The health care industry is about to go through its biggest overhaul in decades. During this time of change, your employees need you more than ever to help them understand the new health law. Here’s what you need to know.
What the New Law Means for Your Employees
If your employees don’t already have insurance (through your business, their spouse, or on their own), they will need to have health insurance beginning January 1, 2014, or risk paying a tax penalty when they file their taxes at the end of the year.
For employees who cannot afford to buy insurance, financial assistance (also known as premium tax credits or subsidies) will be available on a sliding scale based on family income and size.
Your Options as a Small-Business Employer
If you employ fewer than 50 full-time employees, you are exempt from the “employer-shared responsibility” mandate to provide health insurance coverage to your employees. (The employer mandate for larger employers has recently been delayed until 2015.) But even without the law requiring you to offer insurance, we know many of you want to help your employees get health coverage. Here are some options to consider:
Provide group insurance for your employees.
Group or employer-purchased insurance can average $5,615 per employee per year, or $15,745 for a family. Although this insurance generally is more expensive than other options, it is a great way to show your work family how much you value them.
Talk to an insurance broker or carrier to compare plans and prices. You may also want to explore SHOP (state-run marketplace for employer-purchased insurance) when it opens for enrollment in your state. Initially, many SHOP marketplaces will offer only one health plan to your employees. The Affordable Care Act requirement that SHOP marketplaces offer employees a “choice of health plans” has been delayed until 2015.
Help your employees buy their own insurance using pre-tax dollars.
Did you know that employee-purchased insurance is 53% cheaper on average than group insurance? That’s because there are no overhead administrative costs to create the group plan, and your employees pay only for what they need.
When buying their own insurance, some of your employees may qualify for a government tax credit.
For employees who don’t qualify for government assistance, you can help make insurance more affordable by enabling them to use pre-tax dollars to purchase insurance. Pre-tax dollars can mean $500 or more per year in tax savings. Here’s how it works:
Average individual premium for a single person:
$220/month x 12 months = $2,640
Federal tax rate 15%
Social Security and Medicare 7.65%
Total tax rate 22.65%
Total tax savings 2,640 x 22.65% = $598
You also have the flexibility to contribute to help employees pay for health care costs. Many small businesses give $200 per employee per month, but you can pick an amount that fits your budget. Even $0 is OK; your employees will still be able to use pre-tax dollars from their paychecks.
To learn more about how you can enable your employees to buy health insurance using pre-tax dollars, you may contact This email address is being protected from spambots. You need JavaScript enabled to view it..”>[email protected].
No matter what role you play to help your employees get coverage, we give you kudos for wanting to do the right thing for your work family.