Should SMEs Invest in Workers’ Health Insurance

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Every small and midsize enterprise (SME) should consider offering health insurance to their employees, but most SMEs’ profits are so small that they can’t afford the expensive health plan costs resulting from the ongoing medical inflation. Luckily, some SMEs reduce employee benefits to keep their costs manageable. Still, many employees don’t like this cost-containing measure, causing workforce dissatisfaction or employee turnover. 

Even worse, when employees leave, especially the top talent, a small business can quickly go unstable. In the worst case scenario, the company may ultimately experience a decrease in revenues. 

The question is, is investing in workers’ health a must? And is it really worth it? 
 

Worker’s Health Insurance isn’t Legally Required 

No United States federal law requires companies to provide health care coverage for their employees. It’s not only for SMEs or startups, but all businesses of any size and industry. However, as part of the US government’s aim to spread healthcare availability, quality, and affordability across all states, large companies must face a penalty tax.

A penalty tax is given to larger companies with over 50 employees, if they don’t offer health plans to 95% of their full-time workers (or its equivalent in part-time). It costs around $2,750 per full-time employee, which is costlier than an average group health insurance. That’s why many would resort to offering workers health insurance instead. 

SMEs with fewer than 50 full-time employees aren’t required to offer workers health insurance benefits or even face a tax penalty. Still, offering health insurance benefits will give the company a lot of perks. 

 

Top Benefits of Offering Workers’ Health Insurance 

Offering competitive health insurance can attract and retain top talent. A 2022 survey reported that many job seekers consider the benefits package an employer offers as a critical factor in deciding whether they’ll accept the job or not. This also sets your business apart from other competitors. 

Another advantage is that it helps companies save more during tax season. Offering health plans has tax advantages not only for the employers but also for the employees, depending on the health plan offered. 

Take the Health Savings Account (HSA) as an example. It boasts a “triple tax advantage.” This means employees can save on taxes in three ways:

1. 100% tax-deductible HSA contributions;
2. tax-free HSA funds (but only if used for any qualified medical expenses); and 
3. 100% tax-deferred in all interests earned in your HSA. 

Employers can also benefit from pre-tax contributions. First, set your HSA program through a cafeteria plan. This allows your employees to actively make pre-tax payroll contributions to their HSAs, reducing your payroll tax liability. 

Medicare for SMEs: Requirement or Option? 

Medicare can be confusing due to its several features, such as Part A (Hospital Coverage), Part B (Medical Coverage), and Part D (Drug Coverage). Many considering this health insurance often had to thoroughly compare Medicare policies to find one that fits their needs. Another difference is between Medicare Supplement and Medicare Advantage. 

While both can help reduce out-of-pocket costs incurred by healthcare services, the Medicare Supplement adds more features to your existing coverage, while Medicare Advantage replaces your original Medicare. 

It’s also important to understand compliance with Medicare if the company has fewer than 20 employees or more. Here’s the summary:

• Companies with less than 20 employees MUST enroll in Medicare Part B. In this case, Medicare is the worker’s primary insurance, while the company’s provided insurance is secondary coverage.
   
• Companies with 20 or more employees MUST enroll in Medicare Part B. However, the company’s provided insurance will be the primary insurance, while Medicare is the secondary coverage. 

SMEs can subsidize the costs of the employees’ Medicare Part B. This has always proven more affordable than the insurance companies’ individual group health rates. However, if the company pays a big portion of the worker’s individual health insurance premium, the employee typically chooses to remain on the company’s policy. 

What Other Insurance Should Every SME Owner Get? 

Every company needs insurance to prepare for the worst and ensure its survival in the years to come. Investing in this kind of safety net makes every business owner ahead of the competition in the labor markets. 

While having it is crucial for ventures of all sizes, there’s no one-size-fits-all insurance for every kind of businesses. A company should determine the unique needs of its business before choosing the right coverage. 

Apart from health insurance, here are the most common insurance types every SME should get:

1. General Liability Insurance - covers the owner and the company from bodily injuries and property damages caused by the business’s products or services;
    
2. Commercial Property Insurance - covers the company’s physical assets from natural disasters and loss;
    
3. Business Interruption Insurance - covers the operating expenses of a business due to a covered peril;
    
4. Businessowners policy (BOP) - combines general liability, commercial property insurance, and business interruption coverages (and others); and
    
5. Workers’ Compensation Insurance - covers medical expenses, lost wages, and rehabilitation costs of employees who got injured or became disabled as a result of their job. 

Final Thoughts

Offering insurance isn’t only an excellent way to protect your company, but is also a way to build a healthier workforce. Specifically, health plans can boost employee productivity, helping the business become more effective and profitable.