How small businesses can set themselves up for success with health care benefits in 2025

bluebay // Shutterstock Many businesses in the United States offer health insurance as a company benefit. According to the Kaiser Family Foundation, 53% of firms with three or more employees provide coverage for at least some workers, and 98% of firms with 200 or more employees offer health benefits.  If your company isn’t currently offering health insurance as one of your small business employee benefits, consider starting in 2025. Offering health coverage could improve employee retention, make hiring workers easier, and create a healthier and more productive team.  The good news is that you don’t have to spend a fortune or implement a complicated program to give your workers access to health care. Thatch’s guide will explain how to offer a benefits program in 2025 to set your company up for success.  TL;DR Offering employer-provided health insurance can reduce turnover. Companies can typically hire better talent with health insurance as a company benefit. Partners can help your business to offer flexible coverage options employees want at prices that are affordable for your bottom line. Why Add Health Insurance to Your Company Benefits in 2025? Adding health insurance to your small business benefits can significantly impact hiring. Research shows as many as 96% of Americans think it’s important that a job offers health insurance benefits. If you don’t offer coverage, you’ll limit your talent pool. Coverage options also impact employee turnover. In fact, one Gallup poll revealed that 16% of workers stayed at their jobs solely to retain access to insurance coverage. If your strong benefits program encourages workers to stay with your business, this reduces turnover costs and helps your company build institutional memory.  Health insurance can help your workforce stay healthy, reduce absenteeism costs, and improve productivity.  With all these benefits, it’s not surprising that research shows each $1.00 employer spends on health coverage, which results in a $1.47 benefit in terms of direct medical costs, employee retention, recruitment, and productivity.  With such a solid return on your investment, it’s clear offering small business health insurance as part of your company benefits is often the fiscally sound choice. Here are five steps to take to put your policy in place and begin reaping these benefits.  1. Assess Your Business Needs and Budget   The first step to offering health insurance is to assess the needs of your company as well as the budget you have available for coverage. Consider factors like: How many employees do you need to cover? What types of health insurance are standard in your industry? What types of health insurance plans would fit your workforce well? Of course, you also must consider your budget, as costs are a top hurdle in small business health care.  In 2023, the average total health insurance premiums for covered workers came in at $8,435 for single coverage and $23,968 to provide coverage for a family of four. This is expensive, and it explains why employer contributions to workers’ health premiums account for around 6.9% of total employee compensation. Be sure to carefully review your company’s finances to decide how much money you can devote to offering a health plan. You’ll also want to consider ongoing and future costs as your workforce grows and your employees age. Once you begin offering health coverage, you want these benefits to be available for the long haul. Be sure that they’re affordable as part of your long-term plan.  2. Understand Tax Credits That Lower the Cost of Health Coverage  Tax credits make it cheaper and easier for employers to offer subsidized health insurance, so looking into what types of IRS savings you’d be eligible for when putting together a benefits plan is important.  The general rule is that employers can deduct 100% of premiums paid for employee health insurance plans as part of a compensation package. Employers can also deduct contributions made to health savings accounts offered to workers.  There are also additional tax incentives for small businesses. Specifically, your company could potentially qualify for the Small Business Health Care Tax Credit. This credit is worth up to 50% of the cost of premiums you’re paying for employees. To be eligible, you must: Have fewer than 25 full-time equivalent employees Pay an average employee salary below a specific threshold  Pay at least 50% of the premiums for full-time employees Offer coverage through a Small Business Health Options Program Marketplace to all full-time workers  Leveraging these tax breaks can reduce the cost burden of adding health insurance to your small business benefits program. 3. Learn About Regulations Applied to Small Business Benefits “Applicable large employers,” or companies with 50 or more full-time equivalent employees, are required by the Affordable Care Act to offer affordable health insurance coverage to 95% of employees and their dependents.  While smaller employers aren’t subject to this regulation, they must follow the rules if they decide to provide benefits. For example, employers who offer health insurance must offer it to all eligible employees who qualify, and there is a 90-day maximum waiting period. You don’t want to violate any laws when you’re putting together your company benefits package, so it’s crucial to learn the rules or work with an expert who knows them.   4. Explore Plans You Can Offer as Part of Your Small Business Benefits  There are many different ways for your company to offer health insurance coverage. Some common examples include: Group health insurance: This involves choosing and buying a plan or plans to offer coverage to all your workers. You’ll pay a fixed premium for employees and can choose to pass some of these costs on. The group plan can cover workers and dependents, but it leaves employees with limited or no choices as to what policy covers them.  An individual coverage HRA (ICHRA): This alternative allows you to offer employees a monthly tax-free allowance to use towards health care. They can use the health insurance stipend to subsidize premiums for a health insurance plan they buy on the individual market and, with anything left over, to cover other eligible medical expenses.  Self-funded health insurance: This option involves insuring employees directly and paying for covered services when workers get care.  For many employers, an ICHRA is an ideal choice because it offers more flexibility for staff members and reduces company costs. However, the best option for you will depend on many factors, including your staff’s needs and the industry standard. Consider reviewing examples of employee benefits from competitors to see what’s available.  5. Educate Your Employees About Options  Once you’ve selected a plan, it’s time to educate your employees. Providing transparent and detailed information about coverage and costs helps staff members to make the right choices.  For example, you should ensure your employees understand how the group or individual coverage works, what costs you’ll subsidize, and how to find the best plan for their needs. This story was produced by Thatch and reviewed and distributed by Stacker.