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Trying to keep your best employees from leaving?
You should take a close look at small business health insurance.
If 92% of employees report that health benefits are an important factor when they consider a new job, you simply can’t ignore that. However…
Most business owners think health insurance is either too expensive or too complicated for small businesses. With premium costs going up every year, it’s no surprise so many business owners keep putting it off.
The good news? There are ways to make it work. Let’s take a look:
- Why health insurance is essential for employee retention
- How to choose the best health insurance for your employees
- Smart strategies to help you keep costs under control
- Alternative coverage options to save you money
Why Small Business Health Insurance Is Important (More Than You Realize)
Let’s be real with each other for a second…
Small business health insurance is not just another line item on your expenses. In fact, it’s one of the single most powerful retention tools you have in your arsenal.
When over 50% of employees say their decision to stay at a company comes down to health benefits, that’s a big stat.
Imagine for a second you’ve spent thousands recruiting and training that perfect employee. But instead of staying and working, they pack it in after a year and head to a competitor who’s offered them a better benefits package.
All those recruiting and training expenses? Gone. Poof.
But what if that perfect employee had stayed with you?
What if instead, they were still working for you two or three years later because they like you, enjoy the work, and the benefits are great? What if they referred some of their friends to work for you because they’ve heard how awesome it is? That’s the kind of win-win most business owners are aiming for.
The Cost of Not Offering Health Insurance
You might be surprised to learn…
If you’re not offering health insurance, you’re costing your business more money than if you were.
Not offering health insurance means you are:
- Spending more on recruiting & training new employees due to higher turnover
- Losing time & money when high turnover means inexperienced employees
- Giving your competitors an advantage by recruiting talent away from you
- Losing productivity and seeing projects stall as employees jump ship
- Risking penalties for not offering health insurance in some states
The biggest challenge for most small business owners is finding the right group health insurance for small businesses that balances coverage & costs. The right plan can protect your employees and keep your budget intact, but it takes some work to figure it out.
But here’s another reality check…
52% of small businesses with between 3-9 employees do not offer health insurance. If you’re in that majority right now but offer health insurance, you can instantly differentiate yourself from most other employers.
Deciphering Your Health Insurance Options
Let me be clear…
Small business health insurance isn’t a one-size-fits-all situation. You’ve got several options, and the right choice will depend on your business size, budget, and your employees’ needs. So let’s break it down:
Group Health Insurance These are the traditional employer-sponsored plans most people know. You pick a plan and pay a portion of the premiums, with employees paying the rest. They’re a solid option if you have 5+ or 10+ employees.
Health Reimbursement Arrangements (HRAs) HRAs are an alternative that allows you to set aside pre-tax dollars that employees use to purchase their own insurance. You have full control over how much you contribute each month, making budgeting easier.
SHOP Marketplace Plans SHOP stands for Small Business Health Options Program. These are plans designed specifically for small employers, with the possibility of tax credits to reduce your costs by up to 50% if you have fewer than 50 employees.
The key is finding the right option for your specific situation.
Strategies for Keeping Premiums Under Control
Ok, let’s be real for a second…
Health insurance just keeps getting more expensive every year.
Premium costs for 2025 are expected to have a median increase of 7% over last year, and 98% of small businesses think health insurance costs will be unsustainable in 5-10 years.
So how the heck do you continue to offer great benefits and not go broke?
Shop Around Every Year Renewing your current health insurance plan each year isn’t always the best option. Get quotes from at least three other insurance carriers every year. Market conditions change and rates will fluctuate.
Go With Higher Deductible Plans Plans with higher deductibles have lower monthly premiums. Combine these with a Health Savings Account (HSA) to help your employees cover out-of-pocket costs.
Encourage Wellness Programs Healthier employees file fewer claims, which results in lower premiums over time. Incentivizing simple programs like gym membership discounts can help.
Be Strategic About Contributions You don’t have to pay 100% of employee & dependent premiums. Many businesses pay 50-70% for employee premiums and significantly less for dependents.
How to Get the Most Value From Health Benefits
Ok, let’s get real for a second…
Offering health insurance isn’t just about picking a plan and signing the dotted line. You need to help your employees actually understand and use their benefits or they won’t appreciate the value you’re providing.
Walk them through the enrollment process. Explain the different options clearly using real-world examples of what they’ll pay for doctor’s visits, prescriptions, and common health scenarios.
Make sure they have a point person on your team (or a broker) they can call with questions year-round. If employees understand their benefits better, they will use them more effectively.
For bonus points, look into supplemental benefits like dental and vision coverage. These are relatively inexpensive but help complete your benefits package. Or look at FSAs that let employees put aside pre-tax dollars for medical expenses.
The key is creating a benefits package your employees value – not just checking a box.
The Tax Advantages You’re Leaving on the Table
Ok, one more real talk thing before I let you go…
The tax benefits of offering health insurance are astronomical. When you offer qualified health insurance, you can deduct your premium contributions from your business expenses. This includes what you pay for your employees AND dependents.
Your employees get a tax benefit too. The employee share of premiums comes out of their paycheck pre-tax, which lowers their taxable income. And if you qualify, you could get back up to 50% of your premium costs in the form of the Small Business Health Care Tax Credit.
These tax advantages make health insurance much more affordable than the sticker price lets on. Have a chat with your accountant and run some numbers, you might be shocked how much the actual cost comes down by.
Bringing It All Together
Small business health insurance can be one of those topics that sounds so overwhelming, no one knows where to begin.
Premiums are rising, sure. The available options can be dizzying, of course. But in the end, the advantages of offering health insurance outweigh the drawbacks by a longshot.
You retain the talented employees you’ve worked so hard to recruit. You attract better candidates who will stick around. You create a stronger, more unified team.
The best first steps are doing your research, talking to some brokers who specialize in small business plans, and getting some quotes. See what you’d be paying each month after taking into account all those tax deductions.
Then make a plan and commit to it. Your employees will notice. Your retention numbers will improve. And before long, you’ll have built a workplace where people actually want to stay.