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Small business corporate health insurance: the need to knows

26 November 2018 - 11:13am

Small businesses have long been a major part of the Australian economy. 

In fact, they represent 97.4 per cent of Australian businesses by employee size, according to research published by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).

However, significant confusion exists among small business owners when it comes to providing corporate health insurance for their employees. This article aims to answer some common questions, and bust a few of the most prevalent myths surrounding this subject.

Even small businesses can access corporate health insurance in Australia. Small businesses can get access to corporate health insurance plans the same as larger organisations.

1. Are small businesses eligible for corporate health insurance in Australia?

The ASBFEO report defines a small business as one that has an active GST role, an Australian Business Number (ABN), and either turns over less than $2 million a year, or employs fewer than 20 people. However, neither your income nor your staff roster affect your ability to take out a company health policy; through HICA you have the same access as any larger Australian business. 

What is important is that your cover suits the unique requirements of your organisation. We'll discuss how corporate health insurance can be tailored to best serve the interests of your company in point five, but a one-size-fits-all approach isn't appropriate here.

2. What options do small businesses have with corporate health insurance?

Now that we've established that your business can implement a corporate health policy, let's get down to how this works in practice. As with individual private health cover, three levels of cover exist:

  1. Hospital cover only - These policies insure the individual against the costs of in-hospital treatment, as well as surgery theatre fees and accommodation.
  2. Extras cover only - This covers you for services outside of Medicare, for example physiotherapy and dental procedures. Extras cover can also be known as ancillary or general treatment.
  3. Combined hospital and extras - These can be the most all-encompassing policies, providing insurance protection for both hospital and extras as a package, and potentially giving better value.

As well as choosing the type of cover you want to provide, small business owners need to decide how they want to support a corporate health insurance plan. Again, there are three main options:

  1. Voluntary plans - This is the most hands-off approach. You find a plan and offer employees access to it, often at a discounted rate. In this instance you won't contribute financially to individual policies.
  2. Partially funded plans - Here you and your employees share the cost of private health insurance premiums.
  3. Fully funded plans - This method involves you the employer paying the health insurance premiums of your staff. 

Alternatively you could opt to provide your workers with discounted corporate health insurance through excess funding. Instead of taking the standard route of aiding with the costs of premiums, excess funding means that you pay the excess, either in full or in part, should one of your employees need hospital treatment. As a result of your staff feeling safer accepting higher excesses on their policies, they could access premium reductions of up to 15 per cent compared to a non-excess policy.

This system is also highly efficient when it comes to Fringe Benefit Tax (FBT), something we will discuss in more detail below.

Small business owners can choose to provide different levels of private health insurance. Small business owners have a range of options for providing corporate health insurance.

3. How does Fringe Benefit Tax affect small businesses?

FBT is a tax that Australian employers pay on certain benefits they supply to staff. These can include anything from gym memberships to concert tickets, and corporate health insurance. How much you pay will be calculated based on the value of the benefit provided. Generally this will only apply if you directly subsidise premiums so it's important you structure your plan carefully.

4. What are the benefits of corporate health insurance for small businesses?

Corporate health insurance has benefits for businesses of all sizes, but here we'll focus on a problem felt particularly keenly by smaller enterprises - hiring and retention.

With the lure of bigger corporations, and the benefits that they provide, it can be difficult to recruit the best candidates, and even harder to retain them once they feel they've outgrown your organisation.

Supplying perks of your own, such as health insurance, is therefore a good way to increase staff loyalty. In fact, 60 per cent of respondents to a 2016 AFLAC survey said that they would take a role with a worse salary, but better benefits, and 42 per cent stated that improving their benefits package is something their employers could do to keep them in their jobs. 

With the temptations of the so-called gig economy encouraging shorter contracts and more varied career trajectories, employers should be doing everything they can to hold on to their best staff. 

Perks such as health insurance are important to staff in small businesses. Attracting and retaining the best staff is one of the biggest issues facing small businesses and a corporate health insurance plan can be a valuable tool to address this challenge.

5. How to implement corporate health insurance in a small business

As well as the managerial and administrative tasks of running a company, small business owners are often far more integrally involved with day-to-day operations than their counterparts in larger enterprises. Time is, therefore, crucially important. 

However, finding and implementing a corporate health insurance for a small business doesn't have to be time consuming or costly. HICA offers a free consulting service that aims to make the process as straightforward and efficient as possible.

Following a discussion with you, our expert team researches the market and comes back to you with the range of cover options best suited to your company. As well as doing the leg work for you, there are benefits you can access by using HICA's services, based upon the size of your organisation. We can then help you get your new plan up and running, meaning that you can continue to focus on the important tasks involved in running your business. 

For additional information on our services, or to find out more about corporate health insurance for small businesses, get in touch with the team at HICA today.