Do I Have to Have Health Insurance for My Employees?


As health insurance premiums rise year after year, outpacing the U.S. inflation rate, many small business employers wonder whether or not they should offer health insurance to employees for the sake of business expenses. Though approximately 98 percent of large business employers provide some sort of health insurance benefits to employees, U.S. trends show a decline in small-business employer-sponsored health insurance availability, with eight percent fewer small employers offering coverage in 2006 than in 2001.


  • The law – even with the passage of the Affordable Care Act – does not require that any U.S. employer offer health insurance to its employees. As of 2011, there are no penalties for choosing not to do so. However, beginning in 2014, employers with more than 50 full time employees that do not offer group health insurance may have to pay penalties of up to $2,000 per employee, depending on how many employees take advantage of government-subsidized insurance.


  • If you choose to offer your employees a group health insurance plan to which you pay a portion of each qualifying employee’s premiums, you may qualify for tax benefits and incentives. Most businesses can deduct the portion of business income used to pay for employee insurance premiums on their federal taxes. Additionally, if you own a small business of 25 or fewer full-time-equivalent workers, and you pay for at least 50 percent of each employee’s health premiums, you may qualify for an additional tax credit worth up to 35 percent of your annual premium expenses. In 2014, the maximum credit will increase to 50 percent.


  • Massachusetts enacted state health reform in 2006 that requires almost all state residents to purchase health insurance or face a fine. Part of the law causes employers in Massachusetts to face narrow restrictions regarding health insurance availability for employees. While very small businesses do not have to provide health insurance to employees, employers with more than 11 employees must provide all employees with access to a Section 125 Plan, as well as make reasonable contributions toward each employee’s Section 125 Plan to enable employees to purchase health insurance on a pre-tax basis.


  • As an employer, if you are undecided whether to offer your employees health insurance coverage, you may want to consider t/hat employees value health benefits, and qualified health insurance may deter your employees from accepting other jobs with better benefits. According to Mercer, a human resources consultation firm, nine out of 10 employees with insurance coverage value medical benefits equally as they do monetary pay.


  • Photo Credit Comstock Images/Comstock/Getty Images
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