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Small-Sized and Medium-Sized Business Employers

Small business employers

Important Facts About Health Insurance

In addition to giving employees access to affordable health services, purchasing group coverage helps business in other ways such as tax benefits, increased employee productivity and morale, and reduced turnover. Consider the following:

  • There are tax benefits when you provide health insurance for your employees:
    • Health insurance premiums that your company pays are fully tax deductible as a business expense and are non-taxable income for employees. These tax deductions may be thought of as a discount to the cost of the health insurance.
    • Health insurance payments are excluded from base payroll when calculating an employer's Medicare and Social Security payments. An equivalent amount paid in wages would be subject to Medicare and Social Security taxes.
    • Employees may make their premium contributions on a pre-tax basis through payroll deductions, which makes coverage more affordable for workers.
    • Alternative health benefit savings plans, such as health savings accounts (HSAs) and health reimbursement arrangements (HRAs), have added tax savings for employers and employees.
  • Offering health insurance may help employers:
    • Recruit high-quality workers.
    • Reduce staff turnover.
    • Reduce the cost of absenteeism.
    • Limit disability and workers compensation claims.
  • Frequently health insurance costs are reduced when the employer buys a group plan rather an individual ones.
  • Health insurance coverage gives businesses access to the price reductions that health insurance companies negotiate with health care providers.
  • Even if an employee or dependent is in poor health, federal law prohibits insurers from denying coverage to the company, the employee, or the dependent based on health status. However, the cost of the insurance could be higher.
  • Besides the health benefits to employees that come with better access to care, health coverage also means the costs for services will be more manageable. Employees with health coverage are protected from financially burdensome debts arising from major illnesses or injuries. Costs associated with these medical expenses often exceed what most people can afford or want to pay.
 Alabama's ALL Kids offers a low-cost, comprehensive health care coverage for children under age 19 who are in eligible lower-income working families.


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