Is It Typical For a Small Business Startup To Provide Employee Health
Insurance?
It's a great question and part of our Start Up Business Health Insurance JumpStarter Series.
There are many facets to look at in order to answer this question correctly.
We'll streamline it down so you can wrap your head around what might be best for your company.
These are the areas we'll cover:
- What type of business are you in?
- What type of employees do you need in order to start?
- Do you need coverage for the founders?
- How future hiring figures into your decision right now
- What's the best way to offer health insurance to start up employees?
- How to control costs while offering health insurance as a start up
Let's get started!
What type of business are you in?
This really drives the question of offering health insurance for a startup.
What's typical depends on the type of business.
Simply put...if the competitors offer group health benefits, you'll likely need to as well in order to be competitive.
There are situations where companies offer health insurance even if it's not typical.
This is usually due to the need to insure the owners and or family such as with family businesses.
Also, partners or founders may required group health benefits.
Keep in mind that the networks of doctors can be much richer with employer health plans than on the individual/family market (such as Covered Ca or the Exchange).
If founders and/or owners have health issues, existing doctors and hospitals may only be available through the employer health plan market.
We can check doctor status between employer plans and individual/family markets for your startup here.
Let us do the legwork!
Really, it comes down to the type of employee you need to attract beyond the owners/founders.
Let's go there now.
What type of employees do you need in order to start?
Think of this way...what level of employer health insurance are losing to come work for you?
It's very interesting to us...employees really value employer health insurance.
I know that sounds weird coming from health insurance agents but it's always surprising.
We would think a large percentage of employees would take higher pay instead but consistently, they value their employer benefits.
We'll have situations where new employees are hired at one of our start up groups and we help them compare the new plan options versus what they're leaving.
This generally becomes a detailed analysis depending on the employee.
That's the level of scrutiny the apply and this also happens quite a bit before the hire.
The prospective employee is figuring the health benefits into their decision of whether to join the company.
Now before you think, that's a bit arrogant of the employee, keep this mind.
As a start up, you need employees that don't need you.
You need really good employees who CAN choose in order to make your start up last the perilous first year.
That's where group health insurance comes into play...attracting the best candidates and retaining them.
The coverage they're losing is usually the benchmark upon which to compare and this can differ quite a bit from industry to industry.
We'll look at how to obtain this within a budget below.
With all this
talk about the employees, what about the founders and owners?
Do you need coverage for the founders?
Many startups come to us with an immediate need for health insurance for the founders or owners.
Employees may not come along for some time.
There are certain rules on establishing a relationship to the company and/or for how long.
The bullet points are here:
- We need at least 1 person tied to the company
We need this relationship for 45 days or ½ the prior calendar quarter
We need the company to pay at least 50% of the employee's premium
That being said, different carriers will have windows of leniency where they'll be more flexible.
This is especially true for all the carriers at the end of the year.
Check with us via the quote link below with your situation and we'll take your situation into account when running the quote.
The good news is this...we can typically find a way to get coverage pretty quickly for founders and/or owners of a startup.
For family owned startup health insurance, go there.
Now...whatever we decide needs to factor in future hiring for a startup
which is usually the big unknown..
How future hiring figures into your decision right now
Let's say we start with just founders of a startup and offer very rich benefits and contributions.
We then add office staff and realize, they're eligible for the same offering.
There are rules of about parity and descrimination that we need to consider up front for startups with group health insurance.
Generally, we have to apply the same contribution amount and offer the same plans to each employee.
Depending on the carrier, we may be able to carve out certain classes (management versus staff, etc) but we want to take this into account up front.
This really becomes important when dealing with out to treat dependents.
If we offer 100% coverage for the initial founder's dependents, technically, we have to offer 100% to employee dependents that follow later.
The best way we've seen for all parties (employees and the employer) involves building flexibility right into the offering at the beginning.
Let's go there now.
What's the best way to offer health insurance to start up
employees?
The most successful approach is a type of mini-cafeteria plan for startups.
This means that the employer establishes a fixed contribution usually of the following:
- A fixed amount per month (employee and dependents can be different if
offered to dependents at all)
A fixed percentage of any plan or of given plan
The latter is very popular.
Essentially, we can say the company will pay 70% of the Silver level plan.
The employees then get a worksheet which we generate as needed showing their out of pocket for any of the plans offered.
They can go richer or less rich while the employer has a fixed budget based on the silver level plan.
Again, this is very popular and effective. We can quickly quote this option for you here:
We'll first establish which carrier has the best pricing for your area/demographics and with a side by side of all the major carriers.
We can then quote the best priced plan values within that carrier based on a contribution level.
Each employee will have their own worksheet and we can guide them individual (for privacy) through the options.
This method has been incredibly popular for startups who want to retain/attract good employees while having visibility on their near-term budget.
Let's look at some other strategies for start up health benefits.
How to control costs while offering health insurance as a start up
We looked at how to contain cost to a specific plan while still giving employees flexibility in plan choice and cost.
Some other considerations for startups.
Waiting periods for new employees
Employers can establish waiting periods after hiring dates up to 90 days.
This allows an employer to make sure any new addition is the right fit before paying for health benefits.
Full time and part time offering.
Start ups can choose to offer to part timers or now. This is generally any employee below 30 hours under the new ACA rules.
Dependent costs
Startups may choose to offer a different contribution level for dependents or not to offer at all.
For example, you may have 75% contribution (to a given Silver plan for example) for employees and 50% for dependents.
POP 125 treatment for after tax dollars
We can easily set up a POP125 which allows for any contribution made by the employee or enrolled (if founders/owners etc) to be made with pre-tax money.
This works really well with the mini-cafeteria plan we discussed above where employees may take richer plans and pay the difference.
That difference can now be with pre-tax money which could very well be a 20-30% discount depending on their tax bracket.
Tax credits for startup health insurance
We may have access to tax credits for start up companies depending on the average salary and number of employees. We'll quickly determine if this is something we can take advantage of for your startup.
There are many ways to save for startup and we're happy to walk through your situation.
Our services are 100% free to you as licensed health agents with a focus on new company health benefits.
Let us take the work out of this piece of your busy schedule with a new enterprise.
And always….good luck and good fortune with your startup!
Call us at 800-320-6269 or email us with any questions.
As Certified Covered Ca agents and licensed Group health agents, there's zero cost for our assistance.
How can we help?
You can run your Start up Group health quote here to view rates and plans...Free.
Again, there is absolutely no cost to you for our services. Call 800-320-6269 Today!