Business owners are facing a new challenge as they consider the health insurance component of their employee benefit package. The traditional reasons to offer health insurance are still valid:
• Provide valuable protection for employees & family members
• Offer a tax free benefit to the employee and a tax deductible expense to the employer
• Attract & retain high quality employees in a competitive market
• Demonstrate the employer’s commitment to “value” employees
The implementation of the Affordable Care Act in 2014 brings additional factors into the decision making process.
• Employees may be eligible for financial assistance through the Marketplace. How does the existence of a group insurance plan impact their eligibility or their dependents’?
• Pre-existing medical conditions will not be used to determine premiums. Small group and individual premiums will be determined based upon age, location, and tobacco use. Those who were “rated up” in the past because of health conditions or claims will now pay the standard premium.
• The premium for individual health insurance plans historically has been less than small group rates. In 2014, the rates will be about the same. There will no longer be an incentive to go to an individual plan to save money.
• The Small Business Health Care Tax Credit is available to employers with fewer than 25 full-time equivalent employees making an average of $50,000 per year or less. The tax credit is worth up to 50% of the contribution toward employees’ premium costs. The credit is available only to businesses that offer a group insurance plan through the SHOP Marketplace.
• Some employers will face significant increases in the premiums offered in 2014.
• One option that has been considered by those who may be eliminating their group plan is to offer the employees a “stipend” to help offset the cost of purchasing their own insurance plans. The stipend would be taxable income to the employee and would increase employer costs for payroll taxes, workmen’s compensation, and any other expense that is based on payroll costs.
This decision may be a tough one. Both sides of the issue have valid points that impact the financial operation of a business, its relationship with employees, and the company’s values. Your agent is a valuable resource in helping you reach a conclusion.
by Brian McPike, President
402-488-5100