Health care has been a sensitive subject in recent years. The Affordable Care Act (ACA) was a controversial law, and now there is a fresh wave of tension in the wake of president-elect Trump’s promise to repeal it.
American health care operated in a broken system before Obamacare was passed, but the ACA has not necessarily relieved the strain that health insurance places on many individuals and small businesses. But be that as it may, there are still creative ways in which companies can offer their employees health care while still minimizing their own expenses.
Small Business Burden
Although they were initially delayed, the employer shared responsibility provisions in the ACA have since gone into effect. That is, businesses must now pay fines for not providing health care for their employees.
A full 63% of small business owners report that paying for health care is a burden because doing so drains assets they would otherwise use to grow their companies. It is important to note that the ACA does not require all small businesses to pay for health insurance. Only companies with 50 or more full-time employees have to provide a minimum amount of coverage for their workers.
However, even organizations with fewer than 50 people on staff are feeling the weight of being required to provide health care. The pressure remains to use benefits to allure potential employees.
While larger companies have been able to adapt to the demands of Obamacare, many smaller companies have not. As the Fortune content linked above points out:
Finding small business health care is “a complicated, ever-changing process where one size definitely does not fit all.”
Individuals Are Struggling, Too
It’s understandable that people would look to their employers for help with health coverage. Based on data gathered in 2011 by the U.S. Census Bureau, the average family might spend as much as one third of its income on health care.How can people afford to pay one-third of their before tax income for health care and still eat?Click To Tweet
In fact, the financial weight on many people is such that a lot of them cannot afford health insurance without assistance from their employers. And the smaller a company is, the less likely it is that a business will significantly help its employees with their health care costs.
Yet we still expect someone to provide health insurance for us. Americans have unique expectations in the world when it comes to health care—and these assumptions are difficult to sustain in a free enterprise system.
People in the U.S. expect that the quality of health care should always be improved when possible. As advances are made, Americans also believe these improvements should be instantly available to the public as soon as they occur. And we still have these expectations even if those innovations were not available when we purchased our policies.
Mistakes Small Businesses Make
This is all to say, small businesses find themselves in a difficult situation. And it’s easy for them to make mistakes.
I can tell you from experience that most small companies don’t carefully tailor their health care plans to suit the needs of their workforce. That’s unfortunate, because if you don’t customize benefits for your specific employees and their specific health requirements, you may end up with an office full of resentful clock-punchers.
One of the main errors companies can fall into that increases their costs is not consulting with a professional before purchasing health insurance. It’s extremely important to put in the time to find the right broker or consultant for your situation. It’s also wise not to rush through the interviews when deciding whether or not you’re going to hire that person.
Be cautious about buying blanket coverage for all of your staff. In some cases, doing so could work. But on the other hand, it’s unlikely that all your employees require every component of a one-size-fits-all plan. Make sure certain aspects of your plans are optional.
Basically, use your common sense. Know your budget and do your research. And don’t avoid plans with high deductibles.
In fact, high deductibles can be a way of helping you to be creative with meeting your budget. With health care premiums rising, one CEO decided to try something new. She opted for health plans that had higher deductibles than those the company had previously provided. But she also offered to pay a significant portion of those deductibles when employees actually had to meet them.
This is a useful solution. Not all your employees are likely to have an extreme health need, such as major surgery. Offering plans with high deductibles and helping employees meet them when necessary allows you to save what you would otherwise be paying on higher monthly premiums for all of your staff.
There are other strategies pertaining to tax planning that you can use to save money. Expert Mark J. Kohler states that “Many entrepreneurs don’t realize it but as small-business owners we have more options to save on health care costs than any other group of Americans.” Kohler’s advice includes the following tactics:
- S-Corps can claim a health insurance deduction.
- If you pay for a minimum of half the coverage of your single employees, you can take their health insurance tax credits.
- Enroll in a High Deductible Health Plan that offers a Health Savings Account, which is tax deductible.
- Use an HRA so that you can take tax deductions for your health care expenses.
- Be savvy about choosing your health care plans.
It Takes Diligence and Time
According to Kohler, “It simply takes a little bit of research and consulting with professionals to create the perfect plan.”
It’s unfortunate that health care in the United States is convoluted and expensive. We have yet to arrive at affordable coverage for everyone.
In the meantime, there are steps small business owners can take to move toward providing health care for their employees. As with any aspect of building a business, it will take some work to get there. But with time and research, you can do it.
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