(by Andres Rojas)
Between polishing a product, attracting investors, and sticking to a budget, startup CEOs have a lot on their hands. Getting a group health plan to retain a strong employee base, as a small business, well that’s just one more straw on the camel’s back.
Don’t be discouraged, the struggle is worth it.
Fledgling companies can benefit greatly from setting up a group healthcare plan from the start. More than retention, group health plans can cut premium costs without reducing coverage, attract more highly qualified workers, come with favorable tax benefits, and even extend to workers’ family members and/or dependents.
Here is everything you should know about buying small business health insurance.
1. Know Your Obligations: Are You an ALE?
According to the Affordable Care Act (ACA), only small employers with 50 or more full-time workers – a.k.a. Applicable Large Employers (ALE) – have a mandatory obligation to provide group health insurance to their workers.
Small employers that qualify as ALEs and offer a group health plan must cover at least 70% of their full-time employees and not cost more than 9.83% of an employee’s household income to avoid penalties.
Defining if you are an ALE is tricky, though, because it requires that you add the hours worked by both your full-time and full-time equivalent (FTE) employees. Use this easy tool to find out whether your startup qualifies as an ALE.
2. Choose Smartly: the Right Small Business Health Insurance Plan For Your Startup Awaits
Once they choose to implement employee benefits, startups can choose from a variety of small business health insurance options. To narrow your search, here are some of the best plans for small businesses:
Fully Insured Plans
Traditionally, these have been the go-to solution for many small businesses. Fully insured plans require that employers pay an annual premium to the insurance company which, in turn, will take responsibility for the workers’ healthcare costs. Fully insured plans are renegotiated every year and the costs will vary depending on the number and average age of a company’s employees.
Health Maintenance Organizations (HMO) Plans
HMO plans connect insured employees with a network of hospitals and specialists through which they can get medical services for a discount. This arrangement keeps premiums and out-of-pocket costs low as long as employees don’t go out of the plan’s network of providers.
Preferred Provider Organization (PPO) Plans
Though more expensive than HMOs, PPO plans come with a bigger network of medical providers. Besides having more options, members can also receive care outside their network of preferred providers without needing a referral from their primary care physician. Even if members use a provider or service not covered by the plan, PPOs will cover a part of the expenses.
Exclusive Provider Organization (EPO) Plans
Like HMOs, EPOs only cover services provided within the plan’s network. However, members aren’t obliged to pick a primary care physician or to get referrals to see a specialist. EPO premiums are lower than those of more comprehensive plans but come with a smaller network of providers.
Point of Service (POS) Plans
POS plans combine the best features of HMOs and PPOs. They are a great option for startup employers looking to give more flexibility to their workers. If a startup is located in a small town, chances are that your network of healthcare providers won’t cover all the bases.
By signing up with a POS plan, startups can give their employees the freedom to get services outside their plan networks and still have their health insurance cover part of the costs for the care they receive.
Small Business Health Options Program (SHOP)
SHOP is an online health insurance exchange where eligible small businesses can buy health and dental coverage for their workers. SHOP allows buyers to choose between 4 different levels of coverage and pick how much of a worker’s premiums they can pay.
Although eligible employers fall in the 1-50 full-time equivalent (FTE) employees range, in some states companies with as many as 100 FTE can also apply.
3. Don’t Reinvent the Wheel (on Your Own). Trust Your Broker
Picking the right health insurance plan for your company can feel overwhelming – especially if you have a modest budget. Luckily though, startup CEOs can maximize their return-on-investment and ensure that their company continues to grow by investing in experience.
At Zupnick & Associates, we have the experience and knowledge you need to make your startup a magnet for young talent. Contact us today if you have any questions and let us pave the road for your success.