Health Insurance Dilemma for Small Businesses

 

It is a major challenge for small businesses to offer their employees a plan that is both affordable and provides good coverage. 

Under the Affordable Care Act, small businesses with greater than 50 employees must offer a qualified plan to employees or they will be penalized.  The clients I advise are far below the 50 employee threshold but are interested in providing coverage to their employees nevertheless.  This tells me that perhaps there is no need to mandate insurance coverage for small businesses as small business owners often want to provide health insurance coverage to employees but the cost is prohibitive and the coverage poor.  Business owners themselves need insurance and therefore are also evaluating whether they can offer this benefit to their employees.

For young and healthy employees, it is often most beneficial for them to procure health insurance coverage through an exchange than be part of the small employer provided health insurance as the exchange policies often have a lower cost.  For married employees, they can often do better by remaining on their spouse’s plan particularly if their spouse is working for a large company or organization.

So where does that leave the small business owner?  Here is my advice:

  • If you are going out into the marketplace, offer the best plan you can afford to your employees.  In other words, the plan with the lowest deductibles, copays and out of pocket maximums.  There is a growing market for high deductible plans supported by a Health Savings Account (HSA).  I am not a fan of these plans as much of the risk is passed onto the employee and usually a small business is not able to fund the Health Savings Account in a significant way after paying the premiums on the plan. If you choose to offer a high deductible plan tied to a HSA, be sure to offer another option to employees who might not want to bear the risks of such a plan.  
  • If you are unable to offer health insurance at this time, think of other health promoting benefits you can offer your employees – gym memberships, fitness programs, flexible work schedule, additional vacation time, etc.  Remember that cash is KING so your employees will also be grateful for any bonuses and incentive compensation you can offer.  This will enable them to have funds to potentially procure their own health insurance or pay for health related expenses.

We are heading for uncertain times and we will have to wait and see how possible changes to the health care laws will impact small businesses in 2017.