Outside of salaries and wages, health insurance costs are often a small business’ biggest expenditure. While there are strict laws under the Affordable Care Act mandating which companies are required to offer health insurance to their employees and what those plans must cover, understanding exactly what kind of health insurance coverage your company should offer is a bit trickier.
Every business is different, and what might be the right level of health insurance coverage for a large manufacturing company with 100 employees could be total overkill for a small software company with a twelve person team.
If know you want to (or are required to) offer health insurance to your employees but aren’t sure what level of coverage is best, here are three questions to help guide your decision:
What Are Your Company’s Demographics?
Theoretically, the ACA was designed so that the number of (presumably) healthy younger Americans aged 18 to 34 buying health insurance plans would help offset the cost of older enrollees. The same concept can be loosely applied to your business.
If the majority of your employees are young, unmarried, and don’t have children, they’re less likely to need rich, often more costly, coverage options. They might be satisfied with only a high-deductible health plan and access to an HSA, or rarely use their coverage altogether.
If the majority of your employees are older and have families, it’s likely that they’ll expect access to higher quality health insurance plans with more extensive coverage.
If your employee demographics run the gamut in age and marital/family status, offering access to a variety of higher and lower coverage options–with the idea that, like the ACA, the buy-in from your healthier employees will help offset the cost of those who have more health care needs–might be the best way to go.
Related Article: Offering Employee Benefits in a Multigenerational Workplace
What Are Your Competitors Offering?
According to an independent study Justworks conducted, 88% of respondents said the quality and options of health benefits were important to them when weighing a job offer. However, only 41% of employers surveyed offer health insurance as part of their benefits package.
How to Create a Benefits Package
Use our guide to simplify creating a benefits package.
Health benefits are a clear and competitive way to recruit and retain top talent, and if you’re not offering access to health insurance to prospective employees, you may be falling behind in the game. Because there’s such high demand for software engineers in San Francisco, for example, some companies will completely cover health insurance premiums as a way to entice new recruits.
Of course it’s not always financially feasible for a small business to provide such generous coverage options, but if you have a sense of what your competitors are offering, you might consider offering slightly more to give your company an edge (like, say, covering 65% of a plan’s premium instead of your competitor’s 60% offer).
What Can You Afford?
Ultimately, this is what is what it all boils down to for many small businesses. Knowing your demographics and competition doesn’t mean all that much if you don’t have the budget available to pay for health insurance access anyway.
While the Affordable Care Act mandates that employers of a certain size offer affordable health insurance, it doesn’t require that employers pay for 100% of the costs. If funds are tight, you may only be able to offer a high-deductible plan for your employees, but could help sweeten the deal by contributing a small amount of money to those employees’ HSA accounts, for example.
Start by calculating what you can actually reasonably afford, and go from there.
Related Article: What is a Health Savings Account? Your HSA Questions, Answered
Even if you can’t afford a lot for insurance, you can access affordable, high-quality benefits packages. By using a PEO like Justworks, you get the buying power of a Fortune 500 company, even if you have less than 100 employees.
Justworks groups employees together, to give employers health insurance only large companies could usually afford. You can learn more about us here.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.