reimbursement for employee policies? State-mandated policies? or?
what are startups/small companies with 1-3 employees, doing about health insurance?
Answers
We see most small startups who are bootstrapping or following the lean startup methodology (keeping costs as low as possible) opting for individual plans for their team members. This has become even more viable and easier to do with the new insurance exchanges. What startups do about paying for the insurance premium usually depends on whether or not the individual is founder a or an employee and how much capital they have to fund the development and early sales stages of their company.
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Newly formed, local governmental agencies are doing this very thing. Offering a fixed amount per month through a 125 plan while telling employees to obtain health care through the exchange.
In many ways, I applaud this because it puts the ever increasing cost
However, the downside is that it makes recruitment difficult against other agencies that are providing health care as an employer provided benefit.
BTDT
For most businesses, employer paid health insurance will go the way of defined benefit pension plans. More responsibility will be passed to the employee (401K)--- especially given the advent of the State insurance exchanges. This is cost effective for the business and allows an employee to better tailor a health plan to his/her needs. Hopefully the matching contribution will be more than 3-10%.
Going to the exchange and seeing which is cheaper, small biz product or 3 singles.
Then based on what Kent said, determining how much they can afford to pay, without going bankrupt (something no one on the Hill understands..).
Thanks to both of you for the input. Small biz product, haven't seen any. Through the usual brokers?
I would recommend contacting a PEO professional employer organization.
Susan,
You do not indicate who owns the entity, and if the owners work there. That will influence the type of health policy desired. (i.e., the owner may want to a policy that balances cost and the benefits, not exposing him/her to $6,500 in out-of-pocket medical costs and $6,500 in pharmacy costs, and other factors.) Sure, if you minimize costs, you get the cheapest coverage, then you hope that you do not have a catastrophic event. If you do not care about the employees, send them to the exchange, where they may or may not qualify for
There is also a product out there called a Medical Bridge through Colonial Life which will fill in part or all of the deductible. It has a low cost and is being adopted more often than not to protect employees. It is indemnity-based, excluding it from the ACA. Make sure that your broker or a Colonial Life agent shows it to you.
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Thanks, Dabney. Owners work here, and are the only employees right now but there will be contractors brought on as employees once funding is finalized. Too small for Trinet, will look at Colonial Live. Good broker sounds like the way to go.
Our firm services over 250 tech backed start ups. In my experience, there is no simple answer to your question. We consult with our clients about their range of options: 1) no benefits, 2) DIY through a local insurance broker (company then covers a certain percentage of premium), or 3) PEO (e.g., TriNet). The earliest stage, less well capitalized start ups generally provide $0 coverage. Those with greater resources, who are trying to attract the best talent, often go the PEO route. 100% premium reimbursement for employee is typical at this stage, 0% for dependents. If profitability is achieved, dependent coverage is addressed (50% or higher). Every "start up" is different, and their "corporate culture" is often the determining factor.
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Gotcha, since the owners work here the goal was to start with them..saw something called a 125 plan in an earlier mail..? Thinking now that reimbursement policy might be best, which could be re-evaluated post-funding and when there are more employees.. no?
In Indian context, individual policies are taken by the employers. The sum insured depends typically on the role, position and remuneration package of the employee. In addition to the medical policy, companies can also offer 'accidental policies' to cover any accident etc to the employees. It also covers the instances of any permanent or partial disability. Private insurance companies also offers 'group medical policies' in case the number of employees are more than 10.
Susan,
I know of a few who have treated it like a business expense reimbursement. Since the company *would* have paid, each employee instead gets reimbursed up to a cap, then they can go to the "exchanges" and purchase whatever they want with what are in essence pre-tax dollars. This is far better than 125 plans as there is no "use it or lose it" function, and the administrative overhead is much lower.
Cheers
Anon
We used a broker for 7 employee company. Cost sharing was 100% company paid for employee-only coverage and they pay for any additional family members to enroll in the plan. We decided to go with an Aetna HMO plan $0 deductible at a reasonable price. Hope this helps.
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thanks, very helpful. Will check it out.
I really like that you went with employee pays for additional family members. It seems to be the fairest route. We don't hire families. WE hire individuals. Many mangers and staff level employees get confused about this and it can end up with serious consequences.
The cost of dependents can double the premium, resulting in what I see as a legal discriminatory practice. And, maybe even encouraging illegal discriminatory practice!
But every time I've pointed out in my
That is part of the reason I've liked Sec 125 plans (cafeteria). They amount to:
"Here is a list of tax free benefits you may choose from that we offer and here is what they cost as well as how much you have available to spend in tax free funds from us. Choose whatever combination best meets your needs. YMMV."
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