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 small business owner and his employees discussing employee health insurance

Using a PEO to Help You Offer Employee Health Insurance

Small business (SMB) owners must be skilled at juggling multiple tasks at once. Between managing employees, sales, daily operations, and customer service, there’s hardly any time left in the day to worry about time-consuming HR tasks like finding and managing employee benefits.

Because they are usually not considered an Applicable Large Employer (ALE), it is optional for small businesses under 50 employees to offer health insurance coverage. Due to cost and complexity, many small employers choose to forgo it.

Listen to the article: Using a PEO to Help You Offer Employee Health Insurance


However, this might not always be the right choice financially. In fact, adding employee health insurance can prove to be a wise investment, especially if you choose to partner with a Professional Employer Organization (PEO) that may have plans available with better rates and features and can administer the plan for you.

Let’s discuss how SMB owners can determine if adding health coverage to their employee benefits offering is right for them, and how PEOs can streamline the process while offering potentially lower rates for the best coverage.

When to Consider Offering Employee Health Insurance as a Small Business

As your business scales, you’ll eventually need to decide whether it makes sense to begin offering health insurance benefits to your employees.

4 Benefits of Offering Employee Health Insurance

Health insurance is a critical piece of your benefits package for 4 reasons:

  1. Employees Expect Health Benefits: The majority of employees, including 85% of millennials, believe health benefits are “absolutely essential” or “very important.” Put simply, offering quality health benefits is necessary to attract and retain quality employees in 2024.
  2. Tax Advantages: Health insurance premiums are typically tax-deductible, and certain tax credits may be available, especially for smaller businesses that meet specific criteria.
  3. Reduced Absenteeism and Better Health Outcomes: Employees with improved access to healthcare experience better health outcomes, resulting in quicker recoveries and reduced time away from work.
  4. Return on Investment: According to the U.S. Chamber of Commerce, a new study from Avalere Heath indicates that for every dollar an employer spends on employer-sponsored health insurance, they’ll receive $1.47 in return. That is a 47% ROI for business owners, which Avalere projects will grow to 52% by 2026.

5 Factors to Consider When Offering Employee Health Insurance Coverage 

Despite the many benefits, there is no one-size-fits-all solution to this decision. Aside from the number of employees you have, key factors to consider are:

  1. Financial Capability, Including Tax Considerations: Assess if your business can afford the costs of providing health insurance. Make sure to include potential tax benefits and potential future premium increases in your analysis.
  2. Competitive Benefits for Talent Acquisition and Retention: In highly competitive industries where top-talent is required, offering health insurance can offer a significant advantage.
  3. Employee Needs: If your existing team values health insurance over other types of benefits, healthcare may be a wise investment.
  4. Growth Plans: Initiating a health plan early in your business can streamline future employee enrollments as you hire more staff, especially if you plan to scale your operations.
  5. PEO Options: Small businesses can also consider partnering with a PEO that may have access to a wide variety of health plans at affordable rates.

How Professional Employer Organizations (PEOs) Help Small Businesses

As your SMB scales, there’s a good chance you’ll need professional HR services before you can devote the resources necessary to hire a dedicated HR department.

This is where a PEO comes into play.

Think of a PEO as a partner for your business that can help provide guidance in HR, payroll, and health insurance. They’ll be there to answer questions and complete important tasks when you need it, while allowing you to skip the process of hiring and training new HR employees just for these specific purposes.

The Right PEO Will Streamline Employee Health Insurance Coverage

Employers that choose to work with PEOs should expect both convenience and advantages when it comes to adding employee health insurance coverage to their list of benefits. 

Competitive Rates: PEOs offer access to national coverage at competitive rates, even for small employers with less than 20 employees.

Larger Risk Pools: PEOs can pool all their client businesses into one large group, which presents a lower risk profile to insurers, potentially lowering premiums.

Strategic Partnerships: PEOs have more leverage to negotiate long-term partnerships with leading health insurance companies, enabling them to provide access to industry-leading provider networks at competitive rates.

Comprehensive Service Offering: The best PEOs offer comprehensive combinations of services, including payroll, workers’ comp, health insurance, risk management, and HR consulting. This can lead to better pricing for health insurance as part of a broader package of services.

Colorado’s Employers Can Rely on BBSI to Make Competitive Plans Available

Adding employee health insurance coverage to your list of benefits offerings is a forward-thinking strategy. It will improve your ability to compete for top talent, provide better employee health outcomes, and be more affordable than you might assume, thanks to generous tax incentives.

Plus, PEOs like BBSI are available to make health care plans available to you at competitive rates.

We can only do this thanks to our dedication to maintaining a local presence in Colorado and all 50 states nationwide. We work closely with clients and design solutions emphasizing flexibility, affordability, and comprehensive health plan administration.

If you’re looking to add health coverage for your employees and want to:

  • Get access to national provider networks,
  • Enjoy streamlined administration, billing, and open enrollment support,
  • And integrate your healthcare benefits with other services like HR, payroll, and business strategy,

Get in touch with BBSI today. We’ll connect you with a personalized, local group of professionals to support your business’ healthcare needs.

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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