Health care benefits are optional for most small employers, but are vitally important to most employees. Employers of all sizes need to be aware of the pros and cons of offering health benefits to their employees.
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Benefits are a critical part of an employee’s compensation package, and health care benefits are the crown jewel. Health care benefits, along with time off benefits, are the most popular benefits for employees. Every employer should at least consider whether to offer these types of benefits, and in some cases, employers are required to offer health care to remain competitive with other companies for the most talented employees and avoid penalties imposed by health care reform. Another reason many employers choose to offer health care benefits is so they can take advantage of less expensive health insurance than they could get on their own, as well as tax breaks for company contributions.
Unless you are an employer in Hawaii, you are not required by state law to offer health insurance benefits to your employees. Hawaii is the first state to require employers to provide health insurance to employees. The law, the Prepaid Health Care Act, was passed in 1974 and requires employers to provide health insurance to all full-time employees, either through an indemnity plan or an HMO. (The requirement that massachusetts employers with more than ten employees make a matching contribution toward the costs of full-time employee health insurance coverage or pay a matching contribution per employee is no longer in effect as of July 1, 2013, due to the implementation of the federal health care reform).
The Patient Protection and Affordable Care Act and related legislation require employers with 50 or more full-time employees (or a combination of full-time and part-time employees equal to 50 full-time employees) to offer adequate health services. coverage or be subject to assessment if your employees receive premium tax credits to purchase their own insurance. This mandate will take effect beginning in 2015. In contrast, beginning in 2010, small businesses with fewer than 25 employees may be eligible for a tax credit for purchasing health insurance for their employees.
If you make the decision to offer health insurance benefits, keep in mind that you bring into play a whole series of laws that will tell you what coverage you have to offer and how you must offer it. therefore, the first decision to be made is whether or not to offer health insurance.
pros and cons of offering health care benefits
There are a number of advantages to offering health benefits to your workers. These are some of the most important:
- Attract and retain the most qualified employees. Whether health insurance is absolutely necessary to attract and retain the most qualified employees will depend on factors such as whether your competitors or other employers of similar size in your area are offering health insurance.
- Avoid health care reform reviews. The Patient Protection and Affordable Care Act and related legislation require employers with 50 or more full-time employees (or a combination of of full-time and part-time employees which is equivalent to 50 full-time employees) to offer adequate health coverage or be subject to assessment if your employees receive premium tax credits to purchase their own insurance. this mandate will come into effect from 2015.
- Get a tax break. You can offer employees something that increases their compensation package and yet allows you an income tax deduction for the contribution, so your cost of disbursement is less than the value of the benefit to the employee. Self-employed individuals can deduct 100 percent of their health insurance premium costs as a business expense. You can always deduct 100 percent of your employees’ premiums. if the business is incorporated, all costs of its own insurance and that of its employees are deductible.
- Take advantage of the small business health care tax credit. Small businesses with fewer than 25 employees may be eligible for a tax credit for purchasing health insurance for their employees.
- Give employees group buying power. Even if you decide not to contribute anything to your employees’ health insurance, you can offer them the opportunity to earn group rates through your company. In addition, small businesses (generally those with 50 or fewer full-time employees) can purchase health care coverage through a government-run insurance marketplace established specifically for them: the Small Health Options Program. companies (store).
- Ensure the well-being of your workers. Insurance plans offer preventive care that can keep employees healthy and on the job. If employees don’t get preventive care and annual physicals (which they can’t do if they don’t have insurance), you could end up having more employees out for long periods of time with serious illnesses.
- Costs. Health care costs have increased tremendously in recent years. As a result, costs are not only draining valuable resources from many small employers, but the uncertainty makes financial planning extremely difficult.
- the sometimes fraught business of sharing costs with employees. there is a way for a small employer to control costs and bring certainty back to the process: impose any additional costs on employees . while that may solve financial problems, it creates many others. Even if you don’t want to charge all the costs to the employees, it is inevitable to charge some of the costs to them.
- administrative issues. Although the insurance company you buy health insurance from will usually act as the plan administrator, you will have to choose the insurer and then spend some of your time filling out forms . , remittance of premiums and act as an intermediary between the employee and the insurer, among many other tasks.
- Potential Liability. The potential for liability exists for selecting a health care provider who negligently engages an employee. while this risk is small and should not be the reason behind a decision not to offer health insurance, you should be aware that several employers have been sued by their employees for what they claim was their employer’s carelessness in selecting a provider .
There is also a downside to offering health benefits. Some of the disadvantages of offering health benefits are: