For many Americans, the freedom associated with running their own business or working independently as a consultant or freelancer can be very appealing. But with that freedom and independence also comes a lot of responsibility, and not just the day-to-day operations and accounting processes necessary to keep the business afloat. There are also things like small business health insurance to consider.
Here are some questions to keep in mind while looking for coverage:
What kind of small business health insurance suits your needs? (Self-Employed)
As a business owner, it’s important to understand what type of healthcare consumer you are. If you are a self-employed solo entrepreneur, independent contractor, or freelancer, it is not a requirement to have health insurance coverage in 2019.
Here are a few alternative health insurance plans. These don’t provide all of the 10 essential benefits coverage that Affordable Care Act plans offer.
- Short-Term Small Business Health Insurance Plans: These may be a good fit for you if you are already healthy. You may only need temporary coverage that lasts 12 months or less. A short-term health plan is renewable for up to 36 months.
- Fixed Indemnity Plans: Can help manage out-of-pocket medical expenses. There’s no annual deductible and you can get cash benefits to help you pay for ER visits, X-rays, hospital visits, and other services.
- Health Sharing Plans: All plan members’ share the cost of medical bills. These are health care sharing ministries and Christian healthcare plans.
Additionally, if you quit your job, ridding of your current health insurance, then you qualify for a special open enrollment period to buy a health insurance plan. You have 60 days from the time you leave your employer plan to shop for a new healthcare plan. Also, try using your state exchange, the federal health insurance marketplace, or in the private marketplace.
Lastly, you could qualify for a financial subsidy to help lower the cost of your health insurance plan. When calculating your subsidy, you must include your total household taxable income for the year. Also, based on your need, you could potentially save hundreds of dollars on health insurance.
What kind of coverage do your employees need?
If your business retains 50 or more full-time employees—defined as working at least 30 hours per week—then you need to offer minimum value coverage to 95% of those employees and their children, age 25 or younger.
“Minimum value” refers to plans that cover 60% of the entire amount for healthcare expenses, such as standard medical examinations. In addition, the insurance plan must be considered affordable based on the employees’ wages. You can evaluate the affordability of the coverage by ensuring that the percentage deducted from their salaries for small business health insurance premiums does not exceed about 10% of their total income.
You could receive a penalty if you do not offer health insurance. This also applies if your company’s health benefits aren’t considered minimum value coverage based on the Affordable Care Act’s standards. The penalty is a tax payment called the employer shared responsibility payment (ESRP) employer mandate.
To conclude, if your employees are young and single, their insurance needs are going to be different. A parent with small children and elderly employees will be in more need of health care services. Taking this into account is critical to deciding what types of plans and the level of benefits you will provide.
What Are My Options?
Once you know what’s required of you, it’s time to shop and assess your costs. Think about which coverage is ideal for yourself, your household, or those on your payroll.
The National Federation of Independent Business indicates that providing health insurance for their staff is the top priority. There are lots of options for group health insurance and how they’re structured.
The two most common types of managed cares are PPOs (Preferred Provider Organizations) and HMOs (Health Maintenance Organizations). POS (Point-Of-Service) medical plans are less common but offer some of the benefits of both PPOs and HMOs.
HMO – Health Insurance
- Policyholders must almost always seek covered services within the company’s network of medical providers.
- Require primary doctor referrals to see specialists
- Offer the cheapest premiums and lowest out-of-pocket costs of all managed care options.
PPO – Health Insurance
- Policyholders may seek covered services outside of the network but will have to pay more.
- Flexibility to choose their own doctors and other kinds of health service providers.
- More expensive premiums and higher out of pocket costs.
POS – Health Insurance
- Policyholder visits an in-network health provider.
- Plan members may need to show an insurance card at the desk and possibly pay a copay.
- Can choose to see a doctor outside of the network, but the service will get covered at a lower level.
- POS members need a primary care doctor and must get referrals to see specialists.
- Premiums are more expensive than HMOs and cheaper than PPOs.
Small Business Health Insurance: Group Health Plans
Group health plans can be structured as fully-insured, self-funded (self-insured), or level-funded.
- Fully-Insured:The company pays the premium to the insurance company. On average, most members contribute 18% toward, while the remainder is paid by the business. Also, this form of insurance tends to be cost-effective for both employees and business owners.
- Self-Funded (Self-Insured): Employers operate their own health plan instead of buying an insurance company’s fully-insured plan. Employers do not pay for an insurance company’s profit margin on the premium for a fully-insured plan. A few types of self-funded plans are:
- Partially self-insured health plans, with integrated health reimbursement arrangements (HRAs)
- Qualified small employer health reimbursement arrangements (QSEHRAs).
- Level-Funded: Offers self-funded plans and lets employers manage their costs better. Another bonus, employers can pay less for benefits if their employees are young and healthy.
How to save money on health insurance
Here are five tips on how to save money and secure health benefits for your business.
- Consider All Options for Health Insurance: Companies with 50 employees or less should visit the Small Business Health Options Program marketplace. This offers a way for employees to secure health insurance and saves you money. Meet with your broker to figure out what makes the most sense for your company.
- Shop for Benefits During Renewal Season: Health insurance is renewed on an annual basis. Meet with your health insurance broker each year before open enrollment to discuss your options. By shopping around and negotiating premium rates, you may lower your health plan costs.
- Maintain Control of Your Annual Costs: Create a health insurance budget for your business. When making your plan refer to historical price increases. You may also be able to create short-term and long-term spending projections for your health spending.
- Allocate Time to Administering Health Benefits: We all know time is money. Also, to save time, utilize healthcare brokers, HR benefits software solutions and/or defined premium reimbursement programs. If these activities aren’t controlled, they may begin to take up a disproportionate amount of your time.
- Focus on Adhering to Compliance Rules: Follow all federal compliance rules to avoid any penalties. A broker can help guide you through this process and HR benefits software also includes reminders.
What are my next steps?
The best way to determine which small business health insurance is the most affordable, beneficial, and relevant to your specific needs is to contact a licensed health insurance agent. A good agent can help you compare all of your options. This includes whether you need help finding group health insurance or an individual marketplace plan. A licensed agent will help you and/or your staff enroll.
If you’re choosing an ACA plan, the Open Enrollment deadline was December 15. This was for coverage effective January 1, 2019. Group health plans and other individual coverage solutions, such as short-term health plans, don’t adhere to the same ACA Open Enrollment deadlines. Your agent can sign you up for types of plans.