As a small business operator, you want to build the best team possible. A strong staff represents your best chance of competing with your more established rivals. However, your size puts you at a disadvantage, especially when it comes to benefits like health insurance. How can you provide these crucial extras on a startup's budget?

A recent study reported that 60% of small business owners only offer limited insurance benefits, if they offer any at all. The reason for this comes down to high costs, putting health offerings beyond the resources for many small businesses.

Still, you shouldn't give up on health insurance completely. This article will help you see whether you should offer health insurance in your small business or startup, as well as outline eight tips for doing so on a budget.

Why many small businesses don't offer health insurance

When you're a small business, budgets are often extremely tight. This doesn't give much room for error. Every dollar saved gives your organization another dollar to invest in growth.

As a result, many avenues available to larger operations fall outside your capabilities. Health insurance, and other benefits, often count in this category. You simply don't have the resources you need to afford an attractive insurance offering.

Meanwhile, your small business doesn't have the same options as your larger competitors. Self-funding is likely well beyond your means. At the same time, your employee base is likely so small that you won't qualify for many providers and many specific plans. This limits your options.

Given these conditions, it's no surprise that small businesses are less likely than their bigger rivals to offer health insurance. One survey showed that about half of businesses with 3-9 workers offer health insurance, while only seven out of ten (71%) companies with 10 to 24 employees provide this benefit. This rate rises to 85% for firms with 25 to 49 employees.

Benefits of offering health insurance

Given the budgetary realities, it’s understandable why small businesses often pass on offering health insurance. However, this puts them at a disadvantage. It becomes more difficult to attract and retain good talent, limiting long-term growth prospects.

A survey conducted by Fractl placed physical health benefits at the top of job seekers' wish lists when they searched for a position. The data showed that nearly nine out of 10 candidates (88%) said this benefit weighed heavily in their considerations when choosing an employer.

Are you able to compete? The upsides of providing health insurance go beyond the recruiting stage. Along with being able to attract better candidates, this offering can also give you additional advantages. These include:

• Retaining your best performers over the long term: Employees are more likely to stay with a company that provides health benefits.

• Remaining competitive within your industry: Health insurance can make your business more attractive compared to competitors who don't offer it.

• Helping your employees stay healthy and happy: Access to health care ensures employees are healthier and more productive.

• Giving your employees a sense of stability: Health benefits provide security, leading to increased job satisfaction.

• Making sure your team remains available for work by keeping them in top health: Better health management leads to reduced absenteeism.

• Taking advantage of tax incentives related to health offerings: Businesses can benefit from tax deductions and credits​.

• Getting better insurance for yourself as the founder/leader of your company: Business owners can also benefit from group health plans.

• Building a strong corporate culture: Offering benefits fosters a positive work environment and strengthens company loyalty.

How to choose the best health insurance plan

If you've decided to move forward with health insurance, there are many follow-up decisions to consider. It will take deep research and careful planning to find the right offering for you. Here are some tips for selecting the optimal program for your business:

Learn about the market

Start your process with a strong research effort. Discover what kinds of health insurance have become standard in your industry, so you can stay competitive with other employers. Use industry reports and surveys to understand what other businesses in your field are offering​.

At the same time, look into your options and the costs involved. That way, you can begin setting expectations and forming a possible budget.

Understand the legal/regulatory framework

Health insurance is a highly regulated offering. As such, you need to understand your obligations as an employer. Research this aspect as well, giving you a good understanding of the legal framework surrounding the endeavor.

It will be important to know the requirements for offering health insurance under the Affordable Care Act (ACA), and don’t forget to check for any state-specific health insurance requirements.

Shop around

Talk to potential providers. Discover the specific options you have to choose from and see what room you have for negotiations. Get quotes from several insurance providers to compare costs and benefits. This will let you create a short list of possible plans. And don't be afraid to negotiate terms and prices to get the best deal for your business.

Get feedback from your employees

Involve your employees in the process of choosing health plans. Different plans focus on different priorities. Let your team have input in what is most important to them. You can do this by conducting employee surveys to understand their health care priorities and holding focus group discussions to get detailed feedback on preferred benefits.

Start where you can

As a small business, your options may be limited in the beginning. That doesn't mean you should give up the effort to offer health insurance to your employees. Find plans you can afford and use those as a launching-off point. As you grow, you can reassess your provider and seek out other alternatives. This can look like planning for incremental upgrades to your health benefits over time.

Determine your contribution

How much will you subsidize your health insurance offerings? Many times, you'll have a wide range of options in terms of employee contribution. Check the appropriate regulations and do what you can to stay competitive. Actionable steps include determining the percentage of the premium you can cover and offering flexible contribution plans to accommodate different employee needs.

Look for ways to supplement your primary insurance plan

A basic health insurance program provides the foundation of a strong benefits package. However, there are ways to build on this. Look for other potential offerings you can add. In the health arena, these includes items like:

• Dental Coverage

• Vision Coverage

• Supplemental Insurance

• Gym Memberships

Look for bundled packages that offer additional benefits at a lower cost and consider wellness programs that can improve employee health and reduce overall insurance costs.

Periodically review your health offerings

Whatever decision you make now, keep an open mind moving forward. Conditions can change over time. Meanwhile, companies are continually upgrading their offerings, finding new ways to approach the market. Regularly review your health insurance structure to make sure you have the optimal selection for your employees and for your budget.

Steps you can take include conducting an annual review of your health insurance plan to ensure it still meets your needs and budget. Also, regularly solicit feedback from employees to make improvements.

Affordability Strategies

Affording health insurance can be challenging, but here are some strategies to help make it more feasible for your small business:

Small Business Health Options Program (SHOP)

The SHOP Marketplace is designed specifically for small businesses. It allows you to compare health plans and find the best options for your company.

Ensure your business meets the criteria for SHOP, which includes having 50 or fewer full-time equivalent employees. Take advantage of potential tax credits available through SHOP if you meet certain requirements, such as contributing at least 50% toward employee premiums.

Health Reimbursement Arrangements (HRAs)

HRAs are employer-funded plans that reimburse employees for qualified medical expenses. This can be a flexible and cost-effective way to provide health benefits. A few include:

• Qualified Small Employer HRA (QSEHRA): Consider offering a QSEHRA, which is specifically designed for small businesses and provides tax-free reimbursements for health expenses up to a certain limit.

• Individual Coverage HRA (ICHRA): For more flexibility, an ICHRA allows you to offer different levels of benefits to different types of employees .

Group Purchasing Alliances

Joining a group purchasing alliance can help small businesses leverage collective buying power to secure better rates on health insurance.

Look for local or industry-specific group purchasing alliances that your business can join. Evaluate the benefits of membership, including potential discounts on insurance premiums and additional resources or support.

Selecting the right health insurance

You've heard the saying, "with great power, comes great responsibility." That adage feels apt here. However, in this case, maybe it should be, "with great health insurance benefits, comes great rewards to you as a business owner."

[Passing up health insurance] puts small businesses at a disadvantage. It becomes more difficult to attract and retain good talent, limiting long-term growth prospects.

Even with the cost, you receive significant advantages by offering a strong health benefits package. The trick is determining whether you have the capability at this point to cover your employees. From there, you also need to consider the right plan for you.

Use the information provided here to launch your research. These tips will help you determine whether the pros of offering health insurance outweigh the costs. You'll also get a head start on selecting the ideal offering for you and your employees.