Healthcare Overview: The Basics for Employers
Under the Affordable Care Act, there have been extensive changes to the employer-sponsored health insurance market. Although the purpose of the law was to expand healthcare coverage to all individuals and reduce the burden from small businesses, many employers still have uncertainty about its effects.
As large employers (those with 50 or more employees) are required to provide affordable health insurance to their full-time equivalent employees (FTEs) or face paying a penalty, smaller businesses (less than 50 employees) are not legally obligated to offer health insurance. Although many employers would like to offer coverage, it is difficult to qualify for health plans with affordable rates.
To help businesses secure more competitive pricing, the healthcare reform law created the Small Business Health Options Program (SHOP). The SHOP program allows eligible employers to purchase coverage through the online federal health insurance exchange. The exchange is open and available for employers with up to 50 employees or in some states up to 100 employees. Businesses can compare the benefits of different health plans side-by-side while having the flexibility to choose, manage, and pay for their coverage all online.
Why Offer Healthcare?
Nearly two-thirds of Americans have employer-sponsored health coverage. However, the proportion of small employers offering health coverage has been declining for years due to the increasing expense. Still research has found that, for business owners, there are many reasons to provide employees with some type of healthcare coverage.
Some of these benefits include:
- Increased employee attraction and retention, including delayed retirement of key employees.
- Tax incentives for both business owners and employees, such as a reduction in payroll taxes and the employee’s ability to contribute toward insurance premiums with pre-tax dollars.
- Small Business Health Care Tax Credit provides eligible small businesses (with fewer than 25 employees) that provide health insurance, with a tax credit of up to 35 percent (up to 25 percent for nonprofits) to offset premium costs.
- Improved morale, increased productivity, lower rates of workers compensation claims, and reduced absenteeism.
What Type of Options are Available for Employers?
With so many different health plans available, it is not surprising that many small business owners find choosing the right program for their company an overwhelming task. With cost being a primary challenge, more than 50% of small and medium size businesses do not offer traditional insurance. Fortunately, there are many other options available. Whether or not an employer prefers traditional or non-traditional healthcare coverage, it is important to thoroughly review all of the available options before determining the best possible fit. Below are a few of the many options available to small and medium-sized businesses.
Small-Group Major Medical policy programs include:
- Traditional or Indemnity Health Plans
- Health Maintenance Organization (HMO)
- Preferred Provider Organization (PPO)
- Exclusive Provider Organization (EPO)
- Point of Service (POS)
- Consumer-Driven Healthcare (CDHC)
Some additional options include:
- Individual Health Insurance
- SHOP Marketplace
- Private Health Exchange
- Co-Op
(See Health Insurance Options for descriptions on each product)
How a Broker Can Help?
It is very rare for a small business owner to also be an expert in health nsurance. Therefore, the assistance of a professional healthcare broker can be a great benefit to many companies. In addition to bringing a myriad of options, brokers can help assist with legal and compliance issues.
Among these are the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Employee Retirement Income Security Act (ERISA), and other regulations pertinent to employment. Brokers can also assist with employee claims and resolve insurance-related issues.
To find a reliable broker, start the process by speaking with friends, relatives, and colleagues. Other reliable sources include the local chamber of commerce and the Better Business Bureau.
The state insurance commissioner’s website is an excellent resource for information such as the broker’s licensing and records of consumer complaints. The National Association of Health Underwriters’ (http://www.nahu.org) website lists members as well as their offerings.
It is important to select a fully credentialed broker with at least 5 to 10 years of experience in the field.
Additional Resources:
For more information on Small Business Options Program (SHOP) visit: https://www.healthcare.gov/small-businesses/employers/
For more information on employer shared responsibility under the Affordable Care Act visit:
For more information on healthcare for the self-employed visit:
For more information on underwriters and their offerings visit The National Association of Health Underwriters at: