Implementing and insurance plan for your small business can be quite the process, so we’ve invited our longtime friend Makeli Scholer of AMS Insurance to talk about making smart insurance choices for your company.
Podcast Episode 10: Show Notes
Even after being in business for 6+ years, Kenny still has a hard time figuring out health insurance for his small business. You probably do, too. What’s required of you? How do you get insurance for yourself, let alone your team? What about changing regulations?
It’s hard. Of course you’re confused.
As a small team, NeONBRAND hasn’t had to offer benefits to employees. Now, though, we’re growing rapidly and we need to recruit more and better talent – and that means offering benefits is a good business decision.
The majority of businesses in the 10-15 employee realm are NOT offering benefits because of the costs, so don’t feel like a bad employer if you’re in this range and not offering an insurance plan to your employees. If you want to offer benefits, though, there are options available for you.
So, when do you know that it’s the right time to start considering insurance plans for your team?
Our friend (and insurance expert) Makeli is going to answer that, but first, he gives us some background on the current insurance environment.
The Modern Insurance Landscape
Ever since Obamacare was passed, there have been a lot of major changes in the ways people purchase health insurance, what it covers, who gets it, etc. This has been a dramatic change. Insurance plans used to operate on a point system, and preexisting conditions added up points towards increased rates or denials. Now, you can’t be denied for an insurance plan based on the risks, which is a great thing for a lot of people.
As more people get and use their insurance coverage for their more serious illnesses, insurance companies have been trying to offset those costs. Rates are a lot higher than they used to be, and modern plans don’t have the same kind of coverage that you used to be able to get. Costs continue to rise, especially for individuals, and every year when health insurance companies offer their new plans, coverage is arguably worse.
We can’t have our cake and eat it, too, apparently.
Healthy people are more often choosing to leave the system because it’s so unaffordable, but people with preexisting conditions don’t care much about the rate increases because they couldn’t get coverage at all before. The expensive insurance plans are still cheaper than paying full price for health care.
What Are Your Insurance Options?
Let’s take a step back and talk about individual plans. What are your options if you don’t have coverage through your employer, or if your personal insurance plan priced you out?
Option 1: The Exchange
Obamacare created a sliding scale of tax subsidy to help you purchase insurance through the exchange. If your income is on the lower end of the scale, you’re very likely to get a subsidy to help you afford a plan. Go through the exchange to see what kind of help you can get.
There are pros and cons, of course. There are cost savings, but you’re going to have to prove at the end of the year that you make the income you claimed. If you make more than expected, you owe the insurance discount back at the end of the year with your taxes. Variable incomes could be in a little bit of a tough situation because of this.
Obamacare is also undergoing changes, so things might not be the same the next time you look.
Option 2: Health Shares
Having a health share allows people of certain religious groups and/or beliefs to get money back from the share in case of a medical condition or emergency. It’s like an informal version of insurance.
This is a way people can go without health insurance with some security. It’s not insurance, but it is somewhat similar. Healthy people are more often choosing health shares over insurance because it’s far more affordable and they still have options in case of emergency.
The biggest downside is that fewer healthy people are in the insurance system, which makes average insurance costs rise steadily higher as an increasingly large proportion of the insurance pool draw on those limited resources.
Option 3: Individual Plans
Out of all the insurance options available, getting an individual plan is the most expensive.
That’s why we’re here.
Insurance for Small Businesses
When is it the right time to offer health insurance for your employees?
Until 2018, individual rates on the open market were less expensive than group rates. Now, group rates are less expensive than individual rates, which is pretty remarkable.
This has happened because group insurance tends to perform better for the insurance companies than individual insurance, largely because a lot of people with preexisting conditions or higher risk people have individual plans.
Here are the questions you need to answer:
- Is it beneficial to your organization to offer an insurance plan?
- Does it help you attract and keep better talent?
- Does it help your team feel more appreciated and make them more likely to stay?
- Are those benefits worth the cost?
As an employer, if you’re thinking about offering coverage now in 2018, it’s a great hookup for your employees. It’s very difficult for people to afford health insurance, so an employer offering insurance today is a huge deal. Often, AMS ins recommends a base plan plus buy-up options where you have a plan that everyone gets no matter what and employees can select higher options.
Plan pricing varies based on the age of the employee receiving it, and you can also offer different plans for different tiers of employees. If your organization has fewer than 25 employees, you probably need at least 75% participation to get your plan.
Decide how much do you want to budget towards group health insurance, and a broker can help you tailor around that. They’ll make adjustments to the type of plan, your contribution amount, or other factors to make a group insurance plan work for your budget.
Realistically, here’s you should think about contributing:
For a 30-yr-old employee, the full monthly cost of an insurance plan is going to be about $227 for a base level plan. Employers often split down the middle, so your cost is $113 per month for a 30-yr-old employee on a base plan. You might pay for a higher proportion of that split (70%?) or you may pay for less.
Costs vary a bit depending on circumstance. For example, if an employee has a dependent, your 50% split might be $170 for that employee.
This is lower than a lot of people expect, especially when you consider the overall cost involved in maintaining an employee at all.
As a small business owner, the best course is to find an advisor to talk about the options in your situation. Often, the value of insurance coverage exceeds the amount you’re paying for it. It opens up your talent pool and takes a huge weight off of your employee’s shoulders. This is part of being a good employer and it’s a competitive advantage.
Other Insurance FAQs
Is it illegal to go without health insurance?
You used to get a tax penalty for not having health insurance, but this year, we’re pretty sure that’s going away. That does not necessarily mean that being uninsured was illegal, but that it cost you a tax penalty.
With the rise in cost in individual plans and not having an individual mandate anymore, it’s very likely that costs will continue to sharply increase…but there are still some decent rates out there. Group plans are improving, and that’s the way to go if it’s an option.