Health Insurance for Start-Ups

Today in the Wall Street Journal, there was an article about how the Affordable Care Act will increase the number of start up companies because entrepreneurs will have access to quality, affordable healthcare through the exchanges. I found this interesting because it was not something that I really thought about, access to quality healthcare. I never really saw this as a barrier to starting up a company, but it is a big issue, especially for couples with children. Entrepreneurs coming from the corporate world will be shocked at the cost of healthcare, but it is a necessity. And for those entrepreneurs who are successful and are starting to add staff, lack of health insurance may be a deterrent to you getting the talent that you need.

In this post I am going to review a few options for entrepreneurs to have good health coverage. I am not going to talk about ACA requirements, because I am talking about companies with fewer than 50 employees, who are exempt from the ACA requirements (but you can get tax credits, I’ll talk about that later in the post)

Private Insurance: Most insurance companies provide some kind of private insurance option at a decent rate. I never really thought about the cost of health insurance until I started to see how much it costs iBIO to offer coverage to our employees (I’ll talk about what we do later). The best value for your health-care dollar is usually a traditional major medical policy, which provides hospital and surgical coverage. However, medical checkups, ongoing care for conditions like diabetes or heart disease, and prescriptions won’t be covered, meaning you’ll have out-of-pocket expenses every time you see a doctor. PPO and HMO plans are available, but the premiums are very high…usually at least 18% higher than what corporations pay…although I think it is probably much higher than that.

Professional Employment Organization: (PEO) is a firm that provides a service under which an employer can outsource employee management tasks, such as employee benefits, payroll and workers’ compensation, recruiting, risk/safety management, and training and development. It does this by hiring a client company’s employees, thus becoming their employer of record for tax purposes and insurance purposes. This practice is known as co-employment or “joint employment.” As of 2010, there were more than 700 PEOs operating in the United States, covering 2-3 million workers.

iBIO uses a PEO, they are usually for companies with less than 100 employees. It is not a cheap option, but we have found that our PEO provides great service and we are able to offer our employees a competitive benefits package (Health, Life, Vision, Dental, Flex, Transit, ect). Two active companies in our community offering PEO: Empower HR and TriNet.

Industry Groups: I am not going to do a pitch for iBIO, but……membership does have its benefits. Despite some of my best efforts one of the least utilized benefits of iBIO membership is our purchasing program. As an industry organization we have parntered with our sister organizations in other state and offer our members discounted services to some of the most used vendors for our industry. Lab supplies, bulk gas, shipping, Liability-Director & Officer-Clinical Studies insurance…AND employee health insurance.

iBIO has partnered with Wells Fargo Insurance Services (WFIS) as the endorsed platform of employee benefits and brokerage solutions. WFIS offers iBIO members access to all traditional insurance plans plus exclusive offerings from top rated insurance carriers with enhanced benefits and proprietary pricing. Click Here for more info.

Healthcare Exchanges: Starting in October, individuals can enroll in the state based insurance exchanges. I don’t have any info on what the state of Illinois is going to offer. But I know in other states, like Massechusets there is a large effort underway to attract younger indiviudals to purchase insurance through the exchanges. They are offing happy hour information sessions and Red Socks tickets to attract younger enrollees. There is a worry, it may be unfounded, that the exchanges will attract older and individuals with chronic conditions that could increase the cost and reduce the effectivness of the exchanges. So states are trying to attract a younger, healthier demographic who may not think about getting insurance. The exchanges are supposed to provide quality affordible healthcare. Companies with less than 50 employees and pay an average of $50,000 will receive a 35% tax credit if they pay for their employees insurance. Remember that these companies are not required to provide insurance.

No one really knows what impact the Health Exchanges will have. There will undoubtedly be some growing pains, but if they can provide startup and small companeis with quality insurance for their employees, that will be success. But, with the other options avaliable, I don’t see the ACA as a catalyst for startup activity, as the WSJ article suggests. I am sure that between now and October, Illinois will have a large marketing campaign to help educate and inform all of us about the offerings and how the exchanges will work.

I am very interested in the entreprenural midset. It is a different way of thinking, and not necessarily something that someone can learn. I’ll write more on this subject latter, and may even develop a panel discussion. Stay tuned.

This is a conversation, not an editorial. Did I forget something, get it wrong or do you agree? Please Comment, Like, Re-Tweet and Share

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