How Health Insurance Works For Small Businesses With Only One Employee
Even though you are not legally required to purchase health insurance for a single employee by law, there are still great reasons to offer health benefits. In addition to attracting quality applicants for your position, your business also runs better when your employee is happy and healthy. And it may not be as expensive as you think.
Here is a quick rundown on procuring health insurance for both yourself and your employee. The good news? It doesn’t have to be a difficult process!
Table of Contents
What Is Health Insurance?
Small business health insurance is medical coverage that helps you pay for general medical care, routine physicals and health exams, surgeries, and medical emergencies. Each health insurance plan is a unique combination of options that run the gamut between deductibles and no deductibles, copays or no copays, and choices about medical providers.
Is Health Insurance Legally Required For Small Businesses?
The answer to this question in general is: Maybe! But it’s not legally required if you only have one employee.
Here’s a break down of the recent health insurance laws and what they mean for your small business.
In 2010, the Federal Government passed the Affordable Care Act (ACA) and through that health care mandate, over twenty-million more Americans have had access to health insurance who didn’t before. Many of those people were sole-proprietors, independent contractors, and small business owners. Better known as “Obamacare,” the health mandate extended to employers and required businesses of a certain size to provide health insurance.
So, what exactly does the Affordable Care Act mandate? If your business is considered an Applicable Large Employer (ALE) with 50 or more full-time employees for more than six months out of the year, then you will need to provide your employees with health insurance as a legal requirement of the ACA.
If your business is not an ALE, then supplying health care for your employees is a choice.
So as a small business owner with only one employee, you are not required to have health insurance. But, just because you don’t have to provide it doesn’t mean you should overlook health insurance as an option. Providing health care is not only a choice but also a wise investment in the happiness and well being of your employees, and the government offers tax credits to businesses with fewer than 25 full-time employees who supply health coverage.
Can You Have Health Insurance With One Employee?
Can you provide health insurance for your small business if you only have one other employee? Yes! You can! If your business consists of just you and one other person, you can offer health coverage in several ways. However, before you start shopping for plans, it’s important to understand what types of plans will be available to you and what you’ll need to show and prove to start the process.
What Constitutes An Employee?
Insurance companies have a specific definition of an employee. If you are looking into acquiring group health insurance for you and an employee, first you’ll have to prove that you actually have a single employee while you are filling out applications. According to the definitions, a common law employee cannot be you (the business owner) or your spouse. An employee is defined as someone whose workload you control, both in what that work is and how that work is performed — and that person must also be working at least 30 hours a week. An independent contractor cannot be considered an employee.
If you do not have a qualifying employee, group health insurance isn’t an option. Don’t let that discourage you from finding coverage, however. There are many independent and family plans available when during open-enrollment periods.
Can I Enroll In Group Health Insurance With One Employee?
If you have one employee as defined above (a person whose workload you control, who puts in at least 30 hours, and who is not your spouse), then you absolutely can enroll in group health insurance with one employee. If you have between 1-50 employees, the government’s Small Business Health Options Program (SHOP) group health plans are available to you.
SHOP will walk you through the process of determining eligibility, sending you to your state’s group health plan, or helping you compare and shop available plans in your area. After that, you can sign-up directly through the insurance platforms offered in your state or work with a SHOP broker who can walk you through the process. You will need to have information on the following aspects of your business:
- Your business address
- How many employees you are insuring
- Employee ages, zip codes, number of dependents (sometimes tobacco use)
- Business name
- Tax ID
The Benefits Of Group Health Insurance
Even though group insurance isn’t your only option, it has many benefits. Here are some of the reasons why group health insurance is a worthwhile consideration:
- Tax Credits: Under the guidelines of the ACA and the tax codes for 2019, you may be eligible for a tax credit if you enroll your business in group coverage and you have between 1-25 employees.
- Lower Costs Than Individual Plans: Prior to the group health plans offered for small businesses with one employee, the alternative was to purchase individual plans. However, with each new person added on to a group plan, the cost per policy lowers.
- Coverage Designed Specifically For You: Group health insurance broadens the plans and providers you can choose from, whereas with independent insurance, you get what you get. With group health insurance, you and your employee can discuss health options and choose a group health plan that fits with your needs. The opportunity to choose the deductibles and copays you want is one valuable reason to go through a group insurance provider.
- Better For Your Business: Three-quarters of job-seekers say that health insurance and benefits are one of the key factors they are looking for in a job.
How To Enroll In Group Health Insurance
Once you’ve decided to enroll in group health insurance, you will need to gather your company’s information and your employee information to start the process. Here are the steps you’ll need to go through to fully enroll you and your employee with a group health insurance program:
Step #1: Set A Budget
Examine your business’s budget and ask yourself: How much money should I allot to health care? How much will I contribute per employee? You want to choose a plan that offers good coverage to your employee, but that also fits within your business’s budget. This will play a large role in which business insurance plan you choose. It’s vital to know exactly what you are paying for and what you might be asking your employees to pay for.
Step #2: Know What Plan & Benefits You Need
What kind of coverage are you hoping to offer? Go prepared to your first meeting with a provider or broker with an idea of what kind of policy would benefit your employee the most. Decide if you are going to include ancillary insurance options like dental and vision to the policy.
Step #3: Gather The Proper Documents
To receive an accurate health insurance quote from an insurance broker, you’ll need to provide some numbers and documentation. Before you call an agent or a broker, make sure you have gathered and prepared the proper documents. Most often, you’ll need to provide your:
- Business address
- Employee information
- Business name
- Tax ID
Step #4: Start Shopping
Whether you pass along your information to a broker or head to the SHOP site or other online sites for your state, now you’re ready to actually start shopping. Decide if you want to choose the broker approach or head out on your own. (If you decide to outsource to a Professional Employer Organization, they will take it from here!)
Step #5: Compare Quotes
Study the numbers and look at the plans. Sometimes the cheapest plan may not be in your best interest as a small business owner. Examine how much you can buy and how the plans work for your employees. Don’t be afraid to ask questions, push for numbers, and run scenarios with the experts. When comparing quotes and choosing the right health provider, do your research.
Read on for more advice about choosing the right health insurance provider for your small business.
Finding The Right Health Insurance Plan
Health insurance is a complicated issue and can feel overwhelming. So, how do small business owners (with all their extra free-time) navigate the system and find the perfect health plan choice? Start with understanding your needs as an employer; make sure you know the basic terms (co-pay, deductibles, co-insurance, out-of-pocket expenses), decide how much you can afford, and compare how different networks will work best.
There are several ways you can compare and contrast providers and plans. Healthcare.gov offers ratings of health plans and under an in-network plan, you can plug their name into the system and see availability and ranking. You can then sit down with the list of providers in your area and look at their rankings as well.
See our longer post on small business health insurance for more things to think about as you make your choice.
If you can demonstrate you have one employee, then you are set to explore group health options for your company. The best place to start would be the Small Business Health Options Program (SHOP) group health plans. Tool around their site, enter your information, and see what options are available.
Health insurance is not a trivial purchase — your employees work harder and better when they feel protected and healthy. Now, with the addition of the tax benefits and expanded options, it’s easy to finally make it happen.