6 Steps to Build a Health Insurance Plan
As a shop owner, you might offer benefits like a 401(k) retirement savings plan or paid time off. While no small business is required to offer health insurance to its employees, a group plan can help retain employees and even recruit new ones.
Under the Affordable Health Care Act introduced by the Obama administration in 2010, businesses with over 50 employees are mandated to offer a policy, or pay a tax penalty.
The Act also set up the Small Business Health Options Program for employers with a staff ranging from one to 50 employees.
Beyond the legal implications, though, offering your employees health insurance is a way to stand out as an employer—which can help when it comes to recruiting and retaining employees.
For Steve Hahn, owner of CARSTAR Metcalf, a $3.8 million business in Stilwell, Kansas, he’ll do anything he can to keep his 18 employees healthy and safe.
With twenty-some years working in body shops, Hahn has learned the best way to keep his employees healthy is to consistently use available federal and local resources.
Through the five years he has spent with CARSTAR, Hahn has developed a health plan that he says can rival any other shop’s plan in terms of benefits for the employees.
Brian Pinheiro, a practicing lawyer for 22 years and lawyer for Ballard Spahr, says, on a broad level, shop owners have no legal obligation to maintain a health plan for their employees. Yet, he says it is a wise business decision to offer a health plan or show that the owner cares about their employees health in order to compete in the marketplace.
Hahn, Pinheiro and Ed Leeds, counsel on health benefits at Ballard Spahr, share how to research health insurance options and the six steps to launch a plan.
Before You Start: Understand the Basics
In order to compete in the marketplace and utilize his business’ safety plans for profit, Hahn implemented a health insurance plan for his employees.
Health insurance plans vary by state, Pinheiro says. For example, health insurance in Philadelphia is more expensive than Utah because the cost of providing medical services in Philadelphia is raised by the increase in jury trials for malpractice.
It is important for the employee to feel that they are not gambling their life away in their chosen career path, Hahn says.
Pinheiro says the No. 1 resource for any shop is Healthcare.gov or the U.S. Health and Human Services website. He says shop owners should frequently use those resources to update their health care plans.
He says most owners review plans annually, although they might not make major changes each year. Factors that change over time include adding doctors to the network, changing the employer subsidy, adding a higher deductible and possibly adding a wellness program.
In addition, those resources can be helpful for figuring out the requirements from your state. States do not offer health plans to citizens, except for Medicaid, which is available for low-income citizens, Pinheiro says. But, states offer individuals health care exchanges, which are simply marketplaces in which private insurers offer health plans to the employee.
And Pinheiro says the penalty for companies over 50 employees that do not even offer a health plan can involve paying a high penalty. The penalty on business owners started in 2010 with the Affordable Care Act, he says.
Step 1: Learn what benefits your employees need.
An owner should ask his employees what benefits they need. Leeds says it is important to send a formal survey to current employees and ask them what benefits they need the most and what they are currently doing for health coverage.
If an employee is on a spousal plan, the employer might have an opportunity to create a plan with a price that would attract the employee to stay on their spouse’s plan but also be accessible for other staff members.
Step 2: Sort out finances.
Most business owners should search for a local insurance broker to collaborate with on the health insurance plan, Leeds says.
If the employer uses a broker, monthly payments will need to be made to the insurer.
However, if the owner does not want to work with a broker, he or she could go to his or her local chamber of commerce, which Leeds says can offer group insurance plans for small businesses.
Pinheiro says if the owner does not want to pay 100 percent of the cost, the owner can have the employee pay a percentage of the plan each month in what is referred to as a “cafeteria plan.”
“Usually health plans are set up this way,” Pinheiro says.
In a cafeteria plan, the contributions are deducted from the employee’s paycheck on a pretax basis.
Hahn offers his employees a plan in which he pays 80 percent of the individual’s insurance premium and 25 percent of the employee’s family’s premium. Hahn says he chose this type of plan because typically the employee’s family plan is more expensive.
Step 3: Gather the documents.
If an owner chooses not to work with a broker, certain information will be needed before going to the insurance company, Leeds says.
The employer would need to gather payroll statements and, most importantly, demographic information of their employees including the location of the shop, where they live and what age they are.
But, all employee information will be kept confidential. If the business has more than 50 employees, the owner must obtain this information through HIPAA regulations.
Step 4: Research the options.
Research on insurance companies can be done in a number of ways, Leeds says. It can simply be through talking to other shops in the area.
Shops could even avoid using an insurance company by forming an association that meets to discuss health benefits and other collision repair issues, Leeds says. By forming this group, the shops could create and offer a uniform health plan to all the individual shops.
This route, he says, is risky but it would give the smaller shops an even playing field against big businesses.
And, if the employer would rather not offer a plan, he or she can set up reimbursement accounts for their employees. The employee can use the money from these accounts to find individual health coverage through the state, Leeds says.
Step 5: Plan benefits.
For every small group plan or individual plan, essential health benefits should cover outpatient services, emergency services, hospitalization, maternity services and mental health. Substance abuse, prescription drugs, rehabilitation services and preventative care should also be included in the policy, Leeds says. An employer can additionally offer pediatric services, including dental and vision, for the employee’s family members.
Step 6: Launch an enrollment period.
An employer needs to start the process as early as six months before the start of the year. Typically plans are offered on a calendar-year basis, Leeds says.
Leeds says it is a good idea to start the program even earlier than that. Then, offer your employees a chance to enroll in the benefits before they begin at the start of the new year.
He says one way to announce the plan is through a quick email. Outline when the plan will begin, what insurance company was chosen and how much it will cost the employee pretaxes. Employees should have at least two weeks to decide whether they want to enroll.
And, it would not hurt to bring in a representative from the insurance company or the broker to explain the plan to all the employees at once, Leeds says.