You don’t have to be a big business to offer big benefits

You’ve got customers, employees, and enough paperwork to wallpaper your entire office. But when it comes to offering health insurance, you’re still waiting for your business to get a little bigger. What does that mean, exactly? Twenty more employees? A fancy office with a giant fish tank? 

There’s no employee count or revenue milestone that determines when your business is financially ready to offer health insurance. Instead, consider whether your employees want it and if your business can support it.

For some businesses, health insurance isn’t optional

Sometimes, it isn’t just about whether you want to offer insurance. It’s about whether skipping it could cost you. Under the Affordable Care Act (ACA), employers averaging at least 50 full-time employees, including full-time equivalents (FTEs), during the previous calendar year are usually subject to the employer shared responsibility rules. 

In layman’s terms, that means larger employers usually need to offer affordable coverage that meets minimum-value standards to full-time employees and their dependents. If they don’t meet these requirements, they could face penalties. 

To further complicate things, part-time hours count toward that 50-employee threshold. So, just because you don’t have 50 full-time employees doesn’t exactly mean you’re exempt. 

But if you’re running a business with eight employees, the IRS isn’t going to come knocking down your door due to your lack of health benefits. Your employees, however, might have something to say about it.

When a paycheck alone stops being enough

One of the clearest signs that it’s time to offer insurance isn’t hiding in your bank statement. It’s coming straight from your employees.

• Team members are asking for benefits. 
• Candidates are bringing it up during interviews. 
• You’ve lost good workers to employers with better benefits. 

Competitive wages matter, but they’re not always enough. Health benefits can help you attract experienced workers and hold onto the ones you’ve already invested in. And while free lunches and casual Fridays are nice perks, they’re not going to compete with health insurance when someone is starting down a huge medical bill. 

Growth changes the equation

But employee demand is only part of the story. Do you remember when making payroll felt like some kind of miracle? If those days are mostly behind you, that’s a good sign. 

Consistent revenue, predictable payroll, manageable turnover, and plans to keep hiring all suggest your business has moved from struggling startup to more established business. Instead of scrambling to make the rent, you’re in a position to think about long-term investments, including employee benefits. 

But being able to afford premiums today is one thing. Making sure they don’t become next year’s financial headache is where the real test begins.

Can you commit for the long haul?

You don’t want to start coverage in January and have regrets by April. So, start off by figuring out how much you’re realistically able to contribute toward employee premiums. You’ll also need to consider if you’re going to help pay for dependents, too. 

As an example, covering half of a hypothetical $800 monthly premium for five employees would cost your business $24,000 per year. And that doesn’t account for future premium increases. 

You also need to think ahead. This year’s budget looks great, but what about next year? Or even an anticipated slower season? 

The good news is that there is some potential relief. Eligible taxable businesses can receive a credit worth up to 50% of qualifying employer-paid premiums, while tax-exempt employers may receive up to 35%. The credit is usually available for two consecutive tax years. Coverage through the Small Business Health Options Program (SHOP) is typically required, along with paying at least half of employee-only premiums. 

But while a tax credit can certainly help, don’t base your entire benefits decision around possibly getting one. 

Who’s going to run this thing?

There’s a big cost that you’re not going to find on any insurance quote: your time. Employee enrollment, renewals, payroll deductions, plan changes, and answering questions all require someone to manage them – whether that’s you, an HR manager, a broker, or a benefits administrator. 

You don’t have to do everything yourself. But you do need to have a plan for how it’s all going to get done.

Group coverage isn’t your only option

Now, if you want to offer health benefits but group insurance is too expensive or just not a great fit, other options are out there. 

Some smaller employers can use a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) instead. (Try saying that one three times fast!) Despite its long and somewhat intimidating name, the concept is simple. You can reimburse employees for qualifying health care expenses, including some individual insurance premiums. Reimbursements are subject to annual IRS limits, and employees need minimum essential coverage for those reimbursements to be tax-free. You also can’t offer a group health plan and QSEHRA, so choose wisely. 

Of course, there are additional rules. It’s not just a promise to Venmo an employee after their last checkup. Still, it’s an option worth exploring if a traditional group plan isn’t in the cards.

Your health insurance readiness checklist

So, is your business ready to offer health insurance for employees? We can’t answer that for you, but here’s what to check: 

• Employee demand: Are workers or job candidates asking about benefits? 
• Business stability: Are revenue, payroll, and staffing pretty predictable? 
• Financial commitment: Can you comfortably cover ongoing costs? 
• Administrative support: Is someone prepared to manage benefits? 
• Long-term strategy: Will offering coverage help you attract, retain, and support employees? 

If you’re checking these boxes, it may be time to start requesting quotes and exploring your options. 

You don’t need a sprawling headquarters, hundreds of employees, or a swanky reception area to offer health insurance. You just need to have a genuine need for coverage and a business that’s financially prepared to provide it. Before committing, make sure you understand your legal obligations and consider speaking with a qualified benefits professional. 

The goal isn’t to offer impressive benefits. It’s to offer benefits your employees can actually count on.