Benefits of providing healthcare coverage

Offering healthcare coverage can provide significant benefits for small businesses. This may include keeping a healthier workforce, attracting and retaining employees, and beyond. Explore the reasons why you should offer healthcare coverage to your employees.

Better access to care

People who have health coverage are in a better position to obtain medical care, including preventive services that may help avoid more serious health problems down the road. Having health coverage encourages people to actively maintain their health and improves their access to services that may otherwise be unaffordable.

Manageable costs and financial security

Besides the health benefits that come with improved access to care, health coverage also ensures that the costs for services will be manageable. People with health coverage are protected financially from burdensome debts arising from major illnesses or injuries. The need for medical services often arises unexpectedly, and the costs typically exceed what most people can afford or want to pay.

Tax benefits for your business

Generally speaking, expenses related to health insurance and incurred by an employer (for employees or for dependents) are 100% tax-deductible as ordinary business expenses on both state and federal income taxes. In addition, employees can contribute to the cost of health insurance on a pre-tax basis with just a little paperwork on your part. That means small business owners can deduct the cost of the premium from the employee’s paycheck before state and federal taxes are calculated and deducted. This increases the employee’s take-home pay and lowers the amount of the employee’s taxable income.

Employers should also be aware that the Affordable Care Act offers small businesses healthcare tax credits to help offset the cost of insurance. The small business healthcare tax credits have been available since the 2010 tax year. To qualify for a tax credit of up to 50% of premium expenses for any two years, small business owners must pay at least half of employees’ healthcare premiums and have 25 or fewer full-time equivalent employees who earn an average of $50,000 or less per year.

Better Employee Recruitment and Retention

Businesses that offer group medical coverage report there are several advantages to doing so. Having group medical coverage may:

• Lower your hiring costs. Looking for, hiring and training new employees takes time and costs money. Offering health insurance helps you compete with larger businesses, be more attractive to job candidates and help retain talented employees.
• Enhance workplace culture and improve morale. Employees tend to be happier and more satisfied with their jobs when they are offered essential benefits such as healthcare.

In a small business health benefits survey, a majority of small business owners reported several positive effects of offering health insurance for their employees:¹

• 78% said it increased loyalty and decreased turnover.
• 75% said it helped employee recruitment.
• 64% said it increased productivity by keeping employees healthy.
• 62% said that employees demanded or expected health insurance.
• 58% said it reduced absenteeism by keeping employees healthy.

On the flip side, only 25 % of employers who did not offer health benefits responded that they thought not offering health insurance had no impact on their business.

¹ Blue Cross and Blue Shield Association Analysis of 2002 Small Employer Health Benefits Survey, sponsored by the Blue Cross and Blue Shield Association (BCBSA), the Employee Benefit Research Institute (EBRI), and the Consumer Health Education Council (CHEC).