Small Business Health
Insurance Options
Interview with Mark Schwartz
Schwartz & Associates, NYC
By Jeff Yoskowitz and Kathryn Gordon
Kathryn: Hi Mark, I
know you’re a broker and help find health insurance for business owners. Can you tell us how COBRA (the Federally mandated continuation of coverage) works for someone that is considering quitting their current job to start their own
business?
Mark: If an employee under a
plan either quits or is let go, they can extend via COBRA for 18 additional
months. The employee remains under the
coverage of the prior employer, but the employer can charge more for the plan
at that point. It may be worth pricing
out COBRA coverage options because under state law (such as NY state), in
certain circumstances it can be extended past 18 months.
Jeff: What do you see changing in the health
insurance business going forward?
Mark: The jury is still out on President Obama’s
changes. Some may choose to pay fines
rather than follow a particular standard. Hopefully, more people will have
access to healthcare!
Until 2014, if you are an employee of a small to medium-sized business, the owner doesn't have to offer group benefits but you can
choose to buy an individual policy. All
you need for that is proof of residency in your state. Iindividual coverage
will be more for coverage than a Sole Proprietor or Small Group Plan.
Kathryn: Can
you tell us more about a Small Group Plan and a Sole Proprietor Plan?
Mark: Basically, there are 2 options open to
business owners with less than 100 employees:
a small group plan or sole proprietor.
A company with more than 100 employees can qualify for a large group
plan.
1) Small
Group Plan (coverage for 2-49 people)
The advantage is that you can obtain better rates than with
individual health coverage (or sole proprietor rates). What you need to qualify for a group plan is
to be in a business relationship (either a partnership has been formed, or you
have employees you pay via W2’s). You
can offer coverage, or not, to your employees.
You will be able to pick from a portfolio of different health insurance
companies/costs via a broker, who can educate you on your options. The business relationship has to be
substantiated – and a “true arms length relationship” in case of an audit.
2) Sole Proprietor (coverage for
1)
A business owner can obtain sole
proprietor rates, which are generally not as favorable as group rates – but
more favorable than individual health coverage rates. You can put your family on as dependents,
but it will cost more per month than it would under small group health plan
rates. So, if you have an employee
besides yourself, it is clearly favorable to pursue small group options. There are specific options available to the
sole proprietor specific to each state, which means that there are not as many
options as under a qualified small group plan.
But as a broker, we will find you what we can!
Jeff: What kind of documentation is required for
you as a broker to obtain rate quotes for a small group plan?
Mark: We would need to have
the following:
- Breakdown of the number of
singles, employee/children, employee/spouse and number of families.
- The zip code of where the
business resides
- A copy of the existing
plan design (if plan already exists)
Kathryn: Would a couple working together qualify for a
small group plan?
Mark: It depends on the details of that
couple. If both people are working for XYZ company and both truly work for the entity, then regardless of their
job descriptions they can get a small group plan. The wife may be the business owner and hire
other family members, paid via a W2.
However, if for example, a wife owns a business and the husband
keeps the day job – the wife could be a dependent under the husband’s
employer’s plan, but would probably only qualify to get her own Sole Proprietor
plan herself– not a group plan.
Jeff: Does the income level matter? Can someone put someone “on the payroll” for
a nominal wage and qualify for small group health insurance rates?
Mark: If the owner requires
an employee to work full time then payroll records must reflect wages that
correlate to full time hours. Most small
businesses pay their employees through a payroll service (such as Compu-Pay)
for a nominal monthly fee, to have the documentation at the ready in case of a
potential audit. It’s illegal to be a
legitimate company without payroll records if a claim is filed. So in the prior example, a wife would have to
legitimately hire the husband.
Jeff: If a small business owner decides to obtain
health insurance for themselves (and/or their family), do they have to offer
the same plan to their employees?
Mark: The owner can choose to have a different
coverage plan for “upper management” versus what they offer to employees. And the business owner can determine if they
want the employee to pay the health insurance premium, or if the employer wants
to pay the premium for the employee as an incentive to attract and retain
employees.
Kathryn: When someone obtains health insurance, how long
are rates locked in for?
Mark: Typically it is 12 months from the date of
coverage. We recommend that business
owners be in contact with their broker so there isn’t a scramble regarding
paperwork to make changes to a health plan.
A small business might not have human resources or a CFO and the
business owner is typically the person doing their own job as well as
researching their health insurance options and processing paperwork.
Communication with their broker goes a long way. We start to talk to our clients as soon as we
know if plan options are being eliminated (by the health insurance company), to
show new options in the market. When we
know projected rates, we start to talk to business owners. What was competitive last year (regarding
utilization, and/or laws) may not be the same now. We need to talk to you, to avoid doing
everything last minute.
Plans can be initiated all year round – it doesn’t have to
be on a calendar year basis. Most
companies make changes to their health plan 30 days prior. There is usually an open enrollment period
when the paperwork needs to be completed.
Kathryn: It always seems like it’s a scramble, even
for large companies to have their employees hurry up and complete
paperwork!
Mark: Yes, but it doesn’t have to be. Every carrier requires different paperwork,
and it’s best not to do it in haste. Health insurance can be obtained overnight via email if it’s
required. Cards are typically mailed
within the first month, but you can obtain verification of coverage via email
to take to doctors in the interim.
Kathryn: Thanks Mark for
all the information! And if someone
wanted to contact you as a broker?
Mark: My web address is www.schwartzandassoc.com and our
office number is (212) 400-0011.
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