protect both you and your burgeoning company.
As a small business owner with much to manage, how do you locate and arrange an affordable health insurance plan?
How Can Small Business Owners Obtain Health Insurance?
When setting up a small business, your to-do list can be overwhelming. Obtaining health insurance for your small business may seem extra daunting. However, this task may not be as intimidating as you think. Small business owners have a few health insurance options, including:
- Individual Marketplace: If you are the sole employee of your small company, a personal policy purchased via healthcare.gov will suffice. Even better, depending on your location, you may be eligible for tax credits when you buy a health coverage plan.
- Private Plans: Another worthwhile option to explore is a private individual plan through a primary health insurance carrier, such as Blue Cross Blue Shield. You will not receive the same tax credits, but you will receive health care coverage explicitly built with you and your needs in mind.
- Trade Association: If your small business is part of a broader industry, say, plumbing, you may be eligible to take part in professional trade associations. In this case, all members buy into a group insurance policy, so everyone taking part pays a little. You could easily save thousands of dollars per month.
- Medicare: Medicare has seniors’ well-being in mind. If you are of age and met your Medicare tax contribution burden, you may be eligible for a Medicare health insurance plan for small business owners.
Alternatively, if you run a small business with multiple employees, you may qualify for:
- Qualified Small Employer Health Reimbursement Arrangement (QSEHRA): Your small business would essentially set aside funds every month for each employee’s healthcare allowance. If an employee submits proof of their healthcare costs, it reimburses them via the fund.
- Small Business Health Insurance Program Marketplace: Like the individual or private plan marketplace, the small business marketplace offers health insurance plans designed for 1 to 50 full-time employees.
- Private Group Plans: If all else fails, you may be eligible for a private group health coverage plan through a nationwide health insurance carrier. As most offer programs that scale with your business.
Health insurance for small business owners can vary greatly, so be sure to consider all of these options carefully. Start your search well before the open enrollment period to avoid rushing into a plan.
What Are Some of the Best Plans for Small Business Owners?
There are thousands of local and national health insurance companies operating in the U.S. today. Chances are you meet the criteria for one or more. But first, you need to find a health insurance plan for small businesses that makes sense.
Here are a few of the top health insurance providers for businesses:
- Blue Cross Blue Shield
- United Healthcare
Each one offers varying healthcare plans, affordable pricing options, and substantial plan benefits that both you and your employees may take advantage of in the long-run.
The key when purchasing health insurance coverage as a small business owner is to shop around. When you call a health insurance provider, you are not signing a contract—nothing is set in stone yet. We recommend calling a few of the top companies on your list, then request a quote.
In the end, the health insurance provider you choose will be the one that fits your budget and offers health benefits that make sense to you.
How Can You Choose the Best Health Insurance Plan?
We know choosing a health insurance plan for small business owners is challenging. It is quite the feat for an individual, too. There are a few factors to consider when choosing a health insurance plan for your small business:
- “Metal” Categories: Almost all insurance providers under the sun use “metal” categories to denote their policies. You have Bronze, Silver, Gold, and Platinum. These policies offer varying levels of care and cost to you.
- Monthly Cost: As a business owner, a crucial part of your day-to-day is managing the finances. Well, a health insurance policy is one more piece of your financial puzzle. Find a plan with a monthly premium that fits your business budget and explore the policy’s out-of-pocket costs, deductible, and any included benefits.
- Plan/Network Types: Some health insurance policies allow you to select any doctor or health care center in your area. Some, unfortunately, limit your choices for coverage options. Find a policy that works with you, especially if you already have a doctor in mind.
- Enrollment: Do not miss the open enrollment period that rolls around each November. If you do miss this limited window, you will probably need to wait. Most insurance companies have extenuating circumstances they will accept outside of open enrollment periods, though.
What if You Have Employees to Cover?
If you have employees to consider, you are (1) doing well as a business and (2) likely shopping through a national provider or the small business health insurance program marketplace, which we mentioned briefly already.
The more employees you have, the higher the monthly premium, so consider your finances when shopping around for a plan. Furthermore, insurance cost is not the only determining factor to consider. When you have a large group, certain benefits fall by the wayside, while they prop others up.
If you are comfortable choosing a health plan for everyone, then, by all means, start searching straight away for a plan to fit your budget and needs. Otherwise, poll your employees to see what healthcare benefits they require to do their absolute best work. If you can find a plan with enough advantages to benefit most, if not all, of your employees, that is fantastic.
How Does Health Insurance for Small Business Owners Affect Taxes?
As a small business owner seeking health insurance for you and your employees, you may be eligible for a tax credit. If you qualify for the Small Business Health Care Tax Credit, the government may cover up to 50% of the monthly health insurance premiums for your employees.
However, to take advantage of the impressive tax credit, you need to find an eligible plan via the Small Business Health Options Program (SHOP). Furthermore, you only qualify for the credit if:
- You have fewer than 25 full-time employees.
- Your average employee’s salary is $50,000 or less annually.
- You pay at least 50% of your employees’ monthly premium costs.
- You provide SHOP coverage to your full-time staff.
But that’s not all. If you run a business with fewer than ten full-time employees total, each of whom earns $25,000 or less annually, you’ll receive an even larger tax credit.
That being said, you may not qualify for a tax credit if you hire seasonal workers unless you keep them on staff for 120 days or more. On top of that, according to the IRS, the credit is only available to each business for two consecutive tax years. For those two years, you could save—potentially—tens of thousands of dollars. Most reinvest the money into their business.
The IRS is all about fine details, so read through their qualifications or ask your insurance provider for more information on available tax credits for small business owners. You may be eligible for more than one.
Self-Employed Health Insurance Deductions
On top of tax credits for small business owners, there is one more worthwhile deduction to consider. If you are considered self-employed, you can typically deduct 100% of your monthly health insurance premiums for health, dental, and long-term coverage. The same goes for your spouse or dependents aged 26 and under.
Like with the small business tax credits through the IRS, you must file as self-employed and show a net profit on your tax documents to qualify for a self-employed health insurance deduction. Alternatively, you may be eligible if you file as an individual receiving wages from an S Corporation as a shareholder with 2 percent or more shares total.
As a small business owner actively doing their part to care for hardworking employees, you have your work cut out for you. More often than not, shopping around for health insurance policies designed to cover not just you but an entire workforce is a monumental task. It is best not to go at it alone, so consider working with an insurance provider or broker who understands health insurance for small business owners.