Our Guide to Insurance for Business Employees | Fora Financial Blog
Insurance for Small Business Employees: Human Capital Value
November 29, 2019
Health Insurance for Small Business Employees

Insurance for Small Business Employees: Human Capital Value

As a small business owner, offering health insurance to employees can provide a sense of security for them. It’s a benefit that many employees seek when looking for jobs, and it benefits employers because it can help you retain employees.

Many businesses aren’t required to offer insurance for small business employees, and the ones that are required may opt to pay the fines instead. However, health insurance is a great perk to give your employees, but it’s expensive. This post can help you learn the different options available, which may keep costs down and help you find the right plan for your employees.

Why Your Employee’s Health Matters

There are studies to suggest that people who stay healthy will spend less on healthcare. When employees are frequently sick, they will not only use more of their healthcare benefits but also will miss work. In addition, employers offering healthcare benefits have options to include wellness programs to keep their employees as healthy as possible.

To Their Wellbeing

Healthcare is a big concern for most employees. When an employer chooses not to offer coverage, employees will have to fend for themselves. Often, this means not getting coverage, which is stressful. If an employee becomes sick with a serious condition, he or she could be on the hook for astronomical medical expenses. 

Prolonged stress can cause sickness that in turn lowers the immune system. Lacking health insurance coverage will keep the stress levels high indefinitely, which means employees will call out sick more often.

In addition, health plans often come with coverage for exercise. The benefits of exercise are numerous, including lowering stress.

To Your Small Business

When your employees are healthy, it follows that they’ll miss work less often. Healthy employees also have more energy than those who are less healthy. The healthy employees will be your star performers and usually have a better outlook on life and will likely be grateful for their health. That gratefulness, by extension, leads people to stay healthy

Some employers look only at the bottom line when considering offering healthcare insurance. However, as the benefits above suggest, the costs of giving employees options for healthcare increase their productivity. This makes the costs of healthcare an investment into the human capital value of your company.

Employee Sick Best Insurance Options

Best Insurance Types for Small Business

Challenges arise when finding health insurance for employees of small business. While the benefits of doing so are great, it can be an expensive proposition. The options available are often confusing, which can lead employers to avoid selecting a plan or choosing the wrong ones. This section can help you make an informed decision.

Association Health Plans

Small businesses are at a disadvantage with options for health insurance. They don’t have the benefit of a large pool of people to keep costs down. They end up having to pay large sums of money to cover their employees or not provide any coverage. 

The Department of Labor (DOL) has developed a program known as Association Health Plans (AHP) that can help small business owners band together with other business owners. Companies that participate in these pools gain the same benefits as large companies with more employees. 

Participating in these pools is treated the same as a large company by the DOL. These pools must adhere to the same regulations that large companies face.

Self-Funding Health Insurance

As many insurance plans are one-size-fits-all, that may not be desirable for some small business owners. Self-funding health insurance is an option for these businesses as it allows them to structure a plan that works for employees. 

With this option, the employer is taking on the role of insurer and is assuming the risk of claims. However, there are stop-loss provisions that an employer can set up to account for healthcare claims that could spiral out of control.

With these plans, employers aren’t required to pay health insurance premiums upfront, which could improve their cash flow situations. They also benefit from the interest earned on the money used for claims.

Group-Coverage HRA

A group-coverage health reimbursement arrangement (HRA) is a plan that helps lower premiums for health insurance while assisting employees in covering the cost of deductibles. The employer seeks a health insurance plan with a high deductible then create group coverage to help cover the costs of the high deductibles. 

Employees are reimbursed for their medical costs up to the high deductible amounts. However, it’s not likely that all employees participating in the plan will use it up to the high deductible amounts. Therefore, the company will save money with this arrangement. 

Group coverage HRAs must conform to state and federal laws under ACA. For this reason, companies should seek out a qualified benefits consultant to help comply with these laws.

Standard Group Health Insurance

Standard group health insurance is a common option for small business owners. It helps to lower the costs for both employers and employees for health insurance coverage. Companies can structure plans to fit the needs of their employees. When they want to save on monthly premiums, they can choose higher deductibles, which is a good option for companies with younger employees.

Group health insurance is cheaper due to the spread of risk due to more people participating in the plan. If you decide to adopt a group plan, consult with a qualified professional to ensure that it’s compliant with the ACA.


Before the Affordable Care Act (ACA) of 2010, small business owners could reimburse employees for their medical expenses. However, the ACA prevented this provision and treated this action as group coverage. This meant employers had to meet the minimum requirements for a group coverage plan or face fines of up to $100 per employee per day.

Through lobbying efforts by small business groups, Congress created a bill to help small business owners, which led to the creation of the qualified small employer HRA (QSEHRA). The bill was passed into law by the Obama administration in 2016. 

Small businesses with 50 employees or less can use this to reimburse employees tax-free. This reimbursement can also be for premiums on healthcare.

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Doing Right with Insurance For Small Business Employees

Companies that treat their employees right often benefit from having a good reputation within the community they serve.  When that happens, it’s much easier to attract quality employees who become loyal to these organizations. Low turnover and high morale create an environment for businesses to thrive.

Small business insurance for employees is often at the top of the list of benefits that employees desire when looking for a job. By providing quality plans, you’ll take away a big worry that would otherwise consume these employees. They’ll be more productive, which translates into more sales for your company.

Frequently Asked Questions

Are all options compliant with the Affordable Care Act (ACA)?

It’s important to check with a qualified professional for any plan that you choose for employees. Not all options will necessarily be compliant, and that could cause problems for your company.

Do All Healthcare Plans Offer Tax-Free Benefits?

With all the options available, it is difficult to state whether they all offer tax-free benefits. Even among plans, there may be options that are not eligible for tax-free savings. It’s best to consult with your tax consultant when choosing a healthcare plan. Laws are subject to change, and professionals are paid to keep up with these changes.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].