A big worry for most business owners is the cost of providing health insurance to their employees. Besides salaries and payroll, the second-highest expense for businesses is health insurance.
Finding reasonable health insurance for employees isn’t the only stressful item, employers also must administer and manage health insurance plans, negotiate with brokers, and plan for future insurance offerings, which takes up considerable time for a business owner. Here are four ways to offer your employees health insurance.
1. Contribution Allowance
The way small businesses can help with employee paid health insurance is by setting up a defined contribution allowance. It’s the recommended way to improve the cost of employee’s individual health insurance. To set up a prescribed contribution allowance, small businesses should setup formal plans to ensure that compliance is being met. Here are how defined contribution allowances will work:
- Employer provides each employee with fixed monthly benefits.
- Employees can select and purchase any individual health insurance policies and pay the health insurance company directly.
- Employees use defined contribution allowance to reimburse themselves.
2. Taxable Raises or Bonuses
Some small businesses may consider giving employees a taxable raise or salary Bonus to help pay for their individual health insurance. This isn’t a recommended idea, since offering a defined contribution allowance has tax and overall cost savings for businesses and employees.
Some insurance companies will allow businesses to set up List-Billing for their employees. List-Billing is a process that lets employers facilitate employee purchases of individual health insurance policies through post-tax payroll deduction. A health insurance carrier will send an employer a single bill for each employee’s personal health insurance policy.
4. Pay Directly for Insurance Premiums
Some small businesses may pay directly for employee’s individual health insurance plans, but doing this could put a business out of compliance with federal laws and regulations and increase your business tax liability.
Consider a PEO Company
There is another option for getting health insurance for your employees, and that outsourcing a professional employer organization (PEO). Through a PEO, you can access health insurance options for your business that would be hard to get on your own. Sites like Retireat21.com have guides for learning about PEO companies.
Here’s how a partnership with PEO health insurance works:
- PEO selects health insurance options for you – the PEO will choose a benefit plan from some of the best health insurance carriers for your employees, then you can offer them to your employees.
- You can get access to health policies that you might not qualify for because of your business size – PEOs are considered large employers, they have access to Medical health plans that are not offered to small businesses.
- Partnering with a PEO gives you someone to manage a plan and help employees when needed – finding and affording health insurance can be difficult. A partnership with a PEO company gives you access to a specialist to someone to manage the carrier relationship on your business’s behalf, so your time won’t be consumed from your day.
- PEO partners assist with annual planning for the renewal and open enrollment. In essence, a PEO partner manages health insurance costs, negotiation, yearly plans, and budgeting, which frees up time for a small business owner to focus on growing their business. PEOs have experience managers for large group health insurance plans and help with the planning process, minimizing budget surprises, and ensure employees can expect health insurance benefits in the future.