We decided it was time to create our own Benefits Guide for Small Business after consistently hearing the question, “I’m a new small business with 30 employees and new to offering benefits; what options should I consider?“
Every small business wants to take care of their employees, offer employee benefits and get tax break benefits. Employee benefits are typically one of the top 5 expenses on your PNL. So, the question is, can you afford it?
Can you afford Benefits?
You must budget to contribute at least 50% of the employee only premium on the medical insurance alone. For example, 25 employees enroll on your medical plan and the total premium is $12,000 a month. You will need to pay at least $6,000 per month. Insurance carriers will require 75% of employees’ participation. The higher the employer contribution, the better chance of higher employee participation. Qualified waivers do not count towards your participation. What other benefits would you like to include? Make a list of the types of benefits you want to offer, such as; medical, dental, vision, and life insurance.
Many small employers are competing not only with other company’s comprehensive benefits but with healthcare marketplace subsidies.
Small Business Benefit Options
As part of our Benefits Guide for Small Business, small employers need to know they have a few market options to consider:
– Affordable Care Act (ACA) Small group market: you can find more information about that here.
– Medically underwritten pools (health applications are required, carrier approval is based on final enrollment count, varies by carrier)
– Not offer insurance- Send employees to healthcare marketplace (also known as Obamacare)
There is a lot to say about providing a comprehensive group benefits package. A competitive package can help with retention, is a recruitment tool, and improves overall workplace culture. All medical plans offer preventative care, which helps in employee health, absenteeism and presenteeism.
Choosing a Healthcare Plan
When choosing a medical health care plan, you should consider offering a dual option: a high deductible qualified plan (HSA) and a traditional first-dollar coverage plan (PPO). This way, employees have a couple of deductible plan choices to pick from. There are multiple options in carriers, which have different plan choices and networks. Employee input can help identify how to structure your benefits; a good broker can help with that process. As a small business, you have the advantage of being more personal with employees, and it should not be difficult to get their input. Ultimately, employee benefits are for your employees, and they will appreciate that you are considering their feedback. In Utah, the most common networks you will run into are the “IHC” or Intermountain Healthcare and the “Non-IHC” networks.
Where do you start?
Now that you are ready to move forward with a group benefit plan where do you start? While you can work directly with the different carriers, a good insurance broker makes the process easier. We recommend starting this process within 60-90 days before your desired effective date. Navigating the healthcare market can be confusing and a daunting process. In most cases, you will not pay more when working with an agent as most small group commissions have been embedded in your premiums. You will pay the same premium whether you have an agent or not. So, it is in your best interest to use professional advice and support. Additionally, your agent can provide guidance and assistance on your compliance responsibilities with offering employer-sponsored group plans.
Roll-out of Health Plans
Above all, the roll-out of health plans to employees is critical. You need to ensure employees understand the value of the benefits and education is vital to that. Again a good broker can help with this process. Employees need to understand plan design, carrier tools and programs, networks, and programs. An effective roll-out makes this process easier through the year.
Every Dollar Makes a Difference
In conclusion, every penny made earned or spent by a small business company makes a significant difference to your bottom line. It is essential that you carefully evaluate your options and company expenditures. Consult your financial advisor to obtain more information regarding your particular small business tax credits and deductions.
In short, providing health insurance to employees can be expensive, confusing, and time-consuming, but it can also be rewarding when attracting and retaining talent, boosting employee morale and satisfaction, and improving productivity levels. You need to evaluate your options and decide what is best for your business. We hope this Benefits Guide for Small Business was helpful. Please reach out to the Diversified Insurance Group Benefits team with any questions here.