When it comes to employee benefits, health insurance ranks at the top of the list of desired and, to be honest, expected employer-provided perks. Attracting and retaining good employees and staying competitive in a volatile hiring environment also incentivizes most employers to offer these benefits.
In addition to health insurance, many employees expect to have choices for both vision insurance and access to good dental insurance, as well.
The challenge for all businesses, but for small business owners in particular, is being able to “foot the bill” for these employee benefits.
CALIFORNIA HEALTH INSURANCE, HEALTH INSURANCE PREMIUMS, AND THE ACA
For small employers in California, providing health insurance options as an employee benefit is a great way to compete for quality employees and increase employee retention. But it comes at a cost.
However, despite what some may have come to believe as a result of the Affordable Care Act, or ACA, no employer is required or mandated to provide health coverage benefits to employees.
As the Kaiser Family Foundation points out,
“The Affordable Care Act does not require businesses to provide health benefits to their workers, but applicable large employers may face penalties if they don’t make affordable coverage available. The employer shared responsibility provision of the Affordable Care Act penalizes employers who either do not offer coverage or do not offer coverage that meets minimum value and affordability standards. These penalties apply to firms with 50 or more full-time equivalent employees.”
And, as one insurance provider notes,
“Employers must offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to the end of the month in which they turn age 26 or be subject to penalties. This is known as the employer mandate.”
As for those employers with less than 50 full-time or full-time equivalent (FTE) workers, HealthCare.gov states that,
“No small employer, generally those with fewer than 50 full-time and full-time equivalent employees, is subject to the Employer Shared Responsibility Payment, regardless of whether they offer health insurance to their employees.”
So, the question then is, if you do choose to offer a California health insurance plan or options to your workers, which many small employers elect to do, how much do you have to pay for it?
THE COST OF HEALTH INSURANCE BENEFITS FOR SMALL EMPLOYERS
If your company does decide to offer health coverage to your employees, then you are typically required to pay for at least 50 percent of employee premiums as a small employer.
Of course, this can quickly add up if you have more than, say, 10 employees.
For example, according to the Kaiser Family Foundation (KFF), last year in 2021, the average cost of employee health insurance premiums for family coverage was $22,221. The average annual premiums for individual plans was $7,739.
While employers must pay at least 50 percent of those premium costs, it is typically a bit more.
As the KFF determined, in 2021 the average health insurance cost for employers was $16,253 annually, or 73 percent of the premium, to cover a family and $6,440, or 83 percent of the premium for an individual.
The website at HealthCare.gov offers several tools and calculators for employers to use in determining their employee health insurance costs and options. In addition, employers can learn about the Small Business Health Options Program (SHOP), the online marketplace where eligible employers can find coverage options to offer their employees and where their employees can shop for insurance.
Another question that employers have when it comes to assessing the affordability of offering California health insurance to their workers is can you deduct health insurance premiums?
While this topic is somewhat complex, the simple answer is that employer contribution in the form of employees’ premiums are considered a business expense, so these are deductible costs. To be eligible for this deduction, employers typically have to pay at least half of their employees’ premiums.
In addition, employers can also deduct contributions made to an employee’s Health Savings Account (HSA). This is a type of pre-tax savings account, not a health plan, which can be used in conjunction with a high-deductible health plan (HDHP). Generally speaking, all contributions to an employee’s HSA are a deductible business expense for an employer.
However, it is best to carry out your due diligence on this and other health insurance benefits for employees with a professional firm like J.C. Lewis Insurance.
YOUR LOCAL SMALL BUSINESS RESOURCE FOR CALIFORNIA HEALTH INSURANCE
JC Lewis Insurance is a long-time, family-owned firm of expert brokers right here in Sonoma County. We offer California health insurance plans from many of the leading health insurance carriers.
And we are licensed and certified by each of these insurance carriers to offer coverage to individuals, families, and small group employers, along with Medicare supplemental and prescription drug plans for seniors.
When you’re shopping for vision, dental, or health insurance for your employees, or for you and your family, you probably have several questions and concerns.
We understand that providing California health insurance options for your employees can be a daunting and complex undertaking and that you are likely to have several questions and concerns. At J.C. Lewis Insurance Services we welcome your questions about insurance coverage and you can be confident that we will help you find the right solution.