How To Get Your Employees Coverage That Also Keeps Your Balance Sheet Healthy
Putting together a budget for health insurance is no small task for California small businesses. Indeed, providing group health coverage for your employees will be a significant item on your company’s balance sheet.
But offering health insurance to your workforce – even if you are not legally required to do so – will reap substantial dividends that will improve your company’s bottom line. Higher productivity, lower employee turnover, the competitive advantage of being able to attract and retain top talent, and the tax advantages of offering group coverage should all be considered as you prepare your company’s budget for health insurance in the coming year.
In this post, we address some of the most frequently asked questions we receive from California small businesses about budgeting for group health insurance.
How California Businesses Pay For Group Health Insurance
When California employers offer health insurance coverage to their workforce, they usually do so through a group health insurance plan purchased from a private insurance company. In California, there are many insurers to choose from, including:
- Anthem Blue Cross of California
- Blue Shield of California
- HealthNet of California
- Kaiser Permanente
- United Healthcare
This list is not expansive, as there are other insurers that can provide California companies with options that fit their needs and budget for health insurance.
To provide coverage to their employees, California companies select the best plan for the needs of their workforce and the company’s budget for the year. Regardless of which carrier they choose, the company will purchase a policy for their “group” of employees. As part of the policy, businesses can offer to cover just employees or employees and their dependents, as well as full-time employees only or full-time and part-time employees.
What Factors Will Determine How Much My Company Will Pay For Health Insurance?
The exact quote your company receives from California insurers depends on various factors, including:
- How many employees and dependents enroll in the offered plan
- The overall health and health care needs of your workforce
- What type of benefits your plan provides
- The amount you ask your employees to contribute towards premiums.
What Is The Average Annual Cost For Small Business Health Insurance?
Now that you know some of the factors that contribute to the amount you should budget for health insurance, let’s talk averages.
According to the latest Kaiser Family Foundation (KFF) Employer Health Benefits Survey (released in October 2023,) the average annual premium for single (employee only) coverage for workers at small firms in 2023 was $8,722. The average annual premium for family coverage at small businesses was $23,621. Of course, these are only averages, and what your company will actually pay may be more or less based on the factors listed above.
How Much Should My Company Expect Employees To Contribute For Premium Costs?
According to KFF, on average, covered workers who have employer-sponsored health insurance contribute 17% of premium costs for single coverage and 29% of premium costs for family coverage. Covered workers at small businesses on average contribute, a higher percentage for family coverage than those at large firms (38% vs. 25%). Because of this, the average amount covered workers contribute to premiums at small businesses ($8,334) is significantly higher than the average contribution amount for covered workers at large firms ($5,889).
Other Than Employee Contributions, How Can My Company Keep Health Care Costs Down?
There is a direct correlation between the health of your employees and the amount your company should ultimately budget for health insurance. Simply put, healthier employees mean that they will likely need less medical care, and when fewer employees have serious health problems that require expensive and ongoing treatment, the less your company (and your insurer) will pay in health care costs.
That is why so many employers, encouraged by their insurers, are increasingly emphasizing preventative care, disease screenings, wellness programs, and other initiatives designed to reduce the likelihood of illness, injury, or disability.
For example, according to the KFF survey, many businesses are including programs aimed at helping employees identify and address unhealthy behaviors that can lead to greater health risks, whether these be smoking cessation, weight management, and /or behavioral and lifestyle coaching.
Will My Company Be Eligible For Any Tax Credits or Benefits For Offering Group Health Coverage?
The federal government wants small businesses to offer health insurance to their employees even if they aren’t required to. That is why they have put incentives into the tax code to encourage small employers to provide coverage.
First of all, any health insurance related expenses your company incurs are 100 percent tax-deductible under both federal and California law.
Additionally, the Affordable Care Act provides tax credits of up to 50 percent of any small business premium expenses during any two-year period. Per IRS rules, California small businesses can take advantage of this health care tax credit if they:
- Employ fewer than 25 full-time or full-time equivalent employees.
- On average, pay full-time or full-time equivilent employees less than $50,000 a year per employee (this amount is indexed yearly to account for inflation).
- Offer employees a qualified health plan through the Covered California for Small Business Marketplace (CCSB), or qualify for a limited exception.
- Pay for a minimum of 50 percent of the cost for employee-only health care coverage per employee.
These powerful incentives are enough to move many California small businesses to include room in their budget for health insurance.
Preferred Insurance: Helping California Small Businesses Get Coverage That Fits Their Budget For Health Insurance
The experienced California group health insurance brokers at Preferred Insurance work with small businesses throughout the state to find the best coverage for their needs and budget.
If you are ready to discuss how you can budget for health insurance for your employees, contact Preferred Insurance today for your free consultation.