Under the Affordable Care Act (ACA), any company with 50+ full-time employees are required to offer healthcare for employees. Most successful startups are likely to fall under this category. Although ACA (Obama Care) is currently under review by the Trump administration, health insurance is still required in the US.
Entrepreneurs can, of course, obtain HMO, PPO managed-care or even get coverage under a short-term major medical plan. However, for a fledgling startup, these plans are too expensive because of the high premiums.
There are, however, numerous affordable health insurance options available for startups today.
Small Business Health Options Program Marketplace (SHOP) is a public federally or state-run exchange that sells affordable insurance packages to startups or small groups. If your startup has less than 50 workers, SHOP is an excellent place to find some of the best health insurances for small groups so long as you meet the set requirements.
Respective states are running their own SHOP marketplace—either with federal government assistance or on their own–which startups can use to look for, and select the most suitable healthcare options for their specific insurance needs. You can also use SHOP affiliated brokers to help you choose and purchase a plan. If you are eligible, you get access to some specific small tax credits.
Over the last half-decade, medical costs in the US have increased by about 6% a year, underlining the important role played by health insurance. For startups, a viable way of getting more affordable health insurance is through an insurance broker.
A broker typically represents several insurance products being offered by many different companies. They compare policies and coverage levels and can help your startup to find a good insurance policy at affordable rates.
Whatever health insurance option you opt for, you must, at least, cover 60% of the total medical services cost covered by the plan, and the benefits must also include substantial physician service and inpatient hospital coverage.
You may want to consider COBRA coverage if you are transitioning from covered insurance to self-employment such as starting your own small business. This will allow you to hang on to your current employment-based health plan. COBRA is a federal law allowing you to keep on paying for your employee health insurance coverage but for a limited time once your job has ended.
Generally, COBRA requires that group health plans with 20+ employees sponsored by employers offer the affected employees the opportunity to enjoy a temporary extension of coverage (continuation coverage) in specific cases where the health coverage under that particular group plan would otherwise have ended.
If you are ready to invest in some energy and time, you could save some money by directly buying a small group health insurance plan from a provider. However, although this might be in accordance with your entrepreneurial goal of cutting costs, be careful about it, because it comes with several risks.
For one, you would be personally responsible for all the required paperwork such as initial enrollments, eligibility, billings, and claims. This might get quite complicated as you grow. Secondly, some insurance providers simply don’t engage in direct selling—this makes your selection quite limited.
No matter the type of health insurance option you choose for your startup, there is something good: the government has allowed you to deduct 100% of the amount paid for both dental and medical insurance if your group/startup reports a net profit under Schedule C, C-EZ or F.