There are multiple avenues for small business owners or self employed persons to provide health insurance benefits for their families and to their employees. Like any individual, as a small business they have the option to insure through both the private and public market.
How Does Small Business Health Insurance Work?
How a business owner sets up funding for employer coverage depends on them. Some might cover the cost of a monthly premium and provide a max out of pocket coverage expenses per employee, some might prefer to set up a reimbursement system. It all depends on the performance and financial capability for the owner.
Small Business Health Insurance Requirements
If a business is pursuing group coverage, there are no requirements to qualify a small company for business health insurance; other than the fact that it needs to be a business looking to insure more than 2 people and be able to pay the cost of monthly premiums. If the business or self employed person is pursuing individual coverage, then there is no requirement for the number of people to cover.
How Many Employees Do You Need For Small Business Health Insurance?
There is no requirement in terms of the number of employees a business needs in order to secure coverage. If you’re looking for a group plan, you must have a group of people. The number of the group members does not matter.
How Much Does Health Insurance For Small Businesses Cost?
It is difficult to determine how much health insurance can cost for a small business providing health coverage to their employees. The cost depends on a number of things; primarily
- Income
- Number of employees
- Family size (if covering employee families)
Options For Health Insurance For Small Business
Public Market
Depending on the reported annual income of a self employed person or a business, business owners as well as their employees might be able to individually qualify for a subsidy. Meaning they could receive financial assistance.
When a person or family applies for a subsidy through the public market; the government takes into account total household annual income as well as household size. The lower the income and larger the family, the greater the subsidy.
Here’s where that gets tricky – there are two factors to keep in mind when attempting to insure through the public market as a small business owner.
- The government takes into account pre-tax income
- If you under report; you will be penalized and owe back in taxes at the end of the year.
In the case of the self employed person/ the small business – it may not be ideal to go the public market route. However; if they have employees on a fixed W-2 salary, the public market may be best for an employee of a small business.
HRA (Health Reimbursement Arrangements)
If a small business owner of about 5-10 employees can afford it, an HRA might also be an option. This is where the employer reimburses the employee for the costs of their health care. If employees are qualifying for subsidies, the employer might be able to cover the cost of the rest.
In other cases; employers might allow a certain amount per year allocated to the employee’s health care cost. But this would mean the employee has a cap on their health care benefits, and may not be the best route to insure for the employee.
Private Market
An employer is able to secure health insurance benefits for their employees through the private market in multiple ways – one way being group plans. Group plans are beneficial to self employed people who have small businesses with 10 employees or more. They are offered through private insurance – and provide discounted rates for larger groups.
If a small business has under 10 employees then it may be easier for an employer to individually cover the cost of their employees through separate private insurance policies under the same broker or company. This way plans can be tailored to the individual employees needs and keep costs low all around. Lastly for the self employed person; there are also tax benefits for enrolling on private health plans.
If you are self employed or own a small business and unsure of the best method to provide affordable quality health insurance to yourself or your business; don’t hesitate to simply #ask the Art of Insurance!
