Health insurance for employees is generally not mandatory for business owners. However, the new health care reform laws put into place by the Obama administration encourage employers to provide health insurance to employees. The Health Care Reform Act, which goes into effect in 2014, will penalize businesses with over 50 employees that do not provide employee health insurance. However, this penalty costs business owners less than the cost of employee health insurance benefits, so the effects of the new law remain to be seen. Further, many states have proposed legislation that would prohibit the new mandatory health insurance rules from applying to employers.
Some states and cities have taken employee health insurance rules into their own hands. Massachusetts, for example, requires employers with ten or more employees to provide their employees with a “fair and reasonable contribution” to their employee health insurance. If employers in Massachusetts refuse to follow this, they may be penalized with fines of up to $295 per employee, per year. This money goes into a state fund that supports health care for low income individuals and families.
The city of San Francisco has enacted even more stringent health care reform than Massachusetts. A San Francisco health care security ordinance requires employers to spend a minimum amount of money per hour on health insurance for employees who work in San Francisco. Compliance with this ordinance is enforced by the city’s Office of Labor Standards Enforcement. States such as Vermont and Maine, as well as several other states, have also enacted similar employee health insurance mandates that require employers to provide a contribution to their employees’ health care coverage.
If your business is not located within a city or state that has enacted health care reform, then you as an employer will not be penalized for failing to provide employee health insurance coverage until the federal health care reform takes effect in 2014. However, there are benefits to providing employee health insurance coverage. Providing coverage to your employees will make you a more desirable employer and attract employees who are more likely to make a long term commitment to your business.
Further, as of 2010, small businesses may receive up to a 35 percent credit for employee health insurance premium costs. This credit will increase to up to 50 percent on January 2014, and from there is expected to be phased out gradually. Small businesses that are just starting up now should take advantage of this health care credit and begin offering employee health insurance to attract high quality employees. Having a stable business with long-term employees will likely outweigh the costs of employee health insurance in the long run.