Most full-time workers look to their employer to offer health insurance coverage. But that safety net quickly disappears when you start a small business.
Getting the right health insurance coverage is crucial for self-employed people—from solopreneurs working as freelancers to small mid-sized business owners who hire employees.
To gain insights into finding the right health coverage, we talked to Tim Jackson, president of Health Insurance Specialists, Utah-based business that helps individuals and small businesses find the right health insurance coverage.
Jackson notes that some of the following comments may only be applicable to the workforce in Utah, but the overarching theme applies to business owners everywhere.
Q: What types of business owners do you work with?
Jackson: I work with a lot of small, small business owners—I’m talking about freelancers, people who have less than 10 employees. I even work with, like, “mom and pop [shops]” where it’s literally a husband and wife who run the company.
Q: In your experience, what are small business owners most concerned about when shopping for insurance?
Jackson: I’ve literally watched thousands of people make a decision on health insurance. You can get as analytical as you want. You can crunch the numbers all day long. But when it comes down to it, people make a decision on health insurance based on two things.
- Can they afford it?
- Can they sleep at night?
That is how people make a decision about health insurance. And I can break down prices all day long. I can get as analytical as you want.
But really, it comes down to a number they feel they can afford. And can they sleep at night knowing that they can potentially have a deductible of $5,000, $6,000 or $7,000?
Q: Solopreneurs and owners of very small businesses typically purchase individual health insurance. What should these folks keep in mind when shopping for the right coverage?
Jackson: Because they are a small business owner, typically their adjusted-gross income, it can be low because they have write-offs. Because their adjusted-gross income could be low … that means they could qualify for a tax credit.
That’s usually the first thing I bring up to people, because if they want affordable health insurance, the most affordable way to get health insurance is with a tax credit. And that’s for those who qualify based on their personal adjusted gross income.
That’s sometimes a hard number to nail down for people. I try my best to nail it down and help them to understand the consequences of how the tax credit works.
Q: As a business grows and hires employees, small-group coverage can become necessary. How does an employer know when the time is right to switch to this type of plan?
Jackson: Usually when a small business starts a group plan—when I get that call from the employer—it’s because the employee has asked about it. That’s typically what happens.
And it could be for a couple of reasons.
One, it could be that they are trying to attract someone, so they want to hire an employee and they’re trying to find good talent and they talk to the [potential] employee and the employee [currently] has a job that has good benefits. In today’s world, that’s kind of become mandatory—and it’s kind of a deal-breaker, really.
So, the one reason people get into a group plan is to attract employees. And the other reason is for retention.
Now they have the employee and they are trying to keep them, and that employee is getting recruited from the guy across the street. And the guy across the street is offering benefits. So now [the business owner is] coming to me and he’s saying, “Hey, I need to do something to keep my employees around.”
Health insurance has become one of those major things that people count on and hope for help with. So, that’s where the small employer comes in and has to come in and find a group plan to help keep employees.
Q: What should a small business owner consider when choosing such a plan?
Jackson: When you’re going to find an employee, you better find a plan that they like, or that they are going to be okay with.
There’s a big balance in this because you see employees who come from a large corporation where the corporation pays for a large amount of the premium and they have really great plans. And then you have the small employer that comes along and he’s never had [to pay the entire cost of] health insurance. Now, all of a sudden, he’s looking at a bill of several thousand dollars a month, and that’s something he wasn’t quite expecting.
So, they have to be able to figure out what [they can] afford and what can they offer. But you’ve got to be able to offer something to employees that’s enough to attract them and to keep them around.
Q: How can a small business owner best strike that balance?
Jackson: When you are a small employer and you’re going to offer a plan, you have to be able to offer enough to keep the employee around, but you have to also balance what you can afford. And that’s one of the challenges I see employers have.
They want to be able to offer something that would make someone happy or that would attract someone, but they also have to be able to afford it. So that’s that balance—what I call the “carrot and the stick.”
When the Affordable Care Act came around and we called them “qualified [health] plans,” they had all these requirements, they covered several things like maternity and doctor’s appointments and prescriptions and those kinds of things. That made the plans very expensive, or a lot more expensive than they used to be.
Those are qualified plans. And back when it was mandatory to have health insurance, employers wanted to make sure they had qualified plans, so that they were offering something that was legitimate. So, now that that’s not mandatory, some employers are offering other things—catastrophic plans or things like that—that might not be enough. But it really just depends on the employee and the industry and what [the employee] had before.
As a small employer, you can have a conversation with your employees.
With large employers, it’s a little bit harder. If you have 500 employees, you can’t do a census of the whole group.
Q: It sounds like there is a lot for small business owners to consider when choosing coverage. How can a broker help?
Jackson: It’s very overwhelming. It’s really common for one carrier to have several plans to look at it. I try to give [clients] two or three options to look at, and they are trying to process that. It’s a time-consuming thing that most entrepreneurs don’t have time for.
There’s a lot of brokers out there. We work for the employer, and we get paid by the carrier for placing the product. So for the employer it’s free.
[SMB leaders] can work with a broker, and [a qualified] broker [will have] experience working with several carriers and several types of products. They have that knowledge to be able to bring in what they need to help them find a solution to their situation.
There’s several [brokers] out there. So if [employers] are not happy with the first one [they partner with] they can go to a second one. I belong to the National Association of Health Underwriters, and you can go to NAHU.org and find a broker in your area.
Every professional has a strength and an expertise. I have doctors and lawyers who come to me for advice on health insurance. I go to [a lawyer] for legal advice. So, it’s the same thing.
If you’re going to do something, get a professional involved and you’ll be very happy. It’s not going to cost you a lot of money to have a professional involved and just to ask them questions.
Choosing the right insurance plan for your small business is a big deal. That’s why it makes so much sense to get the help of a professional.
And that’s not the only time a little expert advice can go a long way.
Here at Talus Pay, we provide payment processing services that are designed to perfectly match the needs of your business. Not only that, but our consultants will be happy to walk you through the whole process, ensuring you have everything you need.
Reach out to a member of our team today to learn more.
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