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Health care benefits are optional for most smaller employers, but of critical importance to most employees. Employers of all sizes should be aware of the pros and cons of offering health benefits to their employees.
Benefits are a critical piece of an employee compensation package, and health care benefits are the crown jewel. Health care benefits, along with time-off benefits, are the most popular of benefits to employees. Every employer must at least consider whether to offer these types of benefits and in some cases employers must offer health care in order to remain competitive with other businesses for the most talented employees and avoid penalties imposed by health care reform. Another reason why many employers choose to offer health care benefits is so that they themselves can take advantage of less expensive health insurance than they could get on their own as well as tax breaks for the contributions made by the business.
Unless you are an employer in Hawaii, you are not required by state law to offer your employees health insurance benefits. Hawaii is the first state to require employers to provide health insurance to employees. The law, the Prepaid Health Care Act, was passed in 1974 and requires employers to provide health insurance to all full-time employees, either through an indemnity plan or an HMO. (The requirement that Massachusetts employers with more than ten employees make a fair share contribution for full-time employees’ health insurance coverage costs or pay a fair share contribution per employee is no longer in effect as of July 1, 2013, due to to the implementation of federal health care reform.)
The Patient Protection and Affordable Care Act and related legislation requires employers with 50 or more full-time employees (or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) to offer adequate health coverage or be subject to assessment if their employees receive premium tax credits to buy their own insurance. This mandate is in effect beginning in 2015. Conversely, beginning in 2010, small businesses with fewer than 25 employees may be eligible for a tax credit for purchasing health insurance for their employees.
If you do make the decision to offer health insurance benefits, be aware that you call into play a whole series of laws that will tell you what coverage you have to offer and how you have to offer it. Therefore, the first decision to make is whether to offer health insurance at all.
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