Employee health benefits are a set of services an employer provides to help employees maintain wellness and treat any health issues. Usually, these benefits come with a salary package or employment contract.
Many employees expect their company to offer a health care plan. As you’ll learn in this article, the law requires certain employers to provide benefits to their workers. These packages usually include a combination of required programs and voluntary offerings to compensate existing employees and attract new candidates to an organization.
Read on to learn about what health services employers often include in their employee benefits package and what is required in the U.S.. We’ll also cover some advantages that come with providing employee health benefits.
Are you required to provide health benefits to employees?
No federal law requires employers to provide their employees with benefits. However, if you have 50 or more full-time and full-time equivalent (FTE) employees, the Affordable Care Act requires you to offer health insurance that’s considered affordable and meets a set of minimum standards. Penalties may result from failure to comply.
In most cases, you must provide full-time employees health care for themselves and their families. This requirement includes the worker’s dependents until the end of the month when they turn 26. For this act, a full-time employee is any team member who works an average of 30 or more hours per week for more than 120 days in a year.
As an employer, you must provide your workers with affordable health care. Affordability is defined as requiring employee contributions that don’t exceed a certain percentage of their income. The specific threshold has changed each year since 2014, but it ranges from 9% to 10%.
Some state and local regulations may further mandate the provision of benefits, so staying informed about what’s required in your area is a good idea. Consider working with a human resources (HR) professional who can assist you in this process and answer any questions you might have.
Benefits required by law
Some benefits are required for companies of all sizes. This includes workers’ compensation, Social Security and Medicare contributions, unemployment insurance, and the Family and Medical Leave Act (FMLA). Certain states also require disability insurance.
Workers’ compensation covers employees if they’re injured or become ill due to a job-related situation. This coverage pays for the team member’s medical care, rehabilitation, and paid leave or replacement income under specific circumstances.
Medicare and Social Security contributions typically come from a worker’s paycheck before net pay is deposited into their bank account. The employer makes matching contributions to the government accounts in the employee’s name. Employees pay into Social Security to have income after they retire or if they become permanently disabled and can no longer work. Individuals 65 and older or those with certain health conditions or disabilities can use Medicare as their primary health insurance.
For companies with over 50 employees, the FMLA dictates that team members should receive up to 12 weeks of unpaid leave to handle various family situations. These circumstances can include the birth of a new child, preparing for active duty military service, or caring for self or a family member when a serious health condition arises.
Types of employee health benefits
As part of an employee fringe benefits package, health benefits may include:
Employer contributions to health benefits
Some employers may contribute to their employee’s out-of-pocket health care costs depending on the range of benefits they offer. Occasionally, employers pay for employees’ deductibles and copays.
Others may contribute to their workers’ flexible health spending accounts (HSAs, FSAs, or HRAs).
Many workers expect health benefits from their employers, which can be a significant factor they consider as they evaluate whether to take a specific job. Companies that offer robust benefits packages may have an advantage over organizations that try to save costs in this area, especially when attracting the most talented employees.
Health plans to consider
As you think about what health benefits to provide workers, you’ll come across several types of health plans (or group insurance plans).
A few of the most popular options include:
- Health maintenance organizations (HMOs). These plans limit health coverage to doctors, hospitals, and specialists contracting with the insurance company or HMO. Using a doctor outside the HMO likely won’t be covered unless it’s an emergency. These plans usually emphasize ongoing wellness and preventive care.
- Preferred provider organizations (PPOs). These plans allow you to use out-of-network providers, but you’ll spend less when you use a doctor or hospital in-network.
- Point of service (POS). Like PPOs, POS plans don’t cost as much money if you use service providers in-network. However, you must first receive a referral from your primary care provider to see a specialist.
- Exclusive provider organization (EPO). Only services provided by a specific in-network doctor or hospital are covered in an EPO. The lone exception would be in an emergency.
Think about these additional details as you choose a health care plan for your employees:
- Metal category. Most health care plans come in four categories: bronze, silver, gold, and platinum. Each category designates a specific amount you and the insurance company pay for coverage. Individuals typically have the highest out-of-pocket costs on a bronze plan.
- Total costs. Employees may pay a premium each month regardless of whether or not they use any services. They’ll also be responsible for out-of-pocket costs to cover doctor’s visits, procedures, and other medical services.
- Quality ratings. Review the quality ratings your plan has received in the past. Learn about what rating other users have given the plan. Users can give feedback in three specific areas: member experience, medical care, and plan administration.
Rules around health care plans
Various laws exist regarding health plan administration. These regulations impact eligible employees, defined enrollment periods, and minimum value and affordability.
To best answer specific questions about these subjects, consider hiring a benefits specialist to help you sort out any issues you may encounter when establishing or administering a health care plan.
Benefits of offering employee health benefits
Some employers view health plan administration as just one of their many business costs. While it’s true that health care administration is a necessary expense, there are also several benefits for employers who prioritize their employees’ health.
Keep reading to learn how helping employees build and maintain their health can positively impact your organization.
Improved employee well-being
Employees who regularly stay on top of preventive care, vaccines, and routine check-ups will likely treat potential health issues early before they become major problems. Employee health benefits often cover many health services, minimizing out-of-pocket expenses for employees.
Another benefit of providing health care for workers is related to mental health. Workers report higher levels of job-related stress and anxiety since the onset of the COVID-19 pandemic in 2020.
Benefit plans may include access to services like counseling and therapy to help employees process issues. Six in 10 employees expect their employer to invest in mental health support.
Increased employee productivity
Employees may miss work or see their productivity drop due to health issues. If they don’t have sufficient health care coverage, they may put off seeking treatment, worsening the issue. They may even introduce contagious diseases to the workplace resulting in reduce productivity among their coworkers.
This is less of an issue when employees can use their health care plan to seek necessary intervention. With health care coverage, they’re more likely to seek care if they don’t feel well, and they’ll receive the treatment necessary to help them recover and get back to work as soon as possible.
Ability to attract and retain employees
When hiring new employees, a strong health care plan can help you attract top talent. A comprehensive benefits plan can help your company to stand out among the competition.
Imagine that a candidate has multiple job offers on the table. Both jobs come with a similar salary, but one offer includes a comprehensive health care plan for the employee and their family. The health care benefits could seal the deal and help you land your top choice for an open position.
Tax benefits for employers
You can often deduct the cost of the health benefits you provide your employees as business expense. This includes the cost of premiums and HSA contributions. Even if you don’t directly purchase health care coverage for your team members, you can set aside pre-tax dollars to give employees to purchase their own health care plans.
Certain small businesses can also qualify for a special tax credit. These companies must have fewer than 25 full-time employees making an average salary of less than $56,000 per year. If you offer a group policy, pay 50% or more of your employees’ premium costs, and you offer SHOP coverage to all full-time employees, you can qualify for the tax break.
Since not all benefits-related expenses are tax-deductible, it’s wise to consult with an accountant to fully understand how your health care purchases may impact your tax burden. They can give you the best answer for your specific situation and company size.
Higher levels of employee satisfaction
If your team members feel like you truly care about their health and well-being, they may feel greater loyalty to your company. This can improve their job performance and increase retention, saving you money on hiring costs.
On the other hand, if your employees feel as though you don’t care about their health and well-being, they may feel a stronger motivation to look at other jobs. Not only will you risk losing existing workers, but they may also become disengaged with their work as they consider making a change.
Develop a benefits program with Upwork
As you can see, offering health care coverage to employees has numerous benefits. It can help you find and keep your most talented workers and put each team member in a position for greater long-term success. Knowing what types of health plans exist and what components you should include in your benefits package can help you decide what services to offer your team members.
If you want more help defining your benefits package, consider hiring a benefits specialist on Upwork. Upwork’s benefits specialists bring many years of human resources experience to the table and have earned high ratings from clients. Browse available talent and learn how they can help you prepare a strong benefits package.
Upwork does not provide tax or legal advice. Each reader and company should take the time needed to adequately analyze the laws that apply to their business endeavor.
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