With the Affordable Care Act (ACA) in full effect, you might have questions about how to buy health insurance—especially if you’re an entrepreneur, small business owner or freelancer. In fact, you might be wondering whether you’ll be able to afford health insurance at all. If you have employees, you might be wondering whether you'll be able to help with their health insurance costs.
Many entrepreneurs, small business owners, and freelancers feel daunted by the task of taking full responsibility for health insurance for themselves and their employees. If you have limited capital, you may be tempted to forgo health insurance and pay the individual shared responsibility payment. The good news is there are more health insurance options for entrepreneurs, small business owners and freelancers than there used to be. This article contains information about how individual health insurance can benefit you and your employees.
The New Advantages of Individual Health Insurance
While individual health insurance plans are not new, the ACA creates three new advantages that make individual health insurance just as good – if not better – than traditional group health insurance:
-
Coverage of pre-existing conditions (you cannot be denied coverage or charged more because of a medical condition).
-
Coverage of essential health benefits (a core set of health benefits and services).
-
Discounts, via the premium tax credits (which lower the cost of premiums for eligible individuals).
If your small business or startup has employees, there are additional advantages to individual health insurance over a group health insurance policy:
-
Portability: employees may keep their policy when they switch jobs
-
Choice: employees may choose a network that fits the needs of their family
-
Savings: employees may be eligible for a premium tax credit to assist them with the cost of their monthly health insurance premiums
-
Coverage: employees have access to plans that cover essential health benefits, regardless of pre-existing medical conditions
For more details on the advantages of individual health insurance, see this guide.
How to Help Employees With Individual Health Insurance Costs
If you have less than 50 full time equivalent (FTE) employees, the ACA's "Employer Shared Responsibility" does not apply to your business. In other words, there's no penalty for not offering traditional health insurance to employees. That being said, many small business owners, entrepreneurs, and freelancers value offering health benefits for recruiting and retaining key employees.
You can reimburse your employees for their individual health insurance premiums by implementing a premium reimbursement program. To set this up, you first need to decide how much you will contribute toward employees’ health insurance expenses. This allowance, or “defined contribution,” can be the same for all employees, or it can differ depending upon employee class and/or family status.
To remain in compliance with regulations regarding these reimbursements, employers should follow these tips:
-
Set up a formal Premium Reimbursement Plan
-
Use Reimbursement Software to help make administration of the plan easy
-
Work with a health insurance broker or agent to help employees choose a plan
-
Understand the compliance requirements with the IRS, ERISA, HIPAA, ACA, and other applicable rules
-
Educate employees about the reimbursement program and the advantages individual health insurance can offer
When starting and growing a small business, health insurance is the last thing a small business owner, entrepreneur, or freelancer wants to worry about. That being said, offering health benefits will help recruit top talent.
Do you have any questions about providing health insurance for your growing business? Leave a comment below.
