Health Insurance Options for California Small Businesses

Posted: June 11, 2024

If you have a small business, running your company is your top priority, but you still need to consider health insurance for your employees. Offering benefits to your workers helps you retain a loyal workforce, even if you only have a single employee. Here’s what you need to know about sorting through the options and choosing the right health insurance options for your small business.

Common Reasons Small Companies Lack Insurance

Most business owners encounter challenges when it comes to offering benefits to employees. Due to tighter profit margins and lower numbers of workers, finding coverage to fit within your budget can be tricky. The bulk discounts available to larger firms are unavailable to your smaller companies. However, even small business owners like yourself can find affordable ways to offer insurance for their staff with the right information.

Here are six reasons small businesses might lack health insurance:

1. Time Constraints

Small business owners often spend most of their time running the company, which is necessary to drive growth. However, there are other crucial aspects of managing people, such as catering to their well-being. Fortunately, there are ways you can access insurance products without going to the provider’s physical location.

Health for California makes it simple and quick to access various packages online. You can use our intuitive form to get your workers coverage. If you have any questions, we quickly connect you with an agent who will address your concerns. Finding and administering health insurance for your workers will require some effort, but the benefits are enormous. It’s always essential to make time for the things you care about.

2. Insufficient Funds

Benefits come at a price — a price some business owners are reluctant to bear. Most employers would instead invest in areas where they can profit directly to grow their businesses. Others are looking for ways to reduce costs, especially with the prices of health insurance packages potentially increasing. That’s only one side of the coin.

The benefits of having health insurance for your employees often exceed the costs. Small businesses that provide health care have high employee retention rates and a positive reputation. The federal government also recognized the challenge small businesses face in paying for coverage for their workers. That’s why small companies offering Small Business Health Options Program (SHOP) insurance could qualify your company for a tax credit.

Businesses offering SHOP with fewer than 25 full-time workers who average less than $56,000 per year could get the Small Business Health Care Tax Credit. This tax credit may help ease the financial burden of offering health insurance to your employees.

Because benefits draw in the workers you need and help you keep the ones you have, you can’t afford to forego offering health insurance. With the ability to compare prices and shop for the lowest-cost plan, you may not have to spend as much money as expected. Thanks to the internet, comparing all aspects of plans, from coverage levels to prices, becomes more accessible than ever.

3. Lack of Employees

If you have fewer than 50 workers, you do not have to provide health insurance to your employees, but benefits are critical to helping workers decide where to work. Not having more than 50 employees should not be an excuse to not look for insurance. You have several options available, even if you only have a single employee.

Businesses with up to 50 workers will need a certain number of them to accept the insurance you offer for a particular plan. To enroll in the Small Business Health Options Program, SHOP, you must have at least 70% of your employees to whom you offer health insurance to take the plan or have a valid waiver. If you cannot reach this level, you will not be able to be part of SHOP. However, you still have other options.

By looking through the small business health insurance options online, you can find the right way to offer your workers benefits, regardless of how many you supply coverage for.

4. Employees in Multiple States

Today’s labor market is spread out across the country. Many small businesses have remote workers in different states. You don’t have to have all your workers in the same state to offer them insurance. Thanks to the vast online resources, you can find coverage for these workers, regardless of their state.

If you have employees in multiple states, through offices or remote work, you can still offer them health insurance. The SHOP program allows you to purchase insurance from the state even a single worker lives in, as long as your business meets that state’s participation requirements. When choosing individual state coverage for your employees, you must prove that you meet the criteria for SHOP eligibility in every state.

Another option for out-of-state workers is bringing them under a group plan for all your employees. Such a policy must adhere to national or multi-state coverage networks and requirements. Choosing a single insurance plan for all your employees offers the simplest solution, but you may not be able to find a multi-state insurance plan to match the needs of your workers. That is what our team of licensed agents is here to help you with. Whether your employees are only in California or in multiple states, we can advise you on options that meet your unique situation.

5. Fewer Options

Maybe you think you cannot find a single plan to fit the needs of all your employees. The good news is that you don’t need a one-size-fits-all approach. In fact, if you have fewer than 50 employees, you have multiple options to reimburse or help your workers pay for insurance plans of their choice.

Going through our website gives you numerous options you may have never thought about. Additionally, you can research how well-suited your business is for specific insurance offerings. If you cannot afford to offer group insurance to your workers, you can still set up reimbursement arrangements or savings accounts earmarked for health care. These choices let your workers purchase their own health care plans but still benefit from saving money on medical expenses.

6. Insufficient Tax Knowledge

Yes, providing insurance for your workers will make your tax returns slightly more complicated. The type of insurance you offer, how many employees you have, and the state you operate from determine the taxes you pay. However, you could get a tax credit for providing health insurance to your workers.

The IRS makes it easier for employers to know which forms to file, what you must pay or the incentives you receive. Because you should not accept blanket tax advice from the internet, consult your tax professional about any specific questions concerning health insurance and your small business taxes.

Are Businesses Required to Offer Health Insurance?

The Affordable Care Act (ACA), also known as Obamacare, requires employers with 50 or more and “full-time equivalent” employees to provide affordable group health insurance. The coverage must include essential benefits, or else the employer could be sanctioned to pay a penalty. Businesses that fall below the threshold are considered small businesses and are not required to comply with the legislation. However, most small business owners offer health insurance because of the benefits:

• Employee health and well-being: Caring for your employees’ well-being should be paramount to every employer. Health insurance lets employees access necessary health care services, leading to a healthier and more productive workforce.
• Employee retention: Health insurance helps small businesses attract and retain talent in a competitive job market.
• Tax benefits: Small businesses providing health insurance may be eligible for tax credits, enabling them to offset the coverage costs.
• Improved morale: Providing health insurance demonstrates that an employer values the employees’ well-being, which can boost morale and job satisfaction.
• Reduced absenteeism: Health insurance promotes preventive care and timely treatment, reducing absenteeism caused by illnesses. Having your employees available and healthy can improve productivity.
• Competitive advantage: Small businesses with health insurance are distinguishable from their competitors, enhancing their reputation as employers of choice.

What Is the Small Business Health Insurance Credit?

Small businesses participating in CCSB may qualify for tax credits, reducing the cost of health insurance premiums. The tax credit could be worth up to 50% of the employer’s premium contributions or 35% for tax-exempt employers. Small businesses must meet the following requirements to qualify:

1. Have 25 or fewer full-time equivalent (FTE) employees
2. Pay employees an average salary of $56,000 or less annually
3. Make a contribution of at least 50% of the health care coverage for each employee
4. Offer employees a qualified health plan (QHP) to employees through the Covered California for Small Business marketplace unless you qualify for a limited exception
5. Offer CCSB coverage to all full-time employees

Eligible businesses may claim the tax credit using Form 8941.

What Are the Health Insurance Options for Business Owners?

In general, you have five insurance options for your small business:

1. Covered California for Small Business Program (CCSB)

       (formerly Covered California’s Small Business Health Options Program aka SHOP)

If you have between one and 100 employees, you can use CCSB. Under CCSB, you must offer coverage to all your full-time employees, and 70% of those workers must sign up for coverage or have a valid waiver. You are allowed to offer the Health Insurance Benefit to any employee that works a minimum of 20 hours per week.

With CCSB, you have the flexibility to offer your workers several levels of coverage or just one. If you have a wide range of ages among your staff, offering multiple insurance options ensures your employees can choose the coverage level they need. Older workers may want more comprehensive plans than younger employees. If your workforce consists of a small group of healthy young workers, offering one low-cost plan may suffice to save you and the workers money.

2. Association Health Plans

Whether you have one worker or more, small businesses and sole proprietors can join with other similarly sized companies to purchase health insurance at the lower rates larger companies get. Association Health Plans (AHP) also cover sole proprietors and their families.

By choosing an AHP, you can insure your workers with better plan options or lower prices thanks to the larger size of the group from your region enrolling in coverage. As with many other federally overseen health insurance programs, the plans cannot prevent your employees from joining due to pre-existing health conditions.

3. Self-Insurance

You may want to self-insure if you have a small business with healthy, young workers. This option can save you money, but it also means you bear the risk of paying the medical costs of a worker who has an accident or severe illness. Depending on the self-insurance you provide, you may even need to pay a fee to the IRS, which helps fund the Patient-Centered Outcomes Trust Fund.

Many small- and medium-sized businesses embrace self-insurance. To protect your business from losses, you may need stop-loss insurance, which covers you if you must pay a significant amount.

You can make your job easier by using a third-party administrator (TPA) to make coverage decisions to benefit all those on the plan. Some insurance companies provide a similar service under the heading of administrative services only (ASO). With the help of a TPA or an ASO, running the administrative side of self-insurance becomes much more accessible.

4. Health Savings Accounts and Flexible Spending Arrangements

Health Savings Accounts (HSAs) allow contributions from the employer or the worker. The funds in HSAs can pay for deductibles, copayments or other medical expenses not covered by insurance. These accounts provide the employee with an individual, untaxed fund for covering medical costs. These accounts pair with high-deductible insurance coverage. HSAs follow you, regardless of your employment status, and their funds never expire.

Flexible Spending Arrangements (FSAs) have funds that the employee must use in the same year. With FSAs, employees have funds withheld from their paychecks before taxes to go directly into their FSAs. However, employees have a limited contribution of $3,200 per year to each FSA. If the employer allows them to do so, employees may carry over up to $500 to their FSAs for the following year — but generally, these plans require workers to use the funds or lose them.

5. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

The QSEHRA is a way for you to help your workers pay for health insurance of their choice. This type of coverage is reimbursement for employees’ premiums. To ensure their tax advantages from using funds from the QSEHRA remain intact, employees must sign up for minimum essential coverage (MEC). Unlike FSAs and HSAs, employees cannot contribute to HRAs.

A health reimbursement arrangement has no limit for employer contributions, and the government does not tax the funds as long as the employee uses them for eligible medical expenses. At tax time, employees do not need to report their HRA funds. These funds are also not counted in their gross income, so workers reduce their tax responsibility.

Tips for Choosing Health Insurance for Your Business

Below are tips for choosing health insurance for your business:

1. Consider Your Business Size

The size of your business and how many of your employees you will offer coverage to will determine the number of options you have. Generally, you have the highest number of options if you have fewer than 50 people. Regardless of how many workers you have, you can find the right coverage to fit your budget and the needs of your workers. The type of coverage you offer will help you take control of the financial side.

2. Calculate Your Full-time Equivalent

The number of workers and their hours contribute to the number of full-time equivalent (FTE) employees you have. For every 2,080 hours employees work, you have one FTE employee. FTE combines full-time and part-time employees — not just those who work more than 30 hours a week. CCSB insurance is generally available to employers with one to 100 full-time FTEs. Businesses with fewer than 25 employees may qualify for the tax credit.

3. Consult a Professional

Seek advice from insurance professionals to understand your options and select the most suitable coverage. Organizations like Health for California have a network of providers you can choose from, making the process simple and fast. You can leverage their resources to increase your return on investment (ROI).

Professionals with industry knowledge and experience can examine your needs and recommend practical solutions. They can assist you in navigating the complexities of different insurance products. If time is your primary challenge, professionals can take the load off your shoulders, allowing you to focus on your core operations.Check Different Carriers

Why Should You Work With Health for California?

There are many advantages when you work with Health for California:

• Free services: Health for California helps business owners find the ideal insurance coverage and provider for their workers for free. You get access to our experienced and helpful agents without paying a dime. You only pay for the insurance, not the services we provide.
• Free quotes: Besides getting free services, you get free quotes if you have a small business with between one and 100 employees. All you need to do is provide basic information like your zip code, contact information and employee census information. This has helped many California business owners budget towards getting health insurance for workers.
• Access to a vast network of insurance providers: Health for California has a network of insurance providers you can leverage to find the best coverage for your business. We do the heavy lifting by shopping around so you can focus on your core operations. Our agents will assess your needs and connect you with an insurer that can meet your demands.
• Quick and simple application process: Our application process is simple, convenient and fast. Our app is intuitive, eliminating the complications and time-consuming processes associated with purchasing health insurance. It’s designed for busy business owners like yourself who cannot afford to waste time and energy.
• Excellent support: At Health for California, we strive to provide the best services to consumers. Our agents are experienced professionals and genuinely care about your interests. We are always available to answer your questions and address your concerns.

Contact Health for California to Learn More

While health insurance is optional for many small businesses, purchasing coverage is recommended. It improves employee satisfaction and talent retention rates, increasing workplace productivity. Businesses that provide health care benefits may also receive tax credits upon meeting specific requirements.

Health for California helps small businesses find the ideal health insurance coverage for their employees. We make the process easier and faster by leveraging top professionals and advanced technology. All you need to do is reach out to us online and connect with one of our trusted agents.

We can help you find the lowest-cost plans or get the right balance of service and cost for your workers. Do you want to learn more about our offerings? Contact us now!