3 Effective Tips for Managing Small Business Health Care Costs
The ACA is still the law, and if you have 50 or more full-time employees (FTEs), you're still required to provide health insurance. But with rising health care costs, managing these fringe benefits can easily get expensive. So, it's crucial to manage these costs to stay compliant with the law. The great news is that managing your small business health care costs is feasible when you have a plan. Here are a few effective ways to get it done.
Know Your Options
There several options you can take advantage of to ensure you can afford health care for your employees, including an HSA, HRA and PPOs. Offering a Health Savings Account (HSA)-qualifying insurance policy can provide you with potential cost-reducing benefits. For example, you can save on taxes when you contribute to your employee's HSA since employer contributions are payroll tax-exempt. You use HSAs along with health plans that have high deductibles. It's typically an ideal option for small businesses thanks to its tax-deferred and tax-free benefits. Health reimbursement accounts (HRAs) can be used to reimburse the cost of health care expenses for employees and are tax deductible, too. You can contribute to HRAs if you have less than 50 FTEs, and since you manage the account, you maintain the earnings even after the employees stop working for your company.
You can also offer a preferred provider organization (PPO) plan if you want to provide your employees with a wide selection of physicians. However, these plans can be higher than other group insurance plans. So, shop around with an insurance broker or an insurance marketplace to save on costs.
You can also reduce how much of the health care expenses you pay for by creating a more balanced employer cost-share. For example, if your business paid 80 percent of the health insurance plans for your employees, considering lowering your health care cost share to 70 percent. That 10 percent in savings per employee can easily multiply into the thousands, especially if you have more than 50 employees.
Take Advantages of Tax Credits
When you leverage tax credits, you can help reduce your tax liability and, ultimately, your small business health care expenses. To manage your health care costs, you can take advantage of the small business health care tax credit. To qualify for this tax credit, the average annual wages you pay per employee must be less than $50,000 per year. Also, you may qualify if you have less than 25 FTEs and pay half of employee-only health care plans per employee. These plans must also be offered via the Small Business Health Options Program (SHOP) Marketplace. It helps you save up to 50 percent of the health care premiums you pay. Also, consider reducing your tax liability by taking advantage of the HSA tax deduction. You can deduct these contributions from your business income.
Know If You Can Afford It
Determining affordability is essential to keeping your health care costs manageable. To determine whether or not you can afford a health care plan, calculate and compare the costs of the plans you are considering. This helps you to know whether or not reimbursement and benefit options is within your budget. It's also important to consult with a reliable tax professional, such as Honest Buck Accounting, when determining what you can afford. When you use tax consulting professionals, you can count on their expertise and knowledge to help you determine what fits within your budget and the best options for reducing your health care costs.
Being able to afford health care is essential for attracting and maintaining employees. However, it's important to ensure these costs don't run you out of business. By understanding your options, leveraging tax credits and determining affordability, you can ensure you can effectively manage your small business health care costs.