Health Care Options For Small Business – This week’s guest post is from small business tax expert and bestselling author, Barbara Veltman of Big Ideas for Small Business. Barbara shares ideas on how small businesses can stay competitive with health benefits to attract employees in a tight job market.
With health care premium costs rising and the labor market tight, small businesses are looking at every opportunity to attract employees and benefits as a way to stay competitive. So in this post, I thought it was timely to share some of the ways employers can tackle healthcare offerings without breaking the bank.
Health Care Options For Small Business
As PT Burnham said, “The foundation of success in life is good health,” so let’s start with a brief dose of reality and then get down to assessing your options for 2020. The 2020 Large Employer Premiums .are estimated to be 5% higher on average compared to 2019 (premium figures for small employers not available). Small business owners have the challenge of providing health care for their staff within their budget. Fortunately, there are several ways for employers to deal with health care, and the tax law provides rebates to reduce costs.
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Here’s a summary of health coverage options and a brief discussion of tax benefits.
Despite the repeal of the individual order, the employer order requiring certain employers to “play or pay” will continue to apply. If you have at least 50 full-time and full-time equivalent employees, you must provide an applicable large employer (ALE) and affordable minimum essential health coverage (meaning the employees’ share of premiums does not exceed a certain percentage of their household income ) or to pay a fine.
When deciding whether to play or pay, keep in mind that the penalty amounts (there are different penalties) are increasing for 2020. And if you play, cost management initiatives — shopping, increasing deductibles, using virtual care — can help The premium price will be reduced.
Even if you’re not an ALE, small companies want to offer health coverage to their employees. They want their workers to be healthy. And in today’s tight job market, health care is an important asset, with most employees saying their coverage is a key factor in deciding whether to stay with a company. Here are some affordable options to consider:
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Health Savings Accounts (HSAs). If you offer employees a high-deductible health plan (HDHP), it’s a low-premium policy that requires employees to pay out-of-pocket up to their policy’s deductible before coverage begins. The HDHP is then combined with an IRA-like savings plan. called a Health Savings Account (HSA). You can decide whether to contribute to the employee’s HSA or allow the employee to do so. If you make contributions, they are tax deductible and not subject to payroll tax as tax-free fringe benefits.
Qualified Small Employer Health Reimbursement Arrangements (QSEHRA). Instead of a company receiving a group plan, small employers (not ALEs) can reimburse employees up to a certain dollar amount for their individually obtained health coverage. Reimbursement limits have not yet been announced for 2020. For 2019, they are $5,150 for individual coverage only and $10,300 for family coverage.
Individual Coverage Reimbursement Agreements (ICHRA). Beginning in 2020, employers of all sizes can reimburse employees for their individual health coverage premiums. The employer, not the government, sets the reimbursement limit. ICHRA should be provided on a non-discriminatory basis. And the system must meet other requirements, including notifying employees of the plan and verifying coverage, to receive reimbursement. Similar to QSEHRA but with some important differences.
Except for Health Care Reimbursement Arrangements (EBHRA). From 2020, employers who want to offer some additional coverage up to $1,800 can do so with EBHRA to help pay for non-covered costs (eg vision or dental care). It supplements and does not replace group health cover.
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In 2018, the US Department of Labor issued a final rule that allows trades, trade associations and other groups to join together to offer affordable group health coverage to their members. The groups, called association health plans (AHPs), are treated as one large employer and, due to economies of scale, can command favorable premiums.
Premiums paid by employers are fully tax deductible. What’s more, employer-provided health care is a nontaxable fringe benefit that is exempt from payroll taxes, but the employer must report it on the employee’s W2.
Instead of a deduction, small employers who purchase coverage through the government’s Small Business Health Options Program (SHOP) (or through non-SHOP insurers) may be eligible for a 50% tax credit for premiums paid to their employees. Details about this tax credit are in the instructions for Form 8941.
Because of the wide range of options for obtaining health care, small business owners have a lot to think about. But they need to do it soon so they can choose their option and shop now to have coverage until January 1, 2020.
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Barbara Veltman, called “the small business tax guru” by the Wall Street Journal, J.K. The small business taxes of Lasser and J.K. Lasser’s Guide to Self-Employment and a Trusted Advocate for Small Businesses and Entrepreneurs. He has appeared on numerous radio shows and television programs, including Fox News, CNN and The Today Show. She has been named one of the 100 Small Business Influencers in the US five years in a row. Learn more by visiting Big Small Business Ideas.
This blog is written and maintained by the Business Information Services team. Here you’ll find business tips and credit education articles along with the latest small business news and trends. Thinking of offering employer-sponsored health insurance? Of course, you can offer traditional group health insurance to your employees, but that’s not your only option. There are several small business health insurance options that you can choose from.
Read on to learn about small business wellness options to help you choose one that will keep your employees (and budget) happy.
Health insurance benefits are available to many workers… many… but not all workers have the opportunity to enroll. And those who have access to benefits don’t always take advantage of them.
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According to the Bureau of Labor Statistics, 69% of private sector workers have access to medical benefits. And only 49% participate in them.
This low participation rate may mean that the worker receives benefits through a spouse or parent (if they are still dependent). Or it may mean that the benefits offered do not meet their needs and they seek insurance themselves.
Many small businesses find it difficult to offer competitive advantages while keeping costs low for your employer. Unlike companies that employ hundreds of workers, small businesses don’t get the lowest rates for insurance plans.
And on top of that, employers pay about $5,946 for single coverage and $14,561 a year for an employee with family coverage.
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Fortunately, small business owners have some program options that are not available to large employers (for example, employers with 50 or more employees).
For many, a traditional group plan comes to mind when they think of health insurance. Traditional group health insurance is where employers choose a plan or plans to offer to employees. Usually the employer pays part of the bill and the employee pays the other part.
Employee bonuses are pre-tax deductions, meaning you deduct them before taxes are withheld from the employee’s wages. The employee is also responsible for the co-payments and deductibles associated with the plan they have selected.
The QSEHRA, or Qualified Small Employer’s Reimbursement Scheme, is only available to employers with fewer than 50 full-time employees. So what is this?
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QSEHRAs are traditional alternatives to group health plans that allow employers to reimburse employees for individually incurred premiums and qualified medical expenses.
HRAs typically reimburse employees for certain medical expenses, such as drugs or crutches. But the QSEHRA is a standalone HRA that reimburses employees’ premiums.
ICHRA stands for Individual Health Care Reimbursement Agreement. ICHRA is a health insurance scheme launched in January 2020.
Unlike traditional health insurance plans, employers with ICHRA do not provide plans directly to employees. Instead, employees choose their own health insurance plan and their employer reimburses them for some or all of the costs under their plan.
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Individual coverage health reimbursement systems are not specific to small businesses. Any employer can offer them, but employers with 50 or more employees (ie, applicable large employers) must make sure the plan is affordable as determined by the IRS.
Do you think this small business health opportunity program is good? Before choosing this program for your workplace, keep the following in mind:
Excluded benefit HRA is a supplementary insurance option launched in January 2020. Excluded HRA can only be offered if the employer also offers a conventional health insurance plan.
HRAs with excluded benefits provide coverage for premiums and expenses
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