Q: As a small-business owner who employs fewer than 50 employees, does it make sense for me to provide health insurance for my employees even if I am not required to by law?
A: It depends. In our current full-employment economy, there is a lot of competition for good employees. Health insurance is a benefit that many employees look for in employment. Employees who are struggling to make ends meet might prefer additional compensation instead of health insurance. We often forget that many families face issues greater than traditional health insurance. At a recent presentation, Dr. Penny Wheeler, president and CEO of Allina Health, said her organization found that in some of the markets it serves, 40 percent of the people have concerns related to housing, transportation, violence, food insecurity and ability to pay utilities.
Health insurance becomes a secondary issue if you have these types of concerns.
If your employees do not have these concerns, health insurance can be a highly valued benefit that can help you recruit and retain employees. If your competitors provide health benefits, you will have to consider doing the same. Health insurance can be provided tax-free to the employee. In addition to receiving a tax deduction, the employee in effect saves on payroll taxes when compared to providing compensation.
In 2017, Congress changed the laws so an employer can reimburse health insurance costs for an employee, tax-free, for individual health insurance purchased on the health insurance exchange. Employers are setting up plans known as employee payment plans (EPP) or health reimbursement arrangements (HRA). The EPP pays for the insurance directly or reimburses the employee for the premiums. The HRA sets aside money for the employee to use for premiums or other medical costs.
Many employers become close to their employees and are seen as part of family. What would you do if a family member incurred several hundred thousand dollars of medical costs? In this sense, providing health insurance can help you avoid a situation that you would not want to be in.
Consider contacting a health insurance broker to learn more about your options.
Joseph White is a faculty member at the University of St. Thomas Opus College of Business teaching in the health care and executive MBA programs.