Should your small business offer health insurance?

Small business owners have to make plenty of tough decisions, and whether to offer employee health benefits is one of them.

There’s no way to definitively say which decision is right, but we can go over the variables to consider before making a decision.

Let’s go!

The pros of offering employee health benefits

There are plenty of reasons to consider offering employee health benefits, but attracting and retaining talent is always near the top of the list.

Searching for and training new employees to offer the level of customer service expected can cost a small fortune.

Also, hiring bad employees can cost your business its reputation and customer base.  

These situations are especially relevant when unemployment hovers around 4%, as it is at the time of this post. That low unemployment rate has been persistent, so offering health benefits can help deepen a shallow pool of potential talent.

There’s also the potential for increased productivity.

The U.S. Center for Disease Control maintains that employees with health benefits miss fewer work days.  They also tend to take care of contagious health issues when they arise instead of going to work and potentially infecting others. 

Of course, there are tax benefits, too. Generally, the cost of offering health benefits can be deducted, lowering your tax liability.

Your business may also qualify for healthcare tax credits under the Affordable Care Act. To qualify, your business must pay at least 50% of employees’ healthcare premiums and have 25 or fewer full-time employees who earn an average of $50,000 or less annually.

The cons of offering employee health benefits

There are many reasons to consider offering health benefits, but there is a negative side.

First, it can be cost-prohibitive.

This is especially true if you only have a few employees or your industry poses an inherently higher safety risk.  If the premiums, deductibles, and copayments outweigh the tax and productivity benefits, then offering health care insurance may not work.

And if one of your employees requires expensive medical treatment, the cost could affect the bottom line.

Another potential concern is the administrative burden.

Healthcare plans have to be managed. That means dedicating resources to hire a contractor or another employee, which can be expensive.

You can also try doing it yourself, but that may lead to lost productivity.

Compliance is another concern.

Healthcare is laden with regulations. Those regulations can change, and keeping up with them is non-negotiable. Failure to comply with regulations can lead to fines and lawsuits that can derail a small business.

The Bottom Line

There’s no simple answer to the question of offering health benefits. You’ll want to weigh the pros and cons in this post and consult resources like this U.S. Chamber of Commerce article.

Also, consult with mentors and your CPA. They can offer insight you may not be able to find in your research, opening doors for you and your employees that you didn’t know existed.