There are millions of small businesses that have only one employee. Like everyone else, small business owners are also required to provide health insurance to the employee. However, the majority of business owners do not know the answer to questions like how can a small business offer health insurance, and how much is health insurance for small business owner.
There are several health insurance options for you if you own a small business with one employee or you are a self-employed business owner.
How can a small business offer health insurance?
If you run a small business, you can also afford health insurance. There are different options for you whether you plan to grow in future or you plan to remain solo. The main three options for small business owners you are:
- Informal stipend
- Group health insurance
- HRA (health reimbursement arrangement)
Informal stipend is an increase in wage, so the employee can spend it on his health expenses. The problem with informal stipend is that both employee and company must pay tax on it. Therefore, most small business owners and their employees do not want to avail this option. Moreover, the company has no way to ensure that the employee uses the money for health insurance.
Group health insurance is another great option. There is a notion that group health insurance is only for large businesses with hundreds of employees; however, it is not true. Businesses that have only one employee can also avail the option of group health insurance. The only problem is that laws about small business are not the same in all states of the US. Not all small businesses are considered a group in every state of the country. The good news is that all states consider a small business as a group if there is an owner and an employee. In that case, the insurers are required to issue a group policy to such businesses. If the owner of the small business is the only employee, then some states do not allow insurers to issue a group policy to such small businesses.
The third option for health insurance for small business is HRA or health reimbursement arrangement. It is a tax-free monthly allowance that companies give to their employees for managing health expenses. It allows employees to buy health care and even health care policies that suit them. The businesses reimburse them up to the limit of decided allowance. It is probably one the best small business health insurance options. One the one hand, it allows businesses to control the budget of the benefits. On the other hand, employees are free to purchase the health care that suits them.
How much is health insurance for small business owner?
Health insurance for small businesses is a complicated business. It is not as simple as most people think. Health insurance companies offer different types of health insurance plans that cover the small business health insurance cost. Pricing of health insurance varies based on circumstances. In most cases, the total cost per employee is $225 and the contribution by the employer is $115. Some of the popular health insurance of plans are:
- HMO (health maintenance organization)
- PPO (preferred provider organization)
- POS (point of service plan)
HMO plans are very popular because they provide comprehensive health coverage. The plans are affordable due to their low costs. However, the only problem with these plans is that you must choose in-network care options; otherwise, you will have to pay for additional costs. It suits many people, but not everyone likes it.
PPO plans have higher premium payments than HMO plans. The main advantage of PPO plans is that you can enjoy more flexibility and you can use larger networks for health care services.
POS is a hybrid of HMO plans and PPO plans. The cost of POS premiums is between HMO and PPO. The network size of POS varies depending on the location of the small business owner and employee.
In general, the small business health insurance cost depends on factors such as age and location of business owner and employee. In many cases, it also depends on the premium cost-sharing arrangement between the business owner and employee which is a practice to reduce the cost of health insurance.
Health insurance for self-employed
A person who owns a business but does not have an employee is considered self-employed. Independent contractors, freelancers, consultants, and self-employed workers fall into the category of self-employed. Fortunately, the health insurance marketplace offers high-quality and flexible health insurance for self-employed people.
Your income and household size determine whether you qualify for premium tax credits and related savings on a health insurance plan. In many states, CHIP and Medicaid programs offer low-cost or free health insurance for self-employed people. Your household size and income are the main factors that determine whether you can avail those small business health insurance options.
There are many categories in the health insurance marketplace that range from low premiums to high premiums. The low premium plans protect you in the worst case scenario. The high premium plans get less out of your pocket when you avail the health care services.
Health insurance for self-employed can be divided into four categories:
In the case of the Bronze plan category, the insurance company pays 60% of the cost and you pay 40% of the cost.
In the case of the Silver plan category, the insurance company pays 70% of the cost and you pay 30% of the cost.
In the case of the Gold plan category, the insurance company pays 80% of the cost and you pay 20% of the cost.
In the case of the Platinum plan category, the insurance company pays 90% of the cost and you pay 10% of the cost.