- February 27, 2018
- Posted by: JPFarley
- Category: Healthcare Costs
Figuring out employee health benefits can be difficult if you don’t have any prior business experience. Here’s a new owner’s guide to get you started.
Your staff is the most important asset of your small business.
These are the people you will rely on to grow your business. Ensuring a high level of employee health and satisfaction will encourage lasting loyalty from your staff.
The market for skilled, reliable labor is getting more competitive all the time. If you want the best people to come to work for you, you’re going to need to offer more than a fair wage.
That means offering benefits.
Setting up a benefits plan for your employees can be daunting, particularly for new business owners. You need to find a balance between the cost to your business. You’ll need to consider the cost to your employees in terms of premiums and out-of-pocket expenses.
And you’ll want to provide quality coverage that your employees will be happy with.
A breakdown of the common options will help strike a balance between your investment and your employees’ satisfaction. Read on to learn more.
Employee Health and Benefit Obligations Under the Law
Certain obligations must be met regardless of the size of your business.
Under Federal Law, all employers must pay into Social Security at the same rate as their employees. The Social Security Administration offers tools to help business owners with this process.
Certain states may require you to pay for Unemployment Insurance. Requirements vary from state-to-state, so you’ll want to check with your state’s workforce agency to determine if you have any obligations.
Certain states also require that employers pay for Disability Insurance. It allows for partial wage replacement for employees affected by non-work related illness or injury.
California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico all require businesses to pay into Disability.
Beyond the legal obligations, there are additional benefits you may choose to offer. They will cost you, but they’re an effective means of encouraging top-tier recruitment and retention.
Offering health benefits to your employees may also make them more productive. A 2015 study found a positive correlation between employee happiness and productivity. Preventive health care allows for healthier and overall happier employees.
Encouraging greater employee health makes your workers feel cared for and more loyal to the company.
Types of Employee Health Benefits
There are a few options you may choose to offer. Which one is right for you will depend on the size of your business.
Health insurance is one of the most common benefits offered by employers.
Under the Affordable Care Act, businesses with more than 50 full-time employees are obligated to offer health insurance.
Even if your business doesn’t exceed this limit, offering health insurance goes a long way. It makes your business look more attractive.
Because health insurance is a complex topic, you’ll need to ask yourself some questions before committing to a plan.
First, estimate how many employees would actually sign up. You’ll need to know what kind of premiums they would prefer. And you’ll need to find a balance between cost-effectiveness and comprehensiveness.
Then there’s the decision of whether to go with a Preferred Provider Organization (PPO) or a Health Maintenance Organization (HMO).
To simplify the difference, an HMO restricts employees to doctors that are part of their network. There are typically other restrictions as well, such as needing a referral to see a specialist. The upside is that as part of the agreement between the HMO and its in-network doctors, costs are kept low for employer and employee.
A PPO is perhaps what most people imagine when they think of health insurance. With a PPO your employees are free of most of the restrictions imposed by HMOs. The downside is that you can expect higher premiums.
You’ll need to decide which option is right for your business. Many employees prefer PPOs for the freedom of choice they allow. If you go with a PPO, you’ll have to decide how much of those premiums you’re willing to help your employees with.
Third-party services are available to help you provide PPO services if you choose.
Dental and Visual Insurance
Dental and Visual Insurance can be an attractive employee health option.
Both can be acquired at a relatively low cost. This makes them a suitable offering if you can’t afford to offer health insurance.
It also makes a fine supplement to health insurance offerings if you feel the need to sweeten the deal.
Alternative Health Benefits
You may offer certain alternative benefits if full insurance coverage isn’t in your price range.
One option is to offer a Health Reimbursement Account (HRA).
An HRA is an account funded and administered by the employer. They allow employees to be reimbursed for things like premium costs and out-of-pocket expenses. They’re meant to be used along with a conventional employee health plan.
Employers may also opt to offer Flexible Spending Accounts (FSA). An FSA is a fund that allows employees to save money for medical expenses using pre-tax dollars.
Similar to the FSA is the Health Savings Account (HSA). HSAs are accounts specifically for people with high-deductible health plans. The idea is that employees can mitigate their high deductibles by saving pre-tax dollars in their HSA.
Employer-Assisted Health Care Is Increasingly Becoming an Expectation
The market for quality workers is going to get more competitive with time. Offering some form of employee health benefit is now an expectation.
Small businesses are not typically obligated to provide a health plan by law. But those that opt out will have a hard time attracting and keeping capable workers.
It may be prudent to outsource the management of your health benefits to a third party. J.P. Farley offers a range of plans for small business owners. They also provide administrative tools and other miscellaneous resources.
Firms like these will mind your employee health benefits for you so that you can focus on growing your business.