Group health insurance for a small business

A group health planBenefitsGroup health planA health plan an employer maintains for its employees — insured or self-insured. Subject to ERISA for a private employer, and to COBRA once the employer has 20 or more employees is a promise the employer makes to its employees; an insurance policy is one way to pay for it. How it is paid for — its funding — decides who carries the claims risk and whose rules apply. There are three ways a startup meets.

A fully insured planBenefitsFully insured planA group health plan funded by an insurance policy: the employer pays a fixed premium and the carrier bears the claims risk. Regulated by the state's insurance law through the carrier buys a policy: the employer pays a premium and the carrier pays the claims. A self-insured planBenefitsSelf-insured planA group health plan that pays claims out of the employer's own funds, usually through a third-party administrator and with stop-loss insurance. Generally not subject to state health insurance laws, though the ACA's group market reforms still apply pays claims from the employer's own money, usually through a third-party administrator, and buys stop-loss insuranceBenefitsStop-loss insuranceA policy that reimburses a self-insured employer when claims pass a threshold — per person (specific) or in total (aggregate). It insures the employer, not the employees, and is generally not health insurance under state law against a bad year. A level-funded planBenefitsLevel-funded planA self-funded plan sold to small employers as a fixed monthly payment covering expected claims, administration and stop-loss insurance with a low attachment point. Legally a self-insured plan, whatever the invoice looks like is self-insured in law but sold to look like a premium. Self-insured plans are generally outside state health insurance law — though the ACA's federal market reforms still apply to them.

Most startups buy fully insured coverage in the small-group market, through a broker, a carrier directly, or the SHOPBenefitsSmall Business Health Options ProgramThe ACA marketplace for small-group coverage — generally employers with 1 to 50 full-time equivalents (up to 100 in some states), at least one employee who is not an owner or family member, and 70% of those offered enrolling. The only route to the small business health care tax credit Marketplace. SHOP is for employers with 1 to 50 FTEs (up to 100 in some states), at least one employee who is not an owner, spouse or family member of an owner, and coverage offered to every full-time employee. SHOP requires that at least 70% of the employees offered coverage enroll (some states set a different rate) — a rule that does not apply to enrollments between November 15 and December 15 each year.