The small business administration outlines 600,000 plus franchised small businesses accounting for 40% of U.S retail sales. This number is steadily growing. The proliferation of franchised small business is continuing to report strong numbers in the global economy. 28 million small businesses provide for 54% of all U.S. sales. This means that 52.6 million hardworking Americans make up the work force behind these figures. As part of the affordable care act, organizations with under 50 employees are not mandated to provide health insurance for a small business.
Still, many employers choose to provide health insurance to attract and retain talented employees. There are various options to choose from. An organization’s business model will affect which option in health insurance plans will be the most financially viable. If your once small start-up or franchise is growing in sales and employees it might be time to start reviewing your options.
There are shifting tectonic plates in the healthcare world right now and it’s likely nothing will be resolved anytime soon. This article provides the most up-to-date information on the options for health insurance for a small business and will explore five available options.
Individual Health Insurance
Many argue that the most straightforward approach is individual health insurance. Since individual subsidies are commonly available for families with annual household incomes of approximately $95K, and there is flexibility for each employee to choose from thousands of plans for the exact coverage they need, the appeal of taking advantage of the individual market for health insurance for a small business is apparent.
A small business owner can allow their employees to purchase individual health care coverage through the market or broker. If employers would like to contribute to their employees’ premium or other medical expenses they can set up a health reimbursement arrangement (HRA). Individual plans are arguably the most cost-effective. Small groups can contribute any amount up to federal limits. Many small businesses are offering their employees a “raise” to purchase health insurance. This one time raise paired with government subsidies is more cost-efficient than paying for group insurance.
Many employers state the individual route as the best pathway to provide health insurance for a small business who is a first-time buyer or does not have the administration to arrange for a group health plan.
Small Business Health Care Programs (SHOP) Marketplace
SHOP is an extension of the affordable care act. This option rolls out through a public-state or federally run program exchanges that sell small group health policies. Many consider this good coverage for small businesses with less than 50 employees. Organizations with under 25 employees may qualify for a small business health care tax credit which can be worth up to 50% of your premium costs.
- Offer employees single plan, or let them choose from many plans
- Offer only health coverage, health and dental coverage, or only dental coverage
- Choose how much you pay toward your employees’ premiums, and whether to offer coverage to their dependents
- Decide how long your employees’ initial enrollment period is, and how long new employees must wait before joining the plan
SHOP has come under some heat after first being implemented. A series of technical glitches delayed initial enrollment in some state exchanges.Also, the requirement that employers must offer a series of options wasn’t mandated until 2016 allowing 16 of 32 states with SHOP exchanges to only offer only one coverage option.
Private Health Exchange
The term private health exchange has been circulating the radar for the past few years and is gaining traction in the options of health insurance for a small business. This style of exchange is defined as a type of contribution strategy. With a private health exchange, a group of employees can set up a contribution that will be used toward either individual or group-based plans.
A brokered private exchange can be offered to a small group through a broker with a defined contribution or a private exchange provider. Small businesses like startups and new divisions of leading insurance companies have been created to adopt this approach.
Private Small Group Health Plan
Employers can still offer a private small health group plan. Small groups can find options and carriers to select from the private market with more options than SHOP in some states.
Many small groups join a co-op to purchase health care. Using a co-op expands buying power and mitigates risk to a larger group. Depending on the group’s needs, will detail how the co-op is structured. Regional insurance underwriting laws and the structure of the co-op determine whether going with a co-op will be more cost-effective than the insurance marketplace or SHOP.
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