Small Business Health Insurance
Offering health benefits is one of the most powerful things you can do to attract and retain employees. Here's what small business owners need to know about their options.
Your Main Options as a Small Employer
Small businesses have more options than most owners realize: fully-insured group plans through SHOP or private carriers, level-funded plans for groups with 5+ employees, QSEHRAs that reimburse individual premiums, ICHRAs (Individual Coverage HRAs) with no contribution limits, and stipend arrangements (taxable but simple).
The Small Business Tax Credit
If you have fewer than 25 full-time equivalent employees with average wages under $56,000 and you pay at least 50% of employee premiums, you may qualify for a tax credit worth up to 50% of your premium contribution (35% for non-profits). You must purchase coverage through the SHOP marketplace to claim this credit.
Competitive Benefits on a Small Budget
You don't need to offer the most expensive plan to attract talent. A solid strategy: offer a mid-tier HDHP with employer contributions to an HSA. Employees get lower premiums and a growing tax-free medical fund. You get lower premium costs. Everyone wins.
Frequently Asked Questions
Are small businesses required to offer health insurance?
Businesses with fewer than 50 full-time equivalent employees are NOT required to offer health insurance under the ACA. Businesses with 50+ FTEs must offer coverage or face the employer mandate penalty. However, offering coverage - even for small businesses - is a powerful recruiting and retention tool.
What is the SHOP marketplace?
The Small Business Health Options Program (SHOP) is the ACA marketplace for small employers with 1-50 employees. SHOP plans are ACA-compliant and may qualify for the Small Business Health Care Tax Credit (up to 50% of premiums for businesses with fewer than 25 FTEs earning average wages under $56,000).
What is an HRA for small businesses?
A Health Reimbursement Arrangement (HRA) lets employers reimburse employees tax-free for individual health insurance premiums and medical expenses. The Qualified Small Employer HRA (QSEHRA) allows employers with fewer than 50 employees to reimburse up to $6,150/year (individual) or $12,450/year (family) in 2024.
What is a level-funded health plan?
Level-funded plans are a hybrid between fully-insured and self-insured plans. You pay a fixed monthly amount (the 'level' payment) that covers expected claims, stop-loss insurance, and administration. If claims are lower than expected, you may get a refund. These plans offer more flexibility and potential savings for healthy employee groups.
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