Why Small Businesses Should Offer Health Insurance

In today's competitive labor market, offering health insurance is one of the most powerful tools a small business owner has for attracting and retaining talented employees. According to surveys of American workers, health insurance consistently ranks as the most valued employee benefit — more important than retirement plans, paid time off, or flexible schedules. For many job seekers, the availability of health coverage is a deciding factor when choosing between employers.

Beyond talent acquisition, offering group health insurance demonstrates a genuine commitment to your team's well-being, which translates into higher morale, lower turnover, and greater productivity. And with the Small Business Health Care Tax Credit available through the SHOP Marketplace, the cost to the business may be significantly lower than many owners realize.

What Is the SHOP Marketplace?

The Small Business Health Options Program (SHOP) is the ACA Marketplace specifically designed for small employers. It is the only place where small businesses can access the Small Business Health Care Tax Credit, which can be worth up to 50% of your premium contributions. SHOP is available to employers with 1 to 50 full-time equivalent (FTE) employees.

Through SHOP, you can compare plans from multiple insurance carriers, choose the level of coverage you want to offer, decide how much you will contribute toward employee premiums, and enroll your employees — all in one place. You can work directly with SHOP or through a SHOP-registered insurance agent or broker.

The Small Business Health Care Tax Credit: Up to 50% Back

This is the most significant financial benefit of using the SHOP Marketplace. If you qualify, the federal government will give you a tax credit worth up to 50% of the premiums you pay for your employees' coverage (35% for tax-exempt organizations). This credit is available for up to two consecutive years.

To Qualify for the Tax Credit, You Must:

• Have fewer than 25 full-time equivalent employees.
• Pay average annual wages of less than $62,000 per FTE employee (this threshold is adjusted annually for inflation).
• Contribute at least 50% of the cost of employee-only (not family) health insurance coverage.
• Purchase coverage through the SHOP Marketplace.

The credit is highest for employers with fewer than 10 employees and average wages below $27,000. It phases out as your employee count and average wages increase. A tax professional can help you calculate your exact credit amount.

SHOP Eligibility Requirements

How to Enroll in SHOP

1. Determine your eligibility. Confirm that your business meets the size and other requirements for SHOP.
2. Choose your contribution level. Decide what percentage of the employee-only premium you will pay. The minimum to qualify for the tax credit is 50%.
3. Compare plans. Review the available plans in your area and select the ones you want to offer your employees. You can offer a single plan or a choice of plans.
4. Enroll your employees. Your employees will have a set window to review their options and enroll. They can choose from the plans you have selected.
5. Pay premiums and claim your credit. Pay your share of the premiums each month and claim the Small Business Health Care Tax Credit on your annual tax return (IRS Form 8941).

Group Insurance Options Outside of SHOP

If your business does not qualify for SHOP or you want to explore additional options, you can also purchase small group health insurance directly from an insurance company or through a licensed broker. These plans are also ACA-compliant and offer comprehensive benefits. However, you will not be eligible for the Small Business Health Care Tax Credit if you purchase coverage outside of the SHOP Marketplace.

Our licensed agents are registered with SHOP and can help you navigate the enrollment process, compare plans, and determine your tax credit eligibility — at no cost to your business. Call 888-982-0356 to speak with a group benefits specialist today.