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.
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.
Do Employers Have To Cover Family Members
With a group insurance plan, employers usually offer coverage to legal spouses and dependent children.
The ACA requires you to provide dependent coverage to age 26. If you do not, you might have to pay a penalty. You can choose to cover dependents over 26 years old, but you are not required to.
Employers are not obligated to pay premiums for dependents. However, you can contribute towards premiums for dependents. Or, you can require employees to pay the full premium cost for dependents.
You are not required to cover your employees spouses. Some companies decline coverage when a spouse can receive insurance from their own employer. Or, they might charge the employee more to cover the spouse.
According to the Kaiser Family Foundation, most small businesses pay part of their employees family plans. Compared to single plans, small employers usually pay the same amount or more:
- 45% provide the same dollar contribution for single and family plans
- 45% make a higher dollar contribution for family plans than single plans
- 3% vary their approach with the class of the employee
- 7% take a different approach
On average, small businesses contribute more to single coverage but less for family coverage than large companies do. Employees of small firms pay $1,021 for single coverage vs. the large firm cost of $1,176. Small firm employees pay $6,597 for family coverage vs. the large firm cost of $4,719.
Employer Considerations In Offering Health Insurance To Employees
If an employer decides to offer health insurance to its employees, the employer will need to pick a provider for its health insurance. It will also need to decide the amount of coverage that it will offer to employees. There will probably be different levels of benefits that the provider will offer and the ultimate consumer will be able to choose from.
The Employee Retirement Income Security Act of 1974 regulates the types of benefits and coverage requirements of health insurance offered by employers. Health insurance law protects employees against employers cancelling their health care coverage or restricting their access to health care. In general, the goal of federal regulation on job-based health insurance plans is to make sure that all job-based health insurance plans meet minimum standards for coverage.
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Health Insurance From An Employer
In the U.S., a majority of people under the age of 65 have health insurance coverage through an employer-sponsored health plan either from their own job or through a family member, such as a spouse or parent. However, not all employers offer health insurance to their employees. With most job-based health insurance plans, the employer pays a portion of the premiums, and an employee’s contribution is paid on a pre-tax basis.
The Better Option: Health Reimbursement Arrangements
Being on a group plan is like requiring everyone to wear the same size suit. Since everyone has their own needs and preferences when it comes to their health, doctors, and prescriptions, an HRA allows each employee to choose whats best for them.
A health reimbursement arrangement allows business owners to reimburse their employees on a tax-free basis for medical expenses, like health insurance premiums or qualified medical expenses.
Most importantly, HRAs allow business owners to avoid the penalties and fees and taxes we discussed earlier in the post.
The mechanics of an HRA are surprisingly simple. At a high-level, employees pay for their own health expenses and employers reimburse them. Heres how it works:
There are currently three “flavors” on the market.
QSEHRA:a Qualified Small Employer HRA allows small employers to set aside a fixed amount of money each month that employees can use to purchase individual health insurance or use on medical expenses, tax-free. This means employers get to offer benefits in a tax-efficient manner without the hassle or headache of administering a traditional group plan and employees can choose the plan they want. The key thing to remember here is that all employees must be reimbursed at the same level.
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Technology Advancements Make It Easier To Customize Plans To An Individuals Unique Needs
Technology has unlimited potential to bridge the gap between supply and demand in new and creative ways. Its happening everywhere. Netflix has changed the way we think about TV and movies. Amazon has changed the way we think about shopping. The list goes on and on, with new names being added every day.
Healthcare will be no exception traditional healthcare experiences will also face disruption. There are consumer pain points everywhere you look in healthcare. And where there are pain points, there is demand for new solutions. Technology has great potential to help improve healthcare experiences, build fluency, and guide consumers through healthcare decisions, delivering personalized recommendations to help consumers save money on coverage and care.
But we have only scratched the surface of what is possible.
Where Can I Buy Private Health Insurance
A good place to start looking for coverage is the Health Insurance Marketplace created in 2014 by the Affordable Care Act . On the marketplace for your state, you can look through the details of private health insurance plans, and compare the cost and benefits of each. If your state does not have its own marketplace, use Healthcare.gov.
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Do You Give Your Employee A Benefit An Allowance Or An Expense Reimbursement
Your employee has received a benefit if you pay for or give something that is personal in nature:
- directly to your employee
- to a person who does not deal at arms length with the employee
A benefit is a good or service you give, or arrange for a third party to give, to your employee such as free use of property that you own. A benefit includes an allowance or a reimbursement of an employees personal expense.
An allowance or an advance is any periodic or lump sum amount that you pay to your employee on top of salary or wages, to help the employee pay for certain anticipated expenses without having them support the expenses. An allowance or advance is:
- usually an arbitrary amount that is predetermined without using the actual cost
- usually for a specific purpose
- used as the employee chooses, since the employee does not provide receipts
An allowance can be calculated based on distance, time or something else, such as a motor vehicle allowance using the distance driven or a meal allowance using the type and number of meals per day.
A reimbursement is an amount you pay to your employee to repay expenses they incurred while carrying out the duties of employment. The employee has to keep proper records to support the expenses and give them to you.
You Probably Wont Qualify For Marketplace Savings
If you have an offer of job-based coverage and enroll in a Marketplace plan instead, you probably wont qualify for a premium tax credit and other savings even if your income would qualify you otherwise.
Youd have to pay full price for a Marketplace plan even if you dont enroll in the insurance your employer offers.
If you have an offer of job-based insurance, the only way youll qualify for savings on a Marketplace plan is if your employers insurance offer doesnt meet minimum standards for affordability and coverage. Most job-based plans meet these standards.
“Affordable” plans and the 9.61% standard
A job-based health plan is considered “affordable” if your share of the monthly premiums for the lowest-cost self-only coverage that meets the minimum value standard is less than 9.61% of your household income.
You may pay more than 9.61% of your household income on monthly premiums if youre enrolled in your employers spouse or family coverage. But affordability is determined only by the amount youd pay for self-only coverage.
The minimum value standard
A health plan meets the minimum value standard if it pays at least 60% of the total cost of medical services for a standard population and offers substantial coverage of hospital and doctor services.
In other words, in most cases a plan that meets minimum value will cover 60% of covered medical costs. Youd pay 40%.
Most job-based plans meet the minimum value standard.
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How Much Do Companies Pay For 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.
Gifts Awards And Long
A gift or award that you give an employee is a taxable benefit from employment, whether it is cash, near-cash, or non-cash. However, we have an administrative policy that exempts non-cash gifts and awards in some cases.
Cash and near-cash gifts or awards are always a taxable benefit for the employee. A near-cash item is one that functions as cash, such as a gift certificate or gift card, or an item that can be easily converted to cash, such as gold nuggets, securities, or stocks. For more information, see Rules for gifts and awards and Policy for non-cash gifts and awards.
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Can Employers Receive A Tax Credit For Paying Premiums
As a small business owner offering health coverage, you might be eligible for a small business health insurance tax credit. The percentage of health insurance you pay plays a role in whether you can receive the credit.
To be eligible, you must meet the following requirements:
- Pay premiums under a qualifying arrangement
- Have fewer than 25 full-time equivalent employees
- Pay average annual wages of less than $50,800 per full-time employee
- Buy coverage through the SHOP Marketplace
The maximum credit amount is 50% of your contribution towards the employee premiums . The credit is available for a maximum of two years.
The size of the tax credit is based on a sliding scale. Those with lower employee wages get a larger credit.
The SHOP Marketplace can calculate an estimated credit that is paid to your insurance company. The advanced tax credit lowers the amount you pay on monthly premiums. You can also choose to receive the entire tax credit when you file your tax return.
If the credit amount is more than your tax liability, you receive a refund for the difference. If you received an advanced tax credit and your allowable credit is less than estimated, you pay the difference or subtract it from your refund.
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How Many Small Businesses Offer Employer
When considering the costs of health coverage for employees, small business owners may wonder how common it is to provide an employer-sponsored plan.
According to the KFF survey, 57 percent of all firms offered health benefits, while 71 percent of firms with 10 to 199 workers offered health coverage in 2019. The percentage was lower for very small groups, with the survey noting that only 47 percent of firms with 3 to 9 workers offered health coverage to their employees.
Source: Kaiser Family Foundation 2019 Employer Health Benefits Survey
Given that only about half of small businesses offeremployer-provided health insurance, companies that do offer this popular employee benefit have a competitive advantage. Offeringhealth insurance may be one way to stand out from other employers whilecontributing to a companys recruiting strategy and employee benefits package.
Overall, the KFF survey notes that trends in the employer-providedhealth insurance market have been moderate over the past several years.Premiums have increased annually, but in the low to mid-single digits,and cost sharing, especially for deductibles, has meaningfullyincreased over time.
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What If The Health Insurance Through My Employer Is Too Expensive
Many people run up against the problem of their employer-provided health insurance seeming way too expensive. Especially when it includes covering their entire family. Unfortunately, if the costs are still underneath approximately 9.5% of your annual household income, it is still affordable by legal standards, and you still arent eligible for subsidies through the Marketplace.
If you find it cost-prohibitive to ensure your children through your job-based health plan, you may have other options. Depending on your income level, you might be able to get them coverage separate from yours through the Childrens Health Insurance Program . CHIP is the federal program that matches federal dollars with state dollars to provide healthcare for low-income families who earn too much to qualify for Medicaid. Children who live in a household where the household income meets the qualifications can enroll in CHIP. And this is true even when parents get or accept an insurance benefits offer from their employer.
You can see if you or your family qualifies for Medicaid or CHIP by entering your zip code and income information here.
Cancel Or Waive Penalties Or Interest
The CRA administers legislation, commonly called taxpayer relief provisions, that allows the CRA discretion to cancel or waive penalties or interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control.
The CRAs discretion to grant relief is limited to any period that ended within 10 calendar years before the year in which a request is made.
For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2018 must relate to a penalty for a tax year or fiscal period ending in 2008 or later.
For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2018 must relate to interest that accrued in 2008 or later.
To make a request, fill out Form RC4288, Request for Taxpayer Relief Cancel or Waive Penalties or Interest. For more information about relief from penalties or interest and how to submit your request, go to Taxpayer relief provisions.
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Additional Fees When You Get Care
Each time you get care, you may need to pay additional fees. Which of these fees you have to pay and how much you have to pay depend on your plan some plans only have copayments, while others have copayments, co-insurance, and deductibles.
Copayments are a set amount you have to pay for a medical visit or service. The exact amount of the copayment varies depending on the service you get: medications, visits to specialists, lab tests, X-rays, emergency room visits, and other services can all have different copayment amounts.
Under the plan her employer offers, Eliza, her husband, and her son have to pay $40 each time they visit a doctor, $20 for each prescription drug, and $30 for each lab test.
Co-insurance is a set percentage of the cost of a visit or service that you must pay.
Under the plan her employer offers, Eliza, her husband, and her son have to pay 20% of the cost of any surgery. So, if Eliza has surgery costing $5,000, she has to pay $1,000 and her insurance covers the rest.
A deductible is a set amount of money that you pay out of your own pocket each year before the insurance company will begin to pay for certain services, including hospital care, emergency room visits, and brand-name prescription drugs. Once you have paid the deductible, you do not have to pay it again until the next calendar year.
Employment Insurance Premium Rebate
As an employer, you may be eligible for a reduction in the employer EI premium rate that you use to calculate your share of the EI premiums if you offer income protection coverage, such as a wage loss replacement plan or other income maintenance plan, to your employees that reduce the EI benefits payable to an employee. For more information, go to How to reduce the EI premium rate if you provide your employees with a short-term disability plan.
If you are granted an EI premium reduction, you will calculate your employer’s EI premiums using a rate that is lower than the standard employer rate of 1.4 times the employees’ EI premiums.
You have to return 5/12 of any savings to your employees in the year in which you received the EI premium reduction, or within the first four months of the following year. This savings can either be given to your employee in cash, such as a cash allowance or a cash rebate, or indirectly through increased employer contributions to an employee’s health and welfare trust, group sickness or accident insurance plan, private health services plan, or in any other manner. These indirect benefits will only be tax-free if they are given to the employee in the form of a benefit specifically exempt from taxation under paragraph 6 of the Income Tax Act.
If the benefit is taxable you must include it in your employee’s income in the year the employee received it. For more information, see Benefits chart.
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