Unless you are an employer in Hawaii, you are not required by state law to offer your employees health insurance benefits. Employers in Hawaii are obligated to offer health insurance coverage to their employees as a mandatory requirement. The law, the Prepaid Health Care Act, was passed in 1974 and requires employers to provide health insurance to all full-time employees, either through an indemnity plan or an HMO. (The requirement that Massachusetts employers with more than ten employees make a fair share contribution for full-time employees’ health insurance coverage costs or pay a fair share contribution per employee is no longer in effect as of July 1, 2013, due to to the implementation of federal health care reform.)
Employers with a minimum of 50 full-time employees, or a combination of full-time and part-time employees that is equal to 50 full-time employees, are required by law under the Patient Protection and Affordable Care Act to provide suitable healthcare coverage. If their employees receive premium tax credits to purchase their own insurance, these employers may be subject to assessment. This requirement has been in effect since 2015. On the other hand, starting from 2010, small businesses with less than 25 employees may qualify for a tax credit when they purchase health insurance for their employees.
If you choose to provide health insurance benefits, keep in mind that you will activate a set of regulations that dictate the specific coverage you must provide and the manner in which you must provide it. As a result, the initial determination you need to make is whether or not to provide health insurance in any capacity.
Advantages and Disadvantages of Providing Health Insurance Benefits
Providing health benefits to your employees has several benefits. Here are some of the key advantages. :
- To draw in and keep the most skilled workers. It is important to consider if offering health insurance is essential. This will vary depending on factors like whether other businesses of a similar size in your area are providing health insurance to their employees.
- Stay away from evaluations of health care reform. The law known as the Patient Protection and Affordable Care Act and other associated statutes mandates that employers with a workforce of at least 50 individuals who work full-time (or a combination of full-time and part-time workers equal to 50 full-time employees) must provide sufficient health insurance or face penalties if their employees are eligible for government subsidies to purchase their own coverage. This requirement takes effect starting in 2015.
- Obtain tax benefits. You have the opportunity to provide employees with something that boosts their overall compensation while also giving you a tax deduction for the contribution. This means that your actual cost for the benefit to the employee is lower than its value. For self-employed individuals, they can expense all of their health insurance premium costs. And for both self-employed individuals and incorporated businesses, all insurance premiums, including those for employees, are fully deductible.
- Utilize the tax credit available for small businesses in the healthcare sector. Small businesses with fewer than 25 employees may be eligible for a tax credit for purchasing health insurance for their employees.
- Offer employees group purchasing power. You have the option to not make any contributions towards your employees’ health insurance, but you can still provide them the chance to avail group rates through your company. In addition, small businesses (generally, those with 50 or fewer full-time employees) may purchase health care coverage through a government-run insurance marketplace established specifically for them—the Small Business Health Options Program (SHOP).
- Ensure the wellness of your workers. Insurance policies provide preventive healthcare that can ensure the well-being and productivity of employees. In the absence of insurance, employees may neglect preventive care and annual check-ups, leading to a higher number of employees being absent from work for extended periods due to severe illnesses.
There is also a disadvantage to providing health benefits. Some of the disadvantages of providing health benefits include:
- Healthcare expenses. These have significantly surged in recent times. Consequently, not only are these expenses depleting valuable resources from numerous small employers, but the unpredictability also renders financial planning incredibly challenging.
- The occasional stressful practice of dividing costs with workers. Small employers can regain control over expenses and bring back stability to the system by shifting any extra costs onto their employees. Although this approach may resolve financial issues, it gives rise to numerous other challenges. Even if not all expenses are shifted onto employees, it is unavoidable to transfer at least a portion of the costs onto them.
- The bureaucratic challenges. Although the health insurance provider you buy from typically fulfills the role of plan administrator, you will need to select the insurer yourself and dedicate some of your time to completing paperwork, paying premiums, and serving as a middleman between employees and the insurer, among numerous other responsibilities.
- The potential legal responsibility. There is a possibility of being legally responsible if you choose a healthcare provider who harms an employee through negligence. Although this risk is minimal and should not be the sole reason for deciding not to provide health insurance, it is important to note that some employers have been sued by their employees for what they claim was the employer’s negligence in selecting a provider.
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