Although small businesses that have less than 50 employees may not be required to offer health insurance, it is often a good idea. Worker satisfaction, retention rates, and productivity all increase when you provide health insurance benefits. In turn, these benefits help improve your company’s profitability.
Additionally, companies should consider going beyond basic health insurance. Wellness plans, health reimbursement arrangements (HRAs), group health plans, and similar benefits can support your employees’ long-term health and well-being.
Why Small Businesses Should Offer Health Benefits
Today, 86% of private-sector employees are covered by employer-sponsored health insurance. As a small business, you must compete with other businesses that offer health insurance. From better retention rates to fewer sick days, offering health insurance can provide you with a range of different benefits.
1. Difficulty Attracting Talent
From 2024 to 2027, more than 11,200 Americans will turn 65 each day. While the number of retirees is going to go up, the number of young workers won’t increase at the same rate. Because of this forecasted demographic shift, there will be a decline in available workers in the future and a resulting war for talent.
For many job seekers, health benefits are a top priority. If you don’t offer benefits, you won’t attract top talent. Even though you might not be legally required to provide health insurance or other benefits, you’ll be competing with companies that do have to meet these requirements. In a tight job market, you’ll struggle to compete. At the very least, your costs will go up because you’ll need to attract top talent by paying higher salaries or providing alternative incentives.
2. Employee Retention Issues
56% of Americans say that their employer’s health insurance was a major factor in their decision to remain at their job. Additionally, 46% of people said employer-sponsored health insurance was a major influence in picking their current role.
As an employer, you are more likely to experience employee retention issues if you don’t provide health benefits. A lack of insurance signals to your workers that you don’t value them. Additionally, any employee who needs insurance will feel like they have to leave their organization if they want to receive proper medical care.
A high turnover rate means your company will have to hire more employees to replace lost workers. This loss can significantly increase your hiring and training costs. If your retention rates worsen enough, it can even disrupt your business continuity.
3. Reduced Employee Morale and Productivity
When employees are supported and cared for, it improves their morale. A worker who lacks health insurance may feel higher levels of stress, and they may be unable to treat an illness. Both of these factors can negatively impact their performance at work.
Over time, this decline in morale and productivity can lower employee engagement levels and productivity. Employees may be more likely to experience health-related concerns and financial problems. As a result, your workplace will likely have higher absenteeism levels because employees will need to take time off for untreated health problems. The same problems can also weaken their productivity on the days that they are able to show up for work.
4. Financial Stress for Employees
If you don’t offer health benefits, it doesn’t stop employees from becoming sick. It simply prevents them from accessing affordable care. Employees will still need to go to the doctor, but they will have to pay the full cost of their care. Alternatively, they will have to pay out-of-pocket premiums to keep their medical costs lower. Either option can quickly add up to thousands of dollars every year.
When employees have to cover their out-of-pocket medical expenses, it affects how effective they can be as employees. If they’re worried about medical bills stacking up at home, they can’t be as focused and effective as possible at the office.
5. Increased Sick Days and Health Risks
Unsurprisingly, a lack of healthcare means employees will take more sick days. Because they may delay preventative care and treatment, they will likely end up with poorer health. By the time they are forced to seek medical attention, the problem will be more expensive and challenging to resolve.
For all of these reasons, a lack of health insurance can cause higher rates of absenteeism. Even mild illnesses can impact absenteeism because the sick worker will spread illnesses at work. In turn, other employees will need to stay home. The net result is that your workplace will have worse overall productivity, and you’ll be scrambling to get shifts covered.
6. Regulatory and Compliance Risks
Under the Affordable Care Act (ACA), small businesses are required to offer health insurance once they have 50 employees or more. However, different states and municipalities may have different rules. If your company isn’t in compliance with healthcare laws, it can lead to major fines.
As you approach the 50-worker limit, you should plan ahead. To avoid unintentionally violating the law, it’s wise to err on the side of caution and offer insurance before you officially reach 50 full-time equivalents.
7. Weaker Employer Branding
As an employer, the right benefits can make or break your employer branding. Offering health insurance makes you appear like a more attractive place to work, and it helps you be competitive in the job market.
If you don’t offer insurance, it can damage your reputation as an employer of choice. Even if you provide the best compensation possible for each job, you will struggle to make up for the lack of insurance coverage. Besides making you appear less attractive to applicants, a lack of coverage will harm your professional brand image.
8. Increased Long-Term Costs
While it may seem like not offering insurance will save you money, this decision can end up costing you in the long run. Over time, a lack of health insurance can lead to reduced productivity, so it will cost you more to achieve the same production results. Similarly, you’ll end up spending more money on recruitment, onboarding, and training costs because your company will have a higher turnover rate.
Higher costs and lower productivity will make your operations less efficient. However, these problems can be prevented by simply taking steps to improve your employees’ well-being. By helping your workers, you can also help your company’s growth.
9. Employee Burnout and Dissatisfaction
68% of employees feel challenged to get the medical care they need. Even when workers have health insurance, they often struggle to cover deductibles, premiums, and other costs not included in the insurance coverage.
When employees don’t have health coverage, it can feel overwhelming. They end up feeling undervalued and unsupported by their employer. In turn, this leads to higher burnout rates across the board. In demanding roles that already have high burnout rates, this problem is especially apparent.
As a result of all these factors, you are more likely to have disengaged workers if you don’t provide health benefits. Eventually, this can severely harm your team morale and collaboration.
10. Missed Tax Benefits
While it may seem like health insurance involves a major upfront investment, it’s not nearly as expensive as it appears. There are many important tax advantages for health plan contributions, so you can significantly lower your overall costs. For instance, the Small Business Health Care Tax Credit can cover up to half of the cost you pay for your employees’ premiums.
If you don’t invest in health plans for your employees, you’ll face a higher tax liability. You’ll also miss out on many financial incentives that can help you support your employees’ well-being and health.
Use Health Insurance to Support Your Company’s Long-Term Growth
Thanks to the war for talent, many small businesses are struggling with hiring and employee retention. By supporting your employees’ well-being and offering health insurance, you can lower your recruitment costs and turnover rate.
If you’re concerned about the costs of setting up health insurance for your workers, a professional payroll and benefits provider can streamline the entire process and make it easier to manage your plan. Plus, a professional provider can help you find the most affordable options. You can learn about all of the different HRAs, group health plans, and wellness incentives that your organization can use.
To learn more about flexible, affordable ways to offer health insurance at your company, reach out to Asure’s team of small business payroll and HR experts today.