Many small businesses and startups feel intimidated by the responsibility of providing the best health insurance for their employees. The fees are high and startups with limited capital investment sometimes opt to avoid insurance coverage.
But entrepreneurs are more at risk than ordinary employees because many of them are fully invested in the company. However, a trip to an illness or a costly medical procedure can spell the end of the business. There are several options for health care insurance for startups and small businesses which are useful for their employees working in the organization.
Health Insurance Options for Startups
The first thing to understand is that plans are classified into four different levels, each tied to a different level of coverage, such as Bronze, Silver, Gold, and Platinum. Platinum being the highest premiums and the lowest amount out of pocket cost for the company's employees, while Bronze has the lowest premiums, and a higher out of pocket cost for the employees.
Insurance plans at the Bronze level make the most sense for small businesses. These plans have lower premiums but they have very high deductibles. Deductibles are the amount that the employees have to pay out of pocket before insurance kicks in. This makes Bronze plans great for people that about things like car crashes or the flu.
Individual Health Insurance
Individual health insurance can be with or without a defined contribution allowance. This type of plan allows the organization's employees to purchase their health insurance coverage through the public marketplace or an agent. Organization's employees can select any carrier or insurance policy and access discounts on premiums by using individual health insurance tax credits.
Startups can contribute to the employee’s premium and other health expenses using a Health Reimbursement Arrangement (HRA). The companies can contribute any amount up to defined limits.
Individual health insurance is easy and cost-effective for smaller groups to access insurance coverage that is priced out of the group health insurance.
Another option of health insurance for successful startups is the Health Savings Account (HSA). This is specially designated, tax-advantaged savings account that an employee can use to pay for expenses from high-deductible health plans. Money leftover in an employee-owned HSA is saved over time and can earn interest. HSAs work well for employees who prefer specific lower premiums.
HRAs work in a similar way to HSAs, with one main difference being that employees do not own their HRA accounts.
Co-op is also one of the good options for startups as it gives the organization a boost in buying power and spreads the risks to a larger group. However, not all co-ops are structured similarly. It is important to find a co-op with good rates, this also depends on the market itself or regional underwriting insurance laws that dictate rates or the co-op itself.
The Small Business Health Options Program (SHOP) Marketplace is a public state or also known as federally run exchanges that sell insurance to small groups. It is a good place to find the best health insurance for small groups with less than 50 employees if they can meet certain requirements.
Different states have different laws. If a particular business is eligible, SHOP gives access to small tax credits. The brokers affiliated with SHOP Marketplace can help startups to purchase the plan.
Private Health Exchange
The Brokers offer small businesses a private exchange option by working with a defined contribution. Small groups give employees a set contribution that goes towards a menu of plan options, which can be individual or group-based.
A licensed health insurance broker can be a good resource if one is looking for ways to minimize the risk and ensure the coverage of the organization's employees. As for a broker that specializes in small group policies, individual or family policies to help assess the different ways one can get health insurance for the business.
Match the Market Average Coverage
Medical inflation is on the rise and at this state, one visit to the doctor can disrupt any middle-class family's monthly budget. So, the organization needs to ensure that its employees have sufficient coverage. Performing market analysis and benchmark the average before deciding the sum insured, most companies offer a health insurance cover of about Rs 3-4 lakh on average.
Make Employees Co-owner of the Policy
A comprehensive plan includes many features and provides employees with better coverage and benefits. If one plans on providing a comprehensive plan to their employees, but the premiums are way beyond the set budget, make the employees a co-owner of the policy. At a nominal premium every month, deducted from their salary, the employees can enjoy premium benefits and better insurance coverage.
Employee Coverage from the Start
Many small business owners activate the employee health insurance plan after 6-12 months of joining. This makes the new employees feel that they are still not a part of the organization. While not providing health insurance coverage to new employees may save a little money in the short run, but this lowers the chances for great employee relationship in the long run.
The startup employees might want a Preferred Partner Organization (PPO) plan over a Health Maintenance Organization (HMO) plan if they don’t want to see a primary care physician before visiting a specialist. Alternatively, the employees might prefer an HMO plan over a PPO plan due to the lower cost of an HMO, which comes from staying in a medical network for services.
With Exclusive Provider Organization (EPO) plans, the employees can use all specialists and providers with no referrals, although there is usually no out-of-network coverage. It also tends to cost less than HMO and PPO plans and could be a good choice for startup employees who do not expect much medical care and want to save money.
A Point of Service Plan (POS) plan is a combination of HMO and PPO plans, in that employees need to work with a primary care physician while usually having access to a wider range of health care providers.
The art of picking up the best health insurance for a small business isn’t easy. It is essential to compare each startup's coverage options, region-wise availability, employee number, network, capital and revenue and stand-out features. Then the health insurance policy can be chosen.
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