How Much Health Insurance Should A Small Business Offer?

These three questions will help you determine the right solution for your small business.

Today, state and federal mandates exist regarding offering health insurance to employees. But how much health insurance is enough for a small business?

After salaries, health insurance is one of the most expensive expenditures a small business has to make. It can be difficult calculating how much is enough and there is not a one-size-fits-all solution. Every company is different as some have more employees and/or more health hazards, which can result in health insurance costing a greater percentage of total revenue. Here are some questions you can ask to determine how much health insurance to offer.

What Are Your Demographics?
Your company’s demographics can play into how much you need to shell out for health insurance. If your company in made up of primarily people in their mid-twenties, your employees may not require high-cost insurance. If your company is comprised of older employees or those with families, you may need to access higher quality insurance. By determining your demographics, you can better calculate how much you need to offer in terms of insurance.

What Does Your Competition Offer?
It may be wise to look to your competitors to determine how much health insurance you should offer. For example, in San Francisco, due to the high demand of software engineers, many companies offer full coverage healthcare. By offering high-quality benefits, you can make yourself stand out from competitors while keeping your employees satisfied.

How Much Can You Afford?
If you do not have much money to pay for health insurance, the other two questions will not matter as much. It is important to calculate what you can afford to offer in terms of health insurance to your employees. The Affordable Care Act mandates that employers of a specific size offer affordable insurance but does not say they need to pay for all of employees’ health insurance. If your funding is tight, you may only be able to offer a plan with a high deductible. High deductible plans offer perks such as Health Savings Accounts, which are pre-tax accounts used for health expenses. By depositing money into each employee’s HAS, you can compensate for less generous plans.