Small business health insurance:
What's Required?

There’s a lot to starting a small business, but one of the more difficult and literally vital matters is configuring health benefits for your employees. In particular, it’s crucial to understand what insurance coverage options you need to provide. But it can be tough to keep a pulse on what health insurance requirements look like, especially for small businesses.

In the sections that follow, we’ll explain what small business health insurance is and do a quick check-up on the current legal requirements associated.

What is small business health insurance?

Well, small business health insurance is medical coverage provided by the business to its employees to ensure their well-being. This health coverage helps employees cover expenses like:

Visits to hospitals or doctors Diagnostics and testing Surgery and therapy Preventative care Medication

When an employee incurs a medical expense, they will be responsible for a portion of the cost in the form of a deductible and/or copayment. The remainder of covered expenses will be paid by the health insurance company, which in turn receives a health insurance premium. Typically, that health insurance premium is paid in part by the employee and in most part by the employer.

However, unlike large employers, smaller businesses don’t always have to provide health insurance for their employees.

Do small businesses have to offer health insurance?

The legal requirement for a business to provide health insurance depends on the size of the company. The Affordable Care Act (ACA), also known as Obamacare. This act provided that:

  • All businesses with more than 50 full-time employees, including the equivalent in part-time staff’s labor hours, must provide an affordable health insurance option to all employees.
  • Health insurance coverage must be offered to all eligible employees within 90 days of their start at the company.
  • Companies that fail to meet certain minimum requirements for quality and affordability of insurance are subject to Employer Shared Responsibility Payments—which are fees paid to the IRS. Companies under the 50 employee threshold are not subject to these fees, under any circumstances.

The simple diagnosis: if you have more than 50 full-time employees, or their equivalent, then you need to offer an affordable insurance option to your employees. If you employ fewer than that number, then you’re under no such legal obligation. That is, unless your under-50-employee business is itself a health insurance carrier or any other self-insuring company.

Most small to medium businesses are exempt from these ACA requirements. Talk to your insurance agent to find out how the law affects your operations specifically.

Whether or not small businesses meet the threshold, they are required to report information on any employees who they do insure. They must also disseminate certain information about health insurance to all employees.

Why should small businesses offer health insurance?

Even when they don’t legally need to, small businesses should still offer health insurance.

While not all small businesses are required to carry health insurance for their employees, there are many reasons it’s a good idea. Health insurance is beneficial to both the workers and the small business itself.

Healthcare can be extremely expensive, and a simple, uninsured hospital visit can have long-lasting impacts on even the most financially stable families.

For this reason, providing health insurance to your employees can be a savvy business decision, because you can:

Attract and keep talent – The best workers in any field gravitate toward the businesses that offer the most competitive compensation. That includes pay, of course, but also benefits and other perks. One of the best ways to attract top talent to your business, and keep them satisfied, is by offering health insurance.

Build brand reputation – Your potential and existing workers aren’t the only people keeping an eye on your insurance offerings. A company’s success in today’s economy can depend on their reputation with the broader public. Taking the moral high ground and showing you care about your employees through generous health benefits can bolster your brand image with respect to social responsibility.

Reap tax benefits – Beyond the relatively intangible rewards noted above, providing insurance can also lead to financial benefits. Contributions are often tax deductible, and many states give incentives to companies offering insurance above and beyond legal requirements.

Considering these advantages, there’s no reason your small business should neglect health insurance for your employees. After all, employees are the heart and soul of your business, and they deserve to be protected.

What other types of insurance does your business need?

Whether or not you are required to provide health insurance, the benefits of doing so can far outweigh the costs. To attract the best talent to your company, and keep your labor force satisfied and productive, get them coverage they can count on.

Like your employees, the health of your business needs protection, too. Here at Thimble, we believe that companies of all sizes should have access to high-quality business insurance that’s tailored to their specific needs and means.

That’s why we offer on-demand general liability insurance and professional liability insurance policies that you can customize down to the hour, day, or month. That flexibility lets you pay only for the coverage you’ll use, maximizing your efficiency and keeping costs down.

Plus, signing up for a plan with Thimble is as easy as clicking on “Get a Quote” or downloading the Thimble mobile app and answering three simple questions. You can have a policy and any necessary certificates of insurance (COI) in under 60 seconds!

Once your business is protected, you can focus on safeguarding the people who run it.

The content on this page has been verified by
Terri Hitchcock, JD
Chief Insurance Officer, Thimble
Terri has 38 years of industry experience and knows a thing or two about insurance, so she reviewed and approved everything on this page.

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