Health insurance is a definite challenge for small business owners – both in cost, options and constantly changing rules. Personally, my health insurance has increased 204% over the last 8 years, with little to no change in coverage.
Today, at least, we can opt out of health insurance or have a high catastrophe plan that doesn’t meet the Affordable Care Act requirements without paying a penalty.
Here’s a list of options that I have seen put to use. Note every year the amounts or rules regarding the options change – so check to make sure the option works for you and will provide you the coverage you are looking for.
Solo entrepreneurs can get coverage from the following sources:
- Individual marketplace allows you buy an individual plan through healthcare.gov. You may be eligible for premium tax credits depending on your income and location. Monitor your income to ensure that you stay qualified.
- Private individual plan. Health insurance carriers sell individual plans directly to individuals. You won’t be eligible for government subsidies with this.
- Medi-Share is a health care sharing program facilitated by Christian Care Ministry through which a community of believers voluntarily come together to share the cost of one another’s medical bills. It is not insurance but is an option to manage health care costs.
Multi-person businesses can get health insurance from the sources below:
- Private group plan. Health insurance carriers sell group policies to businesses of varying sizes.
- Health Reimbursement Account (HRA) arrangements. To cover expenses that the group health insurance doesn’t cover an employer can provide additional assistance with an HRA. The business must offer an ACA compliant group health insurance policy. Reimbursements of health care costs paid to the employees are tax free.
- Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). Stared in 2016, a small business can allocate a monthly healthcare allowance for each employee. Then, they reimburse each employee for healthcare expenses when the employee submits proof of the expenditures. The business does not have to offer a group health insurance policy.
One type of plan that I have found to be effective is a high deductible health plan (HDHP) that qualifies for a health savings account (HSA). This can apply to individual polices or private group policies.
Health Savings Account (HSA) is like a personal savings account, but it can only be used for qualified healthcare expenses that include a wide range of medical, dental, eyecare and mental health services. The contributions are limited, tax deductible, and the withdrawals are tax-free if you use them for qualified medical expenses. The money is yours, thus it is available for future qualified medical expenses even if you change health insurance plans, go to work for a different employer, or retire.
The Health Savings Account is a great way to reduce your taxable income, if you qualify for it.
Personally, I have found obtaining and offering health insurance in the small business environment is challenging. There are fewer health insurance carriers with fewer options. The rates are based on ages and not health. It is estimated that 66.5% of bankruptcies are due to health care expenses or lost time due to health. Stay healthy!
By Mary Guldan-Lindstrom, CPA