What Incentives Are Available for Providing Group Health Coverage in California?

Covering Your Employees Can Improve the Health of Your Company’s Bottom Line

Providing group health coverage in California doesn’t just benefit t employees. Companies that offer their workforce health insurance coverage also reap the rewards of doing so in the form of fewer sick days, increased productivity, better employee recruitment and retention, and happier employees. 

But if these intangible yet very real advantages aren’t enough to motivate California employers to provide health coverage, the significant tax deductions, credits, and other savings that come from doing so may make the decision much easier. Both the federal and state government want employers to cover their workers, no matter what political winds may blow. To incentivize employers, the law offers robust incentives for providing group health coverage in California.

Related: Is It Better Getting Health Insurance Through a Broker?

More to Consider than the Cost of Premiums When Providing Group Health Coverage in California

Small business owners are often hesitant about enrolling in a group health insurance plan because they worry about the costs and administrative burdens of doing so. But it’s important to consider these generous incentives when evaluating your options. 

Working with an experienced California small business health insurance broker not only can ensure that you take advantage of all available savings but can also help you with selecting and administering your health insurance program.

Here are two of the biggest financial incentives that come from providing your employees with health insurance coverage in California. 

Related: What Are My Employee Health Insurance Options in California?

Your Health Insurance Costs Are 100% Tax-Deductible

California employers with fewer than 50 full-time employees are under no obligation to offer health insurance coverage to their workforce. But if you choose to do so, all of your company’s health insurance-related expenses are 100 percent tax-deductible as ordinary business expenses under both federal and state law. This tax law holds true no matter what type of entity your company is, whether an LLC, S-corp, C-corp, or partnership. 

Additionally, you can usually have your employees pay a portion of the premiums with pre-tax dollars. You do so by deducting the premium costs from their paycheck before calculating state and federal tax obligations. This way, you lower the amount of your employees’ taxable income and increase the amount of their take-home pay every pay period. 

Related: Can Employers Give Employees Money for Health Insurance in California?

Small Business Healthcare Tax Credits Under the Affordable Care Act

Under the Affordable Care Act (ACA), small businesses can receive tax credits of up to 50 percent of their premium expenses during any two-year period. Per IRS rules, a company can generally claim the small business health care tax credit if it:

  • Has fewer than 25 full-time equivalent employees
  • Pays average wages of less than $50,000 a year per full-time equivalent employee (indexed every year for inflation)
  • Offers a qualified health plan to employees through the Small Business Health Options Program Marketplace (SHOP) or if the business qualifies for a limited exception to this requirement)
  • Covers at least 50 percent of the cost of employee-only health care coverage for each employee

As with anything tax-related, you should always consult with a tax professional about the specific implications to your business of enrolling your employees in a group health plan. 

Providing Group Health Coverage in California Is What We Do at Preferred Insurance

Beyond tax savings, however, the positive impact that health insurance coverage has on your employees, your company’s reputation among prospective hires, and the productivity of your workforce should be more than sufficient incentives for providing group health coverage.  

As an experienced California small business and individual health insurance broker, Preferred Insurance can answer your questions and provide practical, affordable solutions during these uncertain times. We can meet all of your coverage needs remotely and take care of everything via video conference, phone, or email.

Contact Preferred Insurance today to arrange for your free consultation to discuss your small business or individual health insurance needs. 

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