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A Rundown on Health Insurance
Being self-employed and running your own small business is one of the biggest roller coasters you’ll ever ride. Right when you think your finances are in check, you are invoiced for an amount that even your accountant had forgotten. Or when you think things are finally going right, they quickly go far left.
One of those lows may be trying to figure out health insurance. Finding the right health insurance policies for yourself and employees can seem like a nightmare. Whether you have one employee or seventy, it can put a damper on your month trying to figure out what the best plan will be and how you’ll be able to afford it.
You may even be asking yourself the question; why should I get health insurance for my employees? Also, if I decide to, what are the steps? What are my options? Today we will be discussing just that.
Why You Should Provide Health Insurance to Your Employees
Group Coverage
There is a significant advantage that comes with having group coverage, which can be used for small businesses. Unlike an Individual plan, where they penalize or even deny you for your pre-existing conditions, group coverage allows everyone on board.
No medical history is needed. Instead, the insurance company needs some demographic information from your group to see what risks may lie ahead. If you or any of your employees have any conditions that have prevented them in the past from getting health insurance at a lower price, this may be heaven sent for them.
Other good news is that a “group” can be made up of just two people. So if you run a small business and have 1 or 2 employees, then you can apply and reap the benefits. Depending on what area or state you live in, you may even be able to be a group of one. Sounds a bit out there, but ask your insurance agent what your possibilities may be.
Recruiting
Even though anyone can apply for health insurance on his or her own, you are more likely to find someone to work for you and retain them if you offer health insurance. It’s a massive deal for a person trying to find a job. Without “benefits” you may not attract potential hires.
Some studies show you’ll reduce turnover at your company and increase loyalty, which is what all small business owners need and want.
Tax Credits
When tax time rolls around, we’re all biting our nails. How much will we owe this year? How will we afford to pay? However, if offering health insurance to your employees could help, wouldn’t you take it?
To be able to qualify for tax credits, you’ll need:
- Less than 25 full-time employees or the equivalent in working hours
- Pay less than $50,000 full-time a year to each employee
- Pay at least 50% of the premium for your business health insurance
The tax credit will depend on what you qualify for, but you’ll get up to 50% OFF your contributions toward employee premiums. That could end up being a lot for your business.
We recommend you consult your accountant as tax credits are not permanent.
It’s the Law
I’m not sure if you’ve heard over the past few years (of course you have!), but having health insurance is the law. So if you have more than 50 employees, you must have affordable coverage available.
How much will you be penalized for not providing health insurance? According to Cigna.com, you will be fined approximately $2320 per employee. If you have 100 employees, then you’ll be fined about $232,000.00 that year. Undoubtedly a number that’ll hurt any small business owner.
Healthy = Productive
If you only have a few employees, then you know how much more difficult it is when they aren’t able to come to work because of an illness. So if they are healthy, then they are productive. If one of your employees does not have health insurance, and they fall ill, then their performance will drop dramatically. You are the one who, in the end, loses.
What Are The Steps to Getting My Employees Enrolled?
Enrolling your employees into health insurance not only sounds difficult, it is difficult. With so much information on the internet and given to you by your friends and family, you’ll feel exhausted, and it may take weeks before you find the right one for you.
Your best bet is to leave it to an expert. Find a broker and let them deal with the headache. Yes, they get paid a commission, but your time is worth money as well. They’ll help you find the best deals and the most efficient plan for your business. Also, you won’t have to go through all the pain of researching and wasted hours of confusion.
Here is some information you’ll need to provide your broker:
- Business/ Employer name
- Business physical address
- List of employees to be covered (you can’t pick and choose whom you cover; if you cover one, you’ll need to cover all employees)
- Each employee’s Tax ID / Employer Identification Number
- Business start date
- Payroll Records
- Industry code (SIC)
An “Employee Census” must be provided that will break down these employee demographics (since they’re not asking for health history.):
- Names
- Ages
- Number of dependents
- Zip codes
If using a broker is not in your interest, then know that finding health insurance can be done alone. However, there are many different insurance companies out there and they are not all equal. If you misjudge your company’s needs or the services provided, you may in the end not be complying with the law. It can cost you a lot in the long run.
What Type of Plans are Available?
Let’s have a small crash-course on the type of plans available and what the insurance lingo means.
There are four kinds of plans available for small businesses:
- HMO
- PPO
- POS
- EPO
Although they make no sense with just their acronyms provided, the difference in coverage is unquestionably notable.
HMO means Health Management Organizations and this plan asks that you pick a general practitioner and covers simple checkup and immunizations. It also asks for a low deductible. It sounds great if you’re on a tight budget and are just overall healthy. If you’re in need of a specialist at any point, then you’ll end up paying a lot out of pocket. So it is not recommended for anyone with current or foreseeable issues.
PPO means Preferred Provider Organizations and this plan is the opposite of HMO. PPO will have options of lower monthly rate and higher deductibles, or higher monthly rate and lower deductibles. PPO is also specialist friendly, but you’ll have to co-pay for regular doctor visits. This plan is excellent for someone who is happy to shop around for doctors, in need of a specialist and someone who is comfortable paying more.
POS means Point of Service, which combines HMO and PPO. The price is also in between the two. This plan is excellent for someone who likes their current General Practitioner but who may need specialists for other conditions.
EPO means Exclusive Provider Organizations which is the exact opposite of POS. You don’t need to see a General Practitioner to be referred over to a specialist, as long as you stay in your network.
What Do Some Of These Terms Mean?
These plan explanations may not make complete sense to you if we don’t break down some relevant terms. So what do the terms premium, out-of-pocket, deductibles, copays, and coinsurance payments mean?
Premium – A premium is your monthly cost of having insurance. The higher your monthly fee, the lower your out-of-pocket costs will be when you visit your doctor.
Out-of-Pocket – Exactly what it says; it is the cost you’ll have to take “out of your pocket” to pay in addition to your premium.
Deductibles – This is the amount of money you need to pay before your insurance kicks in. So if you have a $500 deductible, then any medical costs you are making, you’ll need to pay out of pocket until you’ve spent $500. After that, your insurance will take care of the rest.
Copays – Copays are a flat rate you may need to pay when visiting your doctor. For example, if you’re visiting your General Practitioner, then you could be asked to pay a $25 copay, and the insurance will cover the rest.
Coinsurance Payments – This is similar to copay, but instead of an exact number, you’ll pay a percentage. For instance, your plan may require you to pay 10% of the total cost, while your insurance company will pay 90%.
Knowing these terms will better assist you in making a much more educated decision regarding health insurance plans.
So now that you know the benefits of health insurance for your small business and a quick rundown on what types of plans are available, get out there and begin your health insurance search.
Whether you have less than 50 full-time employees and decide whether or not to provide health insurance, or if you have more than 50 full-time employees and are required to provide insurance by law, you are now better informed about your options and reasons.
Being a small business is going to continue to be a roller coaster, but we didn’t decide to hop onboard because we wanted a smooth ride. Hopefully this article has made something that is very complicated just a little bit easier.