Learn more about how much responsibility you have with employer health insurance.
A number of small business owners fear that offering employer health insurance will hurt their bottom line. For instance, they worry that paying a share of premiums will hurt profits or even force them to reduce the number of workers they must cover. On the other hand, an eHealth survey found that many employers believed a small business health plan benefited their business by reducing turnover and keeping employees healthy.
Before any small business owners can weigh the pros and cons of providing group medical benefits, they should understand all of the costs and benefits of their choice to provide employer health insurance or not. Also, some employers may pay higher taxes or miss tax credits if they fail to offer qualified group health plans.
How much does employer health insurance cost?
Obviously, the type of plan, insurance company, employee census, business location, and many other factors will impact the price of health insurance from an employer. The eHealth survey of small business owners did uncover some interesting statistics about average premiums for employer health insurance when compared to individual or family medical plans:
- Coverage with employer health insurance averaged $284 a month per person.
- Average Marketplace plans for individuals averaged $321.
These statistics support the idea that health insurance from an employer can help make coverage affordable for employees. The survey also found that many small business owners wanted to offer a group plan to their workers because they hoped to do the right thing by making medical care affordable. Employer health insurance may help retain employees because it’s a valuable benefit that can reflect well upon companies that offer it.
How much does employer health insurance cost a small business?Only companies with at least 50 full-time employees and that qualify as an ALE, or applicable large employer, risk a penalty if they don’t offer qualified group health insurance.
The IRS defines an ALE in great detail. These are some examples of ALE qualification besides the minimum number of employees:
- The IRS bases qualification on the average employee census for each month of the previous year.
- An ALE has to pay a penalty if at least one employee gets a tax credit for their own individual insurance from the Marketplace.
- To keep from paying a penalty, the plan has to meet government standards for affordability and value.
Small business costs and benefits of employer health insurance
If a small business owner employs fewer than 50 people, the IRS won’t penalize them. In fact, the government will even allow a small business with fewer than 25 full-time employees to take a small business tax credit for offering qualified employer health insurance.
Some other tax credit qualifications include:
- To qualify, the company’s average salary must not exceed $49,999.
- The business has to pay at least half of each employee’s premiums.
- The company has to offer health insurance to all full-time employees.
While small employers do need to pay at least half of the premiums to qualify, they can get some of this expense back with tax credits and possible deductions for business expenses. Businesses may enjoy other benefits that could include lower turnover, good will, and healthier employees.
This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.
Where to shop for small business health insurance plans
Business owners can quickly search on eHealth to find local plans that may help them qualify for tax credits. The quick health plan quote box on eHealth also provides direct access to information about all kinds of health plans for businesses, families, and individuals. These resources can help businesses and consumers find plans to fit a variety of budgets and get the right information to make an informed decision.