The Affordable Care Act can prove to be a big headache for many brokers and employers. To make things clear, today we are going to focus on small groups that have less than 50 employees. This category is not obligated to offer health insurance, which is why the options here are clearer. Let’s see what options you have when it comes to health insurance for small business.
Health Insurance for Small Business 101
Currently, there were 5 small business health insurance options people preferred:
1. Individual Health Insurance
This first option is a simple approach with good results. It lets employees buy individual health insurance coverage. They can do so either through a broker or the public Marketplace, choosing from any carrier or policy that are available at the time. Moreover, eligible employees can even enjoy discounts on the premium plans through their individual health insurance tax credits.
There is also a health reimbursement arrangement (HRA) which allows the small group to contribute to an employee’s premium, as well as other medical expenses. Many small groups decided this is the most cost-effective option since the group can contribute any amount. In January 2017, the government introduced a new HRA benefit among the health insurance for small business options, namely the Small Business HRA.
2. SHOP Marketplace
These are federally- or public state-run exchanges where people can buy small group health insurance policies. This is another great option for the employers with maximum 50 employees who want to cut down on their small business health insurance costs. Let’s have a look at the conditions for the Massachusetts SHOP:
- Employers must contribute a minimum of 50% of the premium amount;
- 1 – 5 employees: 100% of the employees must be enrolled;
- 6 – 50 employees: at least 75% enrolled.
The small groups that are eligible get access to small business tax credits, which are usually available only in the SHOP (Small Business Health Options Program). The brokers who registered here can also help the small groups choose and buy a plan.
3. Private Health Exchange
These words have been highly used in the last couple of years. Basically, with a private exchange, a small business gives its employees a set contribution. They can further use it for a menu of plan options, whether it’s individual- or group-based. It’s a strategy that relies on a defined contribution.
One of the downsides of this option could be the fact that you don’t get the huge selection or the tax credits available through the SHOP marketplace. Even so, these options can have more competitive prices or can offer a higher quality.
Brokers can offer such a private exchange option to small groups if they work with a private exchange provider or a clearly defined contribution. There was even a boom of new entities created for these exchanges, such as new divisions in leading insurance companies or startups. Many companies adopt this approach, such as Walgreens.
One of the most traditional health insurance for small business options is to join a co-op. In a co-op, you have more buying power, and the risk is also spread to a bigger group. Each of these structures is organized differently. However, this can’t be considered a universal solution. Whether you get smaller rates for insurance with a co-op than a small group can get on the SHOP or open market or not depends on the regional laws and the structure itself. It’s hard to tell beforehand if this option would suit your business better, which is why you should analyze the market first.
5. Private Small Group Plan
Another option small group shave is to purchase a private small group plan. In comparison to the SHOP, here you can find many more options and carriers you can choose from. The problem with the SHOP is that some states only offer 1 – 2 plans you can opt for, which is not enough in some cases, so this could be a good alternative. However, there are some problems here as well.
First, the selection here can be quite limited since some insurers choose not to sell directly. Next, you are responsible for all the paperwork included, from yearly open enrollment periods, eligibility, initial enrollments, billing, claims, etc. This makes it not so efficient. Lastly, you may even miss on a better plan because you’re not an expert in the field. The terminology can get confusing at times, which means you can end up with a purchasing mistake.
We also need to talk separately about the health insurance options for solo entrepreneurs, besides the small business ones. In this case, most likely you will have to purchase individual health insurance. Luckily, there are plenty of resources available online that can help you choose the best plan for you.
From your position as an individual, you just need to take care of your own health needs (or those of your dependents, if that’s the case). While you check out various plans, you should keep in mind the following:
- Your own medical practitioner habits – how often do you get a checkup? How often do you visit a generalist/specialist?
- Personal and family medical history;
- Any prescription medicine you need.
While most small businesses usually choose the small group healthcare because the risks spread out among both employer and employees, this isn’t a good option for you as an individual. For this reason, many states offer the small group insurance only for groups of 2 or more people. Despite this, there are still states that let ‘groups of one’ to be eligible for the small business health insurance. This is a good idea, especially if you can’t find any affordable individual option or if you have a chronic condition. The best thing to do is to check what are the rules in your state and see what’s the best option for you.
To draw a conclusion, you can see there are plenty of options when it comes to health insurance for small business. However, it can be quite complicated to choose the one that suits best your situation, which is why you need to do some serious research before deciding.
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