Should you be offering your workers health coverage?

While the ACA might not require all small businesses to provide health insurance, there are occasions when it is a good idea. We’ve found that fast-growth companies are far more likely to provide insurance coverage for their workers before and after they are legally required to. To learn more about the advantages of providing health insurance, read on.

Do You Offer Health Insurance?

During our recent 2024 HR Benchmark Report, we interviewed over 1,000 small businesses to learn what fast-growth companies are doing to be successful. We examined eight key HR components. As a part of the section on benefits, we asked businesses if they offered health insurance to their workers.

The Basic Numbers: Fast-Growth Versus Zero-Growth Businesses

First, we looked at all zero-growth and fast-growth companies to see how they responded. Our survey received the following results. 

• 66% of zero-growth firms provided health insurance. 
• 90% of fast-growth companies offered health insurance. 

This marked a 24% spread, which is fairly significant. The high number of fast-growth companies offering insurance is not particularly surprising considering all companies with 50 or more employees must provide insurance. 

Beyond the Basics: Small, Fast-Growth Companies Still Offer Insurance

The real surprise came when we broke the numbers more. Companies that have under 25 workers aren’t mandated to have health insurance, so they’re offering it entirely by choice. Take a look at how many businesses go the extra mile to provide coverage. 

• 80% of fast-growth companies with less than 25 workers offer health insurance.
• 45% of zero-growth businesses with less than 25 workers provide insurance. 

The VP of HR compliance, learning, and development at Asure, Mary Simmons, recently gave her take on these figures during the Mission to Grow podcast on, “The Power of Benefits.” According to Simmons, the difference comes down to the fact that “there’s a difference between attracting talent and attracting the best talent.” 

By giving employees health insurance coverage, these small businesses can attract highly qualified workers. Then, these highly trained workers increase the odds that the small businesses will be productive and innovative enough to achieve fast growth.

Why Do Small Businesses Provide Health Insurance When It’s Not Required?

Sometimes, small businesses simply offer health insurance and other benefits because it’s the right thing to do. When you care for your workers, they are more loyal and dedicated to your company. 

Beyond doing the right thing, offering health insurance is useful because it helps with worker retention, productivity, talent acquisition, tax benefits, and future growth.

Attract Talent 

You might be able to hire a worker without health insurance, but you’re likely not hiring the best worker available. As Simmons pointed out in her interview, “You can pretty much fill the seat with zero vacation, PTO, or medical benefits. But if you want to attract the best talent, those are the people that know what’s available.” 

“They’re talking to friends and family, and they’ve interviewed at other places that say, even though I’m a small company, I’m going to give you a generous PTO and I’m going to give you time off. Those are the people that you want,” she says.

Be More Productive 

By attracting top talent, you can make your workplace more productive. Also, sick employees are less productive employees. If workers are staying sick because they don’t have health insurance, it’s going to affect your bottom line. Additionally, you don’t want sick workers getting each other sick, so they need to have insurance. 

Retain Employees 

When employees are happy and feel appreciated, they’re less likely to leave. Even though salary is a major part of an employee’s decision about where to work, health insurance, 401(k)s, and other benefits are incredibly important for worker retention. 

In fact, 56% of American adults say that a major factor in deciding to stay at their company was employer-sponsored health coverage. When you offer health insurance and a competing company doesn’t, it helps to differentiate you among prospective workers.

Get a Tax Deduction 

As an added incentive, providing health insurance coverage may also lead to tax credits and deductions. The Small Business Health Care Tax Credit can give you the following credit amounts for buying employee insurance through the Small Business Health Options Program (SHOP) marketplace.

• 50% of the premiums you paid as a small business
• 35% of premiums paid if you’re a tax-exempt small business

You can only get the credit for a maximum of two consecutive taxable years, but you can carry the credit forward if you need to. Additionally, you must have less than 25 full-time equivalent (FTE) employees and pay average wages per employee of less than $56,000. Finally, you must cover at least half of the employee-only option for each employee.

Prepare for Growth 

By choosing a health insurance policy for your employees, you can prepare for future growth. As your business becomes larger, you’ll eventually need to invest in health insurance. Instead of trying to keep your worker base low, you can start planning for the future by getting coverage earlier.

Find Out More About Providing Small Business Health Insurance 

If you’re interested in growing your company, you need to learn how to offer health insurance to your workers. Fast-growth companies are far more likely to offer health insurance than slow-growth companies, even when they’re not legally required to. Through health insurance, you can attract a better quality of workers and retain more of your current employees. 

For more information on the advantages of insurance and other employee benefits, reach out to our team of small business HR & payroll specialists today.