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5 Stereotypes of Startup Health Insurance - Debunked

Written by: Christina Merhar
February 19, 2015 at 7:00 AM

If you asked an average small business owner what they thought about health insurance options for their startup, what do you think they would say?5 Stereotypes of Startup Health Insurance - Debunked

I imagine some of the responses would be simple, like “ugh” or “don’t get me started.” Or, maybe you’d get a long story about negotiations and a ton of time on the phone with the insurance company.

The truth is, startup health insurance isn’t always fun to talk about, and it’s one of the major small business challenges. While many owners have a lukewarm reaction to it (at best), others have information or perceptions that are just... wrong.

Of course, here at Zane Benefits we love breaking down health insurance options to help startups see what health benefits can do - help you attract and retain the best employees.

So, to help make startup health insurance more clear (and maybe a little more exciting), we’re debunking the top five stereotypes about startup health insurance.

Stereotype #1 - Startups Can’t Afford Health Insurance

If you’re like most startups, you hear the word "health insurance" and immediately assume you cannot afford it. Or, perhaps you’ve gotten some quotes and are, in fact, in sticker shock over the premiums.

Reality - It’s true that premiums for traditional group health insurance premiums are skyrocketing. But what many startups don’t realize is that they don’t have to purchase a group health insurance plan to actually offer health benefits. They can set up a benefits program to reimburse employees for individual health insurance. With this solution, the startup names their price for health benefits.

Stereotype #2 - There are No Health Insurance Options for Startups

Reality -  Whether you are the sole W2 employee, or you’ve got a small and growing workforce, it is easy to get frustrated with the health insurance choices (or lack thereof). But, the reality is when you think outside the box, a few more options open up.

Have you considered giving employees an allowance to use on health insurance (done right, it can even be tax-free)? Have you checked out the SHOP Marketplace or a co-op?

There are more small business health insurance options than there used to be. An expensive small group health insurance plan isn't your only option. You just need to think outside the box.

Stereotype #3 - The Affordable Care Act is Bad for Startups

Reality -  It is common to think that the Affordable Care Act (aka Obamacare) is bad for small business. But in fact, Obamacare opens new health insurance opportunities for startups. How so? Three words. Individual health insurance.

Individual health insurance is bow better, and more affordable than group health insurance. As such, startups can use the advantages of individual health insurance as the foundation of health benefits. And, startups with fewer than 50 FTE employees are not mandated to offer health insurance under Obamacare.

Stereotype #4 - Startups Can’t Compete with Big Corporation Health Insurance

Reality - The health benefits your startup offers might be different than what a big corporation offers, but the truth is you can compete with bigger corporations.

In fact, a recent survey by the Kaiser Family Foundation found that 75% of employees working for small employers (not currently offering health benefits) prefer $2/hour more in wages over actual health insurance. What does this mean? Employees want choice. And, they prefer cash (or a contribution) to go and purchase the insurance they want - rather than receive a one-size fits all plan from their employer.

Stereotype #5 - Under Obamacare, Our Startup Has to Offer Health Insurance

Reality - Assuming your startup has fewer than 50 FTE employees, there is no requirement under Obamacare for your business to offer health insurance - and no penalties if you do not.  


As a startup, you do have options for health insurance, and you can afford it. How? Savvy small business owners are thinking outside of the box and adopting individual health insurance reimbursement. This approach debunks many common stereotypes about what startup health insurance is - and has to be. And most importantly, it provides a way to offer great startup health insurance. What do you think? Leave a comment below.


Topics: Health Insurance For Startups, Health Insurance

Additional Resources

Trying to decide which HRA is best for you? Take our quiz to find out.
Get our guide on how to offer health benefits with a small budget.