There are many benefits you can offer through your business, but there’s one winner that rules them all: health insurance. That’s because the costs for medical coverage whether accessing in-network or out-of-network providers is expensive. This includes the full cost of care when factoring in monthly premiums, co-pays, coinsurance like high deductibles, out-of-pocket maximums, preventive services like screenings, prescription drugs, outpatient care, inpatient care, emergency room visits, and other medical expenses and health care services associated with chronic conditions.
For the uninsured, medical bills are even costlier. So eligibility for health insurance or other employer-funded health benefits to assist with covering medical costs helps keep your team happy and in good health, and signals to employees that you care about their well-being.
Many small business owners offer health insurance benefits even when they aren’t required by the Affordable Care Act (ACA). According to a 2023 survey from the National Federation of Independent Business, 56 percent of small employers provide health insurance with 93 percent of them offering group health insurance.
Why do these small businesses cover their employees through group plans even though they’re not legally required to? Because it’s good for their teams and good for them. If you’re on the fence yourself, here are the top five reasons to offer health insurance to employees:
1. It’s easier than you think to offer health insurance
First thing’s first: You don’t have to do this alone. A broker or health insurance advisor can guide you through the whole shebang.
As your go-to agent, they’ll:
Help select a plan that’s right for you and your team, based on your industry and the coverage preferences of all the folks in your company .
Set everything up and keep you compliant on an ongoing basis.
Be the resident healthcare know-it-all for your employees, so you don’t have to answer difficult questions on all things health insurance.
2. Health benefits make your employees happy
The 2023 Employee Benefits Survey by the Society for Human Resource Management (SHRM) reveals that 89 percent of employers regard health-related benefits as being very important or extremely important, ranking it above benefits for retirement and leave (which both ranked the same with 81 percent of employers considering them to be very or extremely important), flexible work, family care, professional development, education, and transportation.
Employers have been responding to and delivering on what employees have long said they need. According to a 2016 survey by Glassdoor, employees said health insurance is, by far, the most important benefit they receive from their employer. That’s why employers should offer health insurance to employees as their first company benefit, then add on additional benefits over time.
The top three benefits that make employees the most satisfied, according to Glassdoor’s study, are:
Health insurance
Vacation and PTO
Pension plans, 401(k), and other retirement plans
If health benefits are a top priority for your employees, it should be a top priority for you. Offering it can help with recruiting and entice them to stay longer at your company.
3. It saves you money on taxes
This is a big one, so we wrote an entire post about it. In fact, employers and employees pay less for health coverage when they purchase it as a group.
Savings for employees
When employees buy health insurance policies on their own, they have to use post-tax dollars to buy it. That is, they make money, the government taxes that money, and then they take the remaining amount to buy what they need. And whether they get coverage through a private insurance company or through the health insurance marketplace using HealthCare.gov or state exchanges, health care costs are even more for family coverage, which includes dependents, than they are for individual health insurance coverage.
But when employees buy health insurance through a group plan, they pay for the insurance with pre-tax dollars. That can save them up to 30 to 45 percent on their health insurance premiums.
The savings for employees can be even more when employers make contributions toward the cost of employee premiums. Here are some benchmarks from the 2022 Employer Health Benefits Survey by the Kaiser Family Foundation (KFF) that small companies can use when determining if they want to cover all or a portion of employee premiums:
When small employers (with three to 199 workers) provide health benefits, workers contribute more to family coverage than those at large firms ($7,556 vs. $5,580)
Covered workers tend to have higher annual deductibles (49% vs. 25%) of $2,000 or more for single coverage at small firms vs. large ones.
The entire premium for single coverage is paid by small firms for 33 percent of covered workers, compared to 6 percent at large firms. With family coverage, 31 percent at small firms have to pay more than half the premium for family coverage.
Savings for employers
Here are all the tax savings you get by offering group health insurance plans:
Employer contributions are tax-deductible
Employer payroll taxes are reduced by 7.65 percent of employee contributions
Employer workers compensation premiums are reduced
Paying for health benefits instead of higher salaries can save you money because you don’t pay payroll taxes and workers compensation premiums on money used towards health benefits. Plus, your employees may prefer benefits over salary as well. According to that same Glassdoor study, nearly 80 percent of workers said they would prefer new or additional benefits to a pay increase.
4. It can give you access to more doctors and hospitals
Group insurance networks are often larger than individual networks. That means on an individual plan, you don’t have access to the same doctors and hospitals you would on a group plan.
The network differences vary by state, but in California, networks for individual plans are typically two-thirds the size for group plans. So purchasing a group plan can increase your access to more, and often better, doctors and hospitals, which can be critical for better health outcomes when dealing with illness like chronic disease.
5. Providing health insurance helps boost employee productivity
MetLife’s Annual US Employee Benefit Trends Study for 2023 found that 61 percent of employees are satisfied with their benefits, which is the lowest point in the past decade, and 42 percent don’t feel cared for by their employers. According to that same research, 79 percent of employees feel that health insurance is a must-have benefit.
As an employer, you want your employees to focus on being their best productive and successful selves at work. In the past, that same MetLife annual study found that 60 percent of employers said that offering health insurance led to higher productivity levels. And according to the CDC, employees who prioritize preventive care—like regular checkups—get more accomplished at work.
Worrying about medical care can drain an employee’s energy and time, because as you know, health insurance can be a pain to set up. If your employees are enrolled in individual plans, all of that burden of setting up and managing their plan shifts from you to them. When it comes to coverage, make life easier for your employees, so their only concern is making sure they make their health elections during your company’s open enrollment period.
And there you have it. From building a healthier, happier team to actually saving money, there are many reasons to take the plunge and offer health insurance to your team. Offering health benefits signals that you care about your team, ultimately building a culture of trust.
