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5 Reasons Why Your Small Business Should Offer Health Insurance

Small businesses with less than 50 employees may think providing health insurance for their employees isn’t worth the hassle.

Cost concerns, administrative burdens, and uncertainty about the future can all cause small to midsize business (SMB) owners to pause when it comes to investing in health insurance. However, there are some very good reasons to do it anyway, especially if done through a PEO partner.

Health insurance not only adds to employee satisfaction and loyalty, but is also far more affordable, flexible, and streamlined than some owners might believe.

Here are 5 reasons why adding health insurance to your employee benefits package is a good idea for your business.

1. Enhancing Employee Satisfaction and Loyalty

High turnover doesn’t just result in extra time spent recruiting and training new employees. It’s damaging to employee morale and makes it far more difficult to establish a robust and productive company culture.

Avoiding high turnover is a complex task, but one factor that is certain to help is a competitive benefits package, and health insurance lies at the heart of what makes a benefits package great for employees:

  • 85% of millennials consider healthcare benefits to be “absolutely essential” and “very important”
  • Additionally, 78% of employees say they would stay with a company because they value the benefits offered

There are several reasons for this, but all of them boil down to a single factor: employees who are confident that they and their loved ones are taken care of and healthy will experience less stress, giving them more energy to focus on their job.

Beyond that, adding benefits can be a key contributor to your company’s culture. Employees who know their employer makes an effort to keep them healthy and happy are more likely to reciprocate this effort, increasing the chance they will contribute to the culture and values you’re trying to implement.

2. Attracting Top Talent With Health Insurance

Health benefits are increasingly recognized as a primary factor for candidates when choosing between companies to work for.

According to one survey, 80% of job seekers would prefer a job that offered benefits over an identical job that offered no benefits — even with a 30% higher salary.

Benefits are Especially Critical for Small and Medium-Sized Businesses

Small businesses can often find themselves at a disadvantage in a fiercely competitive job market, especially companies in demanding industries like tech. Large corporations may have more resources to invest in salaries and beefy benefits packages, but this doesn’t mean small businesses can’t compete.

By utilizing the services of a PEO, small businesses can gain access to healthcare plans and rates typically reserved for large companies. This can result in more favorable rates for companies that use benefit plans offered by a PEO.

3. Tax Incentives 

One of the most straightforward benefits of offering health insurance is that small businesses' premiums are generally tax deductible. The Small Business Health Care Tax Credit is one accessible example.

Small Business Health Care Tax Credit Eligibility

The eligibility criteria are straightforward. The business must:

  • Have fewer than 25 full-time equivalent (FTE) employees
  • Pay an average annual salary of approximately $56,000 or less per employee
  • Contribute at least 50% of employees' health insurance premiums
  • Purchase insurance through the Small Business Health Options Program (SHOP) Marketplace

Financial Benefits

The tax credit is substantial, covering up to 50% of the premiums paid by small businesses and up to 35% for tax-exempt employers.

Moreover, the credit is designed to benefit the smallest businesses — those with fewer than 10 employees - and average annual wages of $27,000 or less receive the highest credit.

If a business does not owe taxes for the year, the credit can be carried back or forward to other tax years, and any premium amounts paid above the credit can still be deducted as a business expense.

4. Comprehensive Coverage is Accessible and Affordable

Due to limited buying power, small businesses often struggle with the higher costs of health insurance. However, by participating in programs like those offered through a PEO, they gain access to the competitive rates and healthcare plans typically reserved for large corporations.

Pooling Risk to Lower Costs

Health insurance pricing is heavily influenced by the risk pool, or the collective health risk, presented by the insured group.

Larger groups typically have a more predictable risk profile, which is more appealing to insurers. With a larger group of employees, these programs create a diversified and more stable risk pool, leading to more favorable pricing and plan options.

5. Administration Doesn’t Need to be Difficult

Managing health insurance can seem like a daunting task until you realize the convenience and power of using a PEO.

Streamlined Operations

Managing health benefits is complex and resource-intensive.

A PEO can offer centralized administration of benefits, reducing the burden on small businesses. This includes handling enrollment, aspects of compliance, claims processing, and employee support, making it easier and more cost-effective for small businesses to provide health benefits.

An Expert Partner

Navigating the regulatory environment of health insurance requires expertise that many small businesses lack.

Using a PEO-sponsored plan means the PEO team will ensure the compliance requirements related to the plan are taken care of, reducing the small businesses’ legal risks.

Interested in Buying Small Business Health Insurance? We Can Help.

The benefits of providing health insurance for small business employees extend far beyond simple medical coverage.

From fostering a culture of care and commitment to improving employee loyalty, and even realizing potential tax benefits, small businesses that offer health insurance will have a competitive edge over those that don’t.

The key lies in finding the right partner for your health insurance coverage, and BBSI is here to help.

Our clients have access to affordable and flexible health insurance plans that not only fit budgets, but improve the lives of workers. With expert guidance and support, businesses of all sizes and in any industry can start offering health insurance benefits and experience the benefits of a happier, healthier workforce.

Interested in learning more about how BBSI can help your small business access affordable health insurance plans? Get in touch with your local BBSI representative today.

Disclaimer: The contents of this white-paper/blog have been prepared for educational and information purposes only. Reference to any specific product, service, or company does not constitute or imply its endorsement, recommendation, or favoring by BBSI. This white-paper/blog may include links to external websites which are owned and operated by third parties with no affiliation to BBSI. BBSI does not endorse the content or operators of any linked websites, and does not guarantee the accuracy of information on external websites, nor is it responsible for reliance on such information. The content of this white-paper/blog does not provide legal advice or legal opinions on any specific matters. Transmission of this information is not intended to create, and receipt does not constitute, a lawyer-client relationship between BBSI, the author(s), or the publishers and you. You should not act or refrain from acting on any legal matter based on the content without seeking professional counsel.

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