Do SMEs Need To Offer Employees’ Health Insurance Benefits?

Do SMEs Need To Offer Employees’ Health Insurance Benefits?

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Under the Affordable Care Act (ACA), small and mid-size enterprises (SMEs) aren’t required to offer health insurance to employees. As a matter of fact, all companies aren’t mandated to pay insurance in the United States.

While SMEs don’t have to offer health insurance benefits to their employees by law, doing otherwise can promote employee retention, wellness, and morale. Additionally, companies may also enjoy some potential employer tax advantages.

In this article, we’ve rounded up eight perks companies can take advantage of when offering health insurance benefits to their workers.

Better Hiring and Recruitment Strategy

SME group health insurance plans can help companies stand out as an employer of choice. Studies have shown that offering health insurance as part of a compensation package often makes or breaks a job offer for prospective hires, especially those who can help their business thrive.

Increase Employee Productivity

According to the Centers for Disease Control, employees who are in good shape are more productive because they’re less likely to call in sick for work. On the contrary, getting sick, neglecting preventative care, and worrying about medical care coverage can lower work efficiency.

Offering health care insurance doesn’t only promote employees’ welfare but also motivates them to work. As a result, it may reduce absenteeism (the habitual pattern of being absent from work without good reason) and presenteeism (showing up for work without being productive).

Healthcare insurance can also help employees feel more economically and professionally secure. It also helps employees feel less financially stressed and more confident in their capability to recover from a catastrophic injury or disease, consequently improving workforce productivity.

Retain Quality Workers

Salary increases aren’t the only way for employee retention and loyalty. Offering health insurance to SME employees is another effective way to help retain them.

Moreover, doing so encourages them to stay with your company long-term and demonstrates their worth. It’s a low-cost small change that can make a big difference in improving employee retention.

Improve Employee Job Satisfaction

Another way to improve employee productivity and retention is by boosting job satisfaction. According to a survey, health insurance is the top basic employee benefit that’s highly correlated with employee satisfaction.

Essentially, better attitudes from satisfied employees can lead to better results for SME owners’ bottom line.

For example, generally satisfied employees are seen to be more helpful and enthusiastic and improve interactions with clients, leading to highly effective sales conversations. Having a positive workplace environment can also increase the likelihood of effective teamwork.

Promote A Positive Company Culture

Offering health insurance plans as an employee benefit demonstrates that companies view employees as valuable assets. Doing so can help promote healthy company culture.

Further, investing in employees’ well-being doesn’t only encourage an environment of trust and openness among employees. It can also positively shape the company’s brand image, bolstering employee recruitment and retention efforts.

Lower Monthly Premiums

Due to the advantage of having a more sizable risk pool, SME insurance plans have lower per-person costs than health coverage in the individual market. Specifically, a report showed that compared to individual health insurance coverage, small business health plans have:

According to the Small Business Administration (SBA), average costs become more stable when more people pay for their health insurance in a group plan. Consequently, insurers have more resources to obtain when someone needs medical care. In other words, the high cost of any individual results in having a smaller effect on the average cost as the group becomes bigger.

Offer Employees Pre-Tax Benefits

In an SME group health insurance plan, employers take a portion of their employees’ premiums out of their salary before deducting federal income and state taxes. Doing so essentially reduces employees’ taxes. Hence, the tax payments that would have gone toward the government for that paycheck will instead compensate the employees.

Save Employers Money At Tax Time

Not only employees but also employers can save money by offering their employees health care insurance. In addition, employer healthcare premiums are typically tax-exempt, which can significantly offset or even get rid of employers’ tax obligations.

Moreover, employers’ contributions are also tax deductible. In other words, employers can write off employer-sponsored contribution costs when tax season comes. Apart from that, employers can also qualify for the Small Business Health Care Tax Credit.

When Do Workers Buy Their Own Health Insurance?

Most self-employed individuals and part-time employees are responsible for their own health insurance. Some companies with less than 50 full-time employees aren’t legally required to offer health insurance, so their workers tend to buy their own policy. Other employees need additional coverage, so they usually purchase a secondary plan beside their employer-sponsored benefits.

If you’re one of those workers above, here are some quick tips on how to get private health insurance by yourself:

  • Browse plans at Health Insurance Marketplace;
  • Research about different plans and their coverage;
  • Choose policies that match your needs; and
  • Compare quotes; and
  • Pick the policy that meets your medical goals and financial situation.

Final Thoughts

It’s recommended to seek professional advice from insurance agents, especially if you don’t know where to start. Ensure to ask about deductibles, premiums, coverage, eligibility for discounts, and other benefits before settling to one health insurance

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