Small business health insurance is a huge problem for owners who are already struggling to make payroll while also losing the most coveted workers to larger firms. Indeed, as a small business owner, you probably don't need to be told about the dilemma and financial obstacles of offering health insurance to your employees. But there may be certain factors that you haven't yet considered when it comes to this enormous business decision. From employee perceptions to healthcare reform, here is some of the most pertinent information you should know about health insurance for small business.
Attracting Employees with Small Business Health Insurance
Employee expectations for your specific industry will play a huge role in the relative wisdom of offering health insurance to your employees. You probably don't need to offer health insurance to attract a competent worker to run the cash register, but you might as well close up shop if you're trying to attract experienced truck drivers without offering some level of health benefits. Typically, retail companies are twice as unlikely to offer health insurance as manufacturing companies, while agricultural companies are four times as unlikely to offer health insurance as finance and real estate companies.
Before you make a decision, be sure to know where your industry falls in this spectrum of uninsured rates. And when it comes to attracting employees, don't forget to emphasize that employees who work for small businesses report greater job satisfaction than employees who work for large firms. As a small business owner, you should be able to make the case that you can offer better work flexibility, greater visibility to senior management, and more opportunities for promotions and other rewards.
Higher Salaries: Not Always the Best Idea
Many entrepreneurs don't offer small business health insurance benefits because they want employees to decide how best to use their compensation. This may sound like a commonsense solution, but many employees would rather have the health benefits. According to a 2008 survey from the Employee Benefit Research Institute, when employees were asked if they would prefer $7,500 in employment-based health insurance coverage or an extra $7,500 in taxable income, 76 percent chose the health coverage.
Compromises for Health Insurance for Small Business Compromises
- The Piggyback Option: As a small business, you can probably price insurance plans cheaper than individual health insurance rates. Often, you can offer these rates to employees without actually paying into the plans. It's not exactly offering health insurance to your employees, but it's a lot better than sending the message that they're on their own.
- The Self-Insurance Option: Instead of paying an insurance company, you can simply cover basic healthcare services directly from company revenues and then buy into an excess-risk policy that will cover major healthcare expenses. This allows your company to enjoy greater cash flow and an incredible amount of versatility in offering coverage that matches your employees' healthcare needs.
What Healthcare Reform Would Mean for Small Business Health Insurance
Healthcare reform should be a positive for small business owners. If your industry employs a workforce with lower salaries, your employees may be entitled to subsidies to help buy insurance. Better yet, your business is likely to receive tax credits for offering health insurance to employees. That said, the real crux for small business owners is how potential healthcare reform will define a "small business." If your enterprise doesn't qualify as a "small business," there will be new requirements to contribute to employee coverage and penalties for companies that don't.
The House and Senate versions of healthcare reform use different formulas when determining which businesses are exempted from employer requirements. The House version exempts businesses with annual payrolls of $500,000 or less, and uses smaller penalties for businesses with payrolls of $500,000-$750,000. The Senate version gives exemptions to businesses with fewer than 50 employees. The President's Proposal, meanwhile, uses the Senate version of 50 employees, but softens the penalties paid by small businesses who do not offer coverage.
Final Thought: Don't Wait to Get Quotes
It may make sense to wait to see how healthcare reform legislation plays itself out before making any final decisions, but there's no excuse for waiting to get quotes for health insurance for small businesses. First, scary rate hikes are likely coming whether reform passes or not. Plus, you might be surprised by how affordable some employer-based insurance plans are, especially for some of the compromise options discussed above. Every day you wait to look at insurance quotes is another day that a larger firm retains the inherent hiring advantage that comes from offering health benefits.
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