Most business owners know that employees consistently rank health insurance as the most important benefit, above vacations, holidays, and all other benefits. But while larger companies offer health insurance almost across the board, it can be hard for smaller companies to know when they should start offering health care plans to their workers.

The Society for Human Resources Professionals (SHRM) regularly surveys employers and found recently that while 98% of companies with 200 employees or more offer health insurance, that figure drops to about 75% for firms with 10 to 24 employees and even further to about 50% for companies with fewer than 10 workers.

Given the high value that employees put on health insurance, it’s worth looking at as soon as you start hiring staff. In most cases, you can start offering group health insurance once you have at least two employees.

So when is it time?

The biggest reason to start offering health insurance is when it becomes important to attracting and retaining employees. Even in a down jobs market, there is always competition for the best and brightest staffers, and benefits are an easy thing to compare across competing job offers. Bringing in the most talented employees is essential to ongoing success, and your health insurance plan can make or break a prospect’s decision.

You’ll also need to keep your current employees around. While some may be able to get health care coverage from a spouse or other source, having a plan in-house helps make employees more comfortable in staying with you for the long haul. The combination of the financial benefit and the less tangible feeling of being valued by the company can really help improve retention.

Our recommendation is that any company with more than 10 employees should absolutely offer health insurance, and in most cases even 5 or so employees is enough. Once you move beyond the basic start-up phase, it’s critical to maintaining employee morale.

Why wouldn’t you offer health insurance?

The biggest obstacle for small businesses is cost. The Kaiser Family Foundation (KFF) reports that average annual premiums were $4,704 for single coverage and $12,680 for families in 2008. That’s a significant cost for smaller companies – but keep in mind that you don’t have to bear the entire burden. The same KFF report indicates that only about 40% of small businesses (defined there as fewer than 200 employees) pay the entire premium for single coverage, and only about 13% do for family coverage.

If you broke that data down and looked at firms with fewer than 10 or 20 employees, I suspect you’d find even more businesses paying only a portion of the health care costs. This reduces the financial burden on the company while still helping the employee: not only are you sharing the costs with them, but the costs for individuals to get coverage on their own are much higher.

Of course health insurance doesn’t make sense for some businesses: in industries that see constant turnover, for example, or firms that employ lots of low-level, part time employees, it wouldn’t make sense to cover them.

Want to get started?

Does your small business need to start offering health insurance to your employees? Try BuyerZone’s free request for health insurance price quotes. We’ll match you to several insurance providers and brokers who will help you get the best deal. You can also read more about how to buy health insurance in our exclusive Health Insurance Buyer’s Guide.