When to Get Small Business Group Health Insurance

By Jonathan Pletzke
http://www.startupnation.com/series/95/9045/small-business-group-health-insurance.htm

Whether you’re starting a small business, already in business, or planning a startup, health insurance is a topic you’ll have to confront. You’ll be forced to answer questions like, Should you keep health insurance for up to 18 months from a previous employer through the COBRA option, buy individual health insurance, seek to become a part of the association health insurance plan, or take insurance from a spouse or life partner? Should you consider going without health insurance for a time, or pick up a short-term health insurance policy for the six months to a year that they are offered?

In this article, we’ll tackle the question about when you might want to consider small business group health insurance. The other choices will be covered in other articles in this small business health insurance series.

How long does it take to get small group health insurance?

In order to get a Small Group Health Insurance Policy, you typically need to have been in business for about a year. This is not a hard and fast rule, though. Formally created businesses, such as corporations or limited liability companies (LLCs) may be able to get a small business health insurance policy right away.

How many employees do I need in order to qualify?

This depends on which state the business is located. In some states, such as North Carolina, you need only one person, and in others you need two people. If you are covering yourself and a spouse, then that may count as two, especially if you list both as employees to be covered on the application.

What kind of paperwork am I getting myself into?

Expect to fill out an application that lists employees, and to some degree medical information on the employees. Since the group health insurance policies are almost always guaranteed issue, such that your business and employees can’t be turned down, the rate can vary according to the laws of the state - sometimes a little and sometimes a lot. Once you’ve signed up for a policy, you’ll probably need to provide annual paperwork such as company information (a profit & loss statement, etc.), and actually re-apply each year for coverage.

Won’t rates go up a lot year after year?

Yes, rates go up every year. But they may go up a different amount depending on the insurer that you choose, the state that you live in, and how much health insurance you use. For example, when I was working at a startup company a few years ago, someone at the company had a series of expensive operations for obesity. The amount of health insurance used by that individual drove up the rates for the group as a whole, and when that person left the startup, the human resources person shopped around for a new carrier to get a better rate so that the company would be starting over with a new experience rating.

Why do I want small business group health insurance?

With some of the most common questions answered already, you may be curious to know if you would be a good candidate for small business group health insurance. From my perspective, there are two top reasons to pursue a small group health insurance plan.

The first is as a benefit to attract and retain employees. If your competitors offer health insurance as a benefit to employees, and you wish to attract and retain similarly qualified people, then you may need to have a small group health insurance plan.

The second reason is if you or a key employee or dependent needs to get guaranteed issue health insurance because of a medical condition. In most states individual health insurance is medically underwritten and you may be denied coverage due to an existing condition, or even the use of prescription medicines for simple things like acne! A small group health insurance policy will ensure that everyone gets coverage, possibly at a lower cost than when buying individual health insurance for someone with a condition.

Shopping for small business health insurance

It’s more work to shop for a small business health insurance policy than an individual policy. In most cases you won’t be able to pick up quotes online. You’ll have many more companies to choose from and choices to make. You’ll have to work closely with a good health insurance agent licensed and in good standing in your state. My own small business policy experience has shown that in some cases the responses are slow from personal contact with agents, though that varies depending on the agent. And I got little to no response to my online queries for small business health insurance.

Summary

Hopefully you’ve got a better picture of when you might want to consider a small business health insurance policy. There’s more work to do with this type of policy, including the shopping and the annual renewal, than you’d have with either an individual policy or as an employee of another company. There are alternatives, too, such as employee leasing companies that take care of all of these mechanics and choices, which may be worth it for the busiest and best financed startups.

Jonathan Pletzke is a StartupNation community member and is part of a startup in Chapel Hill, North Carolina. His experience includes consulting work at life and commercial insurance companies and many technical papers on the subject.

Jonathan is author of Get a Good Deal on Your Health Insurance Without Getting Ripped-Off, which was created to help people make the best possible decisions when buying health insurance. Learn more at www.besthealthinsurancebook.com.

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