If you’re a business owner, insurance is a big part of the cost of doing business. But the price of the different types of insurance that you need will add value to your business as well. They keep both your business and your employees safe in every way.
When it comes to insurance for your business, your first thought might be group health insurance. Depending on the size of your business, you might not need to offer a healthcare plan to your employees, but offering health insurance to your staff is beneficial in a lot of ways. For example, doing so can help bring in and keep top talent, and help you save you money through tax incentives.
But you also have to think about the insurance your business itself needs. You’ll need everything from workers’ compensation, which protects you and your employees in case of an injury at work, to the different types of liability coverage that protect your assets from potential losses or lawsuits. You can even find policies that bundle everything you need together under one policy.
But figuring out insurance for your business can be challenging, since there are so many options to choose from, and so many regulations to follow. If your business doesn’t have a full HR department, you will have to navigate all of this without much help. So, to help you better understand your options and get you started, we’ve created a guide to everything you need to know about the types of health insurance your business can offer your employees, as well as the types of insurance you can buy to protect yourself.
How Small Business Group Health Insurance Works
If you are considering offering group health insurance to your employees, there are four things you should keep in mind while building your group health insurance plan:
- Coverage – If your small business is financially able to offer health insurance, and you choose to do so, your employees are guaranteed coverage if they want it. Your employees and their dependents can’t be denied coverage due to pre-existing conditions or for any other reason.
- Business size – Generally, you have to employ at least one person besides yourself to qualify for small business health insurance. But the guidelines vary from state-to-state, so that may not always be the case. And you do not actually have to offer a healthcare plan unless you have more than 50 full-time (or full-time equivalent) employees. But it is a good idea to do so.
- Your contribution – You are required to pay a percentage of your employees’ premiums when you offer them group health insurance. The percentage you have to contribute varies depending on your state.
- Enrollment period – You can look for health insurance as a small business owner at any time of year. There is no need for you to wait for the annual Open Enrollment Period. Once you’ve chosen a plan, you can add new employees and dependents to it throughout the year. Or remove coverage for those who leave your company. At the end of the year, you can typically renew your coverage or look for a new plan.
Are Small Businesses Required to Offer Health Insurance?
According to the ACA, businesses with more than 50 full-time or full-time equivalent employees must offer affordable group health insurance. If they don’t, they will face a tax penalty. But if your company has less than 50 full-time employees, you are exempt from this requirement. But just because you’re not required to offer health insurance doesn’t mean you shouldn’t.
Benefits of Offering Health Insurance
More than half of small business owners across the country offer group health insurance to their employees. Although, as we pointed out above, small business owners are not obligated to provide health insurance, there is a strong case to be made that you should do so, if at all possible, as it offers value to both your employees and your company. Think about the following benefits:
Saving money – Paying for a group health insurance plan can typically lower tax obligations for employees, increasing their take-home pay. Additionally, you could be eligible for a tax credit under the ACA’s Small Business Health Options Program (SHOP), if you meet its requirements.
Healthier employees – Employees who have health insurance might take fewer sick days, which could increase productivity at your small business. Your staff may proactively take care of their medical needs with less disruptions to their work schedule thanks to access to a variety of healthcare resources.
Employee recruitment and retention – A robust healthcare plan can help you both draw in and retain top talent. Employees prefer to work for a company that satisfies their needs, including health insurance benefits. And when you hire the best people – and encourage them to stick around – you will spend less on hiring and training.
Overall, offering health insurance to your staff benefits everyone.x
Small Business Health Insurance Tax Credit
To expand on one of the benefits mentioned above, you may be eligible for a small business healthcare tax credit worth up to 50% (or 35% for non-profit organizations) of the premiums you pay for your employees.
Your credit amount is determined on a sliding scale, depending on the size of your business. A bigger healthcare tax credit is often available to smaller businesses. For instance, the highest tax credit would be available to a company with fewer than 10 employees with an average annual wage of under $26,000. And if your small business doesn’t owe taxes for your current year, you can carry the credit backward or forward to previous or future tax years.
Small businesses and nonprofit organizations can typically only qualify for the small business healthcare tax credit by signing up for a Small Business Health Options Program (SHOP) plan. All of the following requirements must be met in order to be eligible for a SHOP plan and the tax credit:
- You have less than 25 full-time or full-time equivalent (FTE) employees.
- Your employees’ average salary is $56,000 or less a year.
- You cover at least 50% of your full-time employees’ premiums.
- All of your full-time staff members have access to SHOP coverage. To be eligible for the tax credit, you are not required to offer coverage to dependents or employees who work fewer than 30 hours a week.
Overall, the healthcare tax credit could help small businesses in buying group health insurance at a lower cost, while still ensuring that their plan complies with ACA insurance standards.
If you choose to offer your staff a group health plan, and you meet the above requirements, you can apply for your tax credit using IRS Form 8941.
Even if you don’t qualify for the tax credit, there are still ways to save money when you buy a group health insurance plan. You may still be able to write off certain contributions on your taxes. For example, contributing to employee premiums can count as a business expense. It’s important to note that even if you do qualify for the tax credit, you might still be able to write these expenses off, giving you double the savings.
Since you, the employer, supply the group health insurance you can have employees pay a portion of the monthly premiums (usually 50% or less) through their paycheck. while still meeting the ACA’s health insurance mandates and employer cost-sharing requirements.
Other Types of Business Insurance You Need
There are several types of insurance you’ll need to consider for your small business. Along with a group policy for your employees, there’s also business owner’s policies, general liability, professional liability, and workers’ compensation.
As discussed above, group health insurance covers groups of people, like employees. But there are also small business health insurance plans and group health insurance plans for union, professional, fraternal, and advocacy group members as well.
A Business Owner’s Policy (BOP) is a combination of business property and liability insurance. BOP insurance helps financially protect your company in case of fire, theft, and other covered events. Claims that might result from your business operations are also covered by business owners’ insurance, such as allegations of physical harm or property damage.
General liability, sometimes called commercial general liability, is insurance to protect your business against bodily injury or property damage claims. You can buy these plans either on their own or in a bundle through a BOP.
Professional liability, aka “errors and omissions”, is insurance that covers a portion of the costs from negligence claims or lawsuits. For example, if you or an employee makes a costly mistake like giving someone bad advice, or improperly handling private information, professional liability will cover you.
Workers’ compensation insurance will cover your employees’ medical bills and wages if they sustain and injury or become ill at work. Every state has its own set guidelines for the benefits required by this type of insurance, so make sure you check out our state pages to see what the rules are in your area.
Business Insurance FAQs
How do I report group health insurance on my business taxes?
To be in accordance with the ACA, you have to report the cost of your group health plan on your employees’ W-2 form. This cost includes the contributions from both you and your employee. But even though you report the cost of health insurance on your taxes, the contribution will not necessarily be taxable. In fact, many companies find that they qualify for tax relief because of the contributions they make to their employees’ healthcare.
Do I have to offer group health insurance?
It depends on how big your business is. If you have less than 50 full-time employees, there is no law that requires you to offer a group plan. On the other hand, if you do have more than 50 full-time employees then yes, you have to offer health insurance to your employees.
Do I need commercial insurance?
Workers’ compensation insurance is generally required in most states and general liability insurance is advised for the majority of small businesses. Aside from that, it depends on your specific situation, but you may also need commercial auto, cyber liability, and/or professional liability insurance. Check out our in-depth pages on each type of commercial insurance to find out what your business may need.
Finding Your Business Insurance
Whether you’re looking for Group Health Insurance for your employees, or looking for commercial insurance to protect your business, EZ can help. Our agents work with the top insurance companies nationwide to make sure you find the best insurance for your business and your employees. In fact, we can save you hundreds of dollars a year by working with your budget to find you the best coverage. If you have questions, feel free to give us a call at 877-670-3531 for Group Health Insurance help, and 877-670-3538 for commercial insurance.