Health insurance is just one more thing of which you, as a business owner, must stay atop. And that’s not easy, given what seems like constantly changing rules and regulations. But fear not: here’s what you need to know about small business health insurance in 2021.
The Issue
If you have fewer than 50 full-time employees, you don’t have to provide group coverage. Moreover, if you as a small business do choose to provide it, you are likely eligible for a two-year tax credit.
Any more than 50 workers, though, and the government deems you a large employer that must provide minimum, affordable coverage, meaning insurance that costs no more than 9.83% of household income. If you do not provide it, the government will heavily penalize you.
What About That Tax Credit?
To qualify, you can’t have more than 25 employees, and the average salary you pay your workers must be under $56,000. In addition, you’re required to pay at least half of your employees’ premiums and buy your plan on the Marketplace or an affiliate like eHealth.
In general, the smaller your business, the higher your tax credit. For example, to qualify for the top tax credit, you’d need fewer than 10 employees with an average salary of under $26,000.
Can I Still Buy Group Health Insurance if I’m Ineligible for the Tax Credit?
Yes. It might be possible for you to, as a business expense, deduct what you pay for monthly employee premiums from your federal taxes. As a small-business owner, you may also want to consider asking your workers to shell out for part of monthly premiums. Where to find the top options? Check out eHealth.
What Do I Need to Know Tax-Wise?
If you’re offering group health coverage, you’re required to report to the IRS the value of each employee’s policy.
Also, for any pay that exceeds $200,000, you must withhold and report an extra 0.9%. Further, you’ve got to contribute, via a fee, to the Patient-Centered Outcomes Research Trust Fund.
What Incentives Do I Have to Offer Insurance?
Well, how about luring and retaining workers? All things being equal, insurance provision just may be what nabs that top recruit. You can fold coverage into a compensation package.
Offering health insurance may also separate you from other businesses, since just 55% of firms with fewer than 100 workers do so. Even when they must cough up a portion of the premiums, employees usually sign on to the group plans.
And how about this incentive: healthier employees. Offering insurance could bolster your bottom line, since employees who aren’t ill show up to work and are generally more productive.
Note that the American Rescue Plan Act of 2021, aimed at helping businesses through the COVID-19 pandemic, provides small business incentives that may make up for some of the cost of providing insurance.
The takeaway is that while you may not be legally bound to offer your employees coverage, doing so may be advantageous overall.
Where Do I Find Insurance?
For small business health insurance your best bet is eHealth, an online marketplace. If you pop in some info such as how many employees you have and your company’s zip code, you can get instant insurance quotes. You can also size up plans against other offerings.
Now you know what you need to know about small business health insurance. Providing your employees with insurance may not be as troublesome or expensive as you might think, and it does offer benefits such as a happier, healthier and more productive workforce.
