Group health insurance for self-employed entrepreneurs allows you and your employees to have access to affordable health care. All an entrepreneur needs is to have one employee on payroll to qualify for group health insurance.
A group health insurance plan for self-employed business owners offers a more cost-effective way to cover all employees. Employee premiums typically are less than what employees pay for individual health insurance plans. Group health insurance for self-employed entrepreneurs include premiums that employees pay with pre-tax dollars, which reduces the tax burden. Employers pay reduced payroll taxes, as well as deduct their annual health insurance contributions from gross income.
How Group Health Insurance for Self-Employed Works
Many self-employed business operators are too busy to find affordable health insurance for their employees. Health care costs in general scare self-employed professionals, and they typically do not understand the nuances of group health insurance.
Group health insurance requires everyone participating in a plan to share paying the costs associated with the premiums. The plans cost less because there are more participants to drive down the average cost. Both a self-employed entrepreneur and the employees pay a portion of the premiums.
The math behind group health insurance goes something like this:
Few participants mean higher risk for an insurance company
More participants reduce the risk for an insurance company
Higher risks cost more money to insure an entire group of participants
Lower risks cost less money to insure an entire group of participants
As the pool of participants increases, the average cost of the premiums decline. Group health insurance for self-employed professionals is the best way to cover employees at an affordable cost. Working with an experienced insurance broker can help you better understand the nuances of group health insurance.
Why Group Health Insurance Works
If you are self-employed and you manage a relatively small operation, why should you spend money on group health insurance?
Cost-effective for the self-employed and their employees
Way to show employees the business cares about them
A study showed providing group health insurance produces a 25 percent reduction in sick leaves and workers compensation claims
More than 95 percent of employees that underwent health check-ups enjoyed a higher quality of life
A competitive advantage when recruiting employees
Factors to Consider for Choosing Group Health Insurance
Now that we have established group health insurance for self-employed entrepreneurs as an important benefit for employees, let’s review the factors to consider for enrolling in the right plan for your business.
Number of Employees
One of the most important factors for choosing the right group health insurance plan is the number of employees. As we mentioned, the more employees you have, the less it costs on average for each premium. A self-employed professional can use the money saved to expand health benefits or spend the money on another expense that boosts revenue, such as starting a digital marketing campaign.
How Do Your Employees Benefit?
Sending surveys out via emails can help you understand what your employees want for health insurance coverage. You have to include factors like employee age, number of family members, and pre existing medical conditions to find the most compatible group health insurance plan for your employees.
For example, you can opt for group health insurance that covers an employee or a plan that covers an employee and every family member. A state-licensed insurance broker can walk you through all of the factors that concern employee health care coverage.
Cost of Premiums
Like other expenses for self-employed business owners, health insurance is a line item cost on the ledger sheet. However, a less expensive group health insurance policy does not make the policy better than a policy that costs more. Request bids from at least three group health insurance providers to conduct a comparison test for premium prices. If you find a plan that you like, but it is not budget-friendly, try to find one or more other expenses that you can reduce or eliminate.
Level of Service Provided by a Group Health Insurance Company
Customer service is one of the most important factors in determining which company you decide to partner with for group health insurance. You should have access to around the clock online chat. The company’s website should have a page devoted to answering the most frequently asked questions. You should also select a company that offers friendly and knowledgeable live customer service over the phone.
Customizing Group Health insurance for Self-Employed
Every self-employed business owner has a unique set of health insurance needs. Make sure the group health insurance provider you work with allows you to customize features of the plan.
Here several customization options:
Coverage for preexisting conditions
No waiting periods
Provide maternity coverage for nine months
Company buffer to cover expensive medical procedures
Infant coverage from the time of birth
Policies that include or exclude certain treatments
Co-payments allowed
One-hundred percent coverage for emergency care
Dental/Vision Insurance
Group health insurance for self-employed entrepreneurs can include dental and vision coverage for employees. If you consider adding the additional sections to an employee health insurance policy, does the cost justify the higher employer-paid premium? Your company can require employees to pay for dental insurance and vision on their own, but does that lead to a disgruntled team of employees?
What about the Future?
Nobody expects you to be Nostradamus when it comes to future group health insurance needs. However, you should select a plan that your self-employed business can grow into within the next couple of years. Do you add a waiver that triggers the start of additional health care coverage?
A highly rated health insurance broker can help guide you into the future with a group health insurance policy for your self-employed business.
Where to Look for Group Health Insurance
Recent federal government initiatives supposedly make obtaining health insurance for self-employed business owners a bit easier. Nonetheless, the process has become more difficult because of bureaucratic red tape and confusing legal language written into new federal guidelines.
Unfortunately, many self-employed entrepreneurs do not meet the minimum guidelines for buying group health insurance for their employees. Instead, small businesses have to go hire independent contractors to work on projects. If you run a small business that you started and funded, are there any options besides limited HMO plans to cover your entire team?
The answer is there are several sources of group health insurance for self-employed professionals.
Healthcare Marketplace
The most popular source for group health insurance is the federal government. If all the options make you feel overwhelmed, lean on the expertise of an accomplished state-licensed insurance broker. The open enrollment period for 2020 starts on November 1 and runs through December 15.
COBRA
Passed by the United States Congress in 1985, the Consolidated Omnibus Budget Reconciliation Act (COBRA) provides employees that lose their health care benefits the right to select a group health insurance plan. COBRA is the perfect option for self-employed professionals that need to bridge the gap between health care coverage policies. COBRA group health insurance lasts up to 36 months.
Multiple Employer Welfare Arrangement
A multiple employer welfare arrangement (MEWA) plan helps small businesses reduce the cost of providing group health insurance. Pooling resources, a large group of employers purchase group health insurance. The contribution of each employer depends on the number of employees. MEWAs represent a powerfully effective health care option for employers that want to move out of a government-managed plan.
Short Term Group Health Insurance
If the open enrollment period has ended for the healthcare marketplace, self-employed businesses can buy short term group health insurance to maintain health care benefits for employees. The cost of short term group health insurance is typically lower than what self-employed entrepreneurs pay for group health insurance. However, the policies are considered bare minimum health care coverage that does not include care for chronic medical conditions.
Small Business Associations
A few associations dedicated to helping small businesses flourish in a highly competitive economy offer group health insurance for the self-employed. The most influential organization that helps self-employed small businesses is called the National Association for the Self-Employed (NASE). NASE charges an association fee in addition to the premiums paid for group health insurance. Make sure you conduct the research needed to determine whether the cost is worth providing health care benefits.
Level Funded Health Plan
Also referred to as a partially self-funded plan, a level-funded health insurance plan combines the affordability and customization of self-funded plans with the financial security delivered by fully funded plans. Self-employed business owners still sign contracts with full-service health insurance companies, but they assume more financial risk.
Level funded health plans appeal to small businesses that are defined by the Affordable Care Act (ACA) to have between two and 49 full-time employees. Four primary components define a level-funded health plan.
Administrative costs
Aggregate stop loss coverage
Individual stop loss coverage
Claims
Professional Employer Organizations
Professional Employer Organizations (PEOS) outsource management tasks that include accounting and human resources. PEOs also offer health care benefits for self-employed entrepreneurs that acquire group health insurance for a monthly fee. The main attraction for self-employed business owners is a group health insurance plan offered by a PEO provides a similar stopgap measure for health insurance that COBRA provides.
Health Cost Sharing
Joining a health network is similar to joining a multiple employer welfare arrangement. The biggest difference is the health network is responsible for getting employers together to purchase group health insurance. Health cost sharing delivers affordable health care that covers the basics, which means your employees do not receive dental and vision coverage. Moreover, everyone enrolled in a health cost-sharing program must be in good physical condition.
Conclusion
Group health insurance for self-employed business owners can turn into a complicated exercise in frustration. Constantly changing federal laws and guidelines can confuse entrepreneurs that need to focus on running their business operations. At Wilson Insurance Group, we work with self-employed professionals to connect them with the group health insurance plan that matches their criteria. We spend time with every client, whether it's the CEO, Head of HR, or anyone else, to discuss the numerous options to purchase group health insurance.
Call our office or complete the short online form to schedule a free consultation with a health insurance consultant.