Health Insurance Basics For LLC Owners
Health insurance for your small business is an important topic, but it often stirs up confusion. Despite the puzzling insurance jargon and complex tax return brain twisters, getting health insurance is doable. This guide will help you understand the topic and feel confident in making a healthcare decision for your business.
To add to an already confusing subject, while this information is targeted to owners of a Limited Liability Company, the options are different depending on how the entity is taxed (sole proprietorship, partnership, s corporation, or c corporation).
Health Insurance Options for LLC Owners
Small business owners have several options when it comes to health insurance. What is available to you depends on how your business is structured. The first distinction is whether you have employees. And secondly, if you have employees, do you want to offer health insurance coverage or an alternative option?
Sole proprietorships (or Limited Liability Companies taxed as a sole proprietorship) without employees can get insurance through an individual healthcare plan. Small businesses with employees can get a group health insurance plan or offer a health reimbursement arrangement (HRA). HRAs provide tax-free reimbursements for an employee’s health-related costs and are a great alternative to a traditional (but often more expensive) health insurance plan.
Individual Health Insurance
An individual health insurance plan is available for small business owners who don’t qualify for a group health insurance plan, such as those who are self-employed. You can purchase a new policy through private insurance companies or brokers. The plans vary in coverage and deductibles, so check that the one you choose fits your healthcare needs.
In addition, through the Affordable Care Act (ACA), you can shop for affordable health insurance coverage. ACA insurance uses your expected annual income and household size to determine an affordable rate.
Group Health Insurance
Group health insurance requires a group of more than one person to qualify—and typically, the additional people need to be employees. A group health insurance plan is what many may traditionally think of when it comes to health insurance. It can include high-deductible HSA plans, PPO plans, and others.
The employer contributes to the premium costs for group health insurance plans and selects plans based on the company’s budget. Then the employees can opt into the plan and contribute to the premium, usually pre-tax.
Health Insurance Exchanges
Health insurance exchanges, or marketplaces, are a great tool to compare insurance options. Private insurance companies list their plan information on the exchange, allowing you to compare coverages and premiums.
The small business health options program (SHOP) is a common exchange for small businesses to search for plans to cover their business when they have 1 – 50 full-time employees. Also, your business may even qualify for additional tax credits through SHOP’s insurance plans. You can search SHOP options through healthcare.gov.
Choosing the Right Health Plan
Choosing the right plan for health insurance depends on the type of LLC you own and what you want to offer employees.
Here are a few questions to consider:
- Is the plan for only you or employees too? If the plan is for you, you would enroll in an individual health care plan. Otherwise, available options for your employees include a group health coverage or an HRA.
- How much do you want to pay for health insurance? For group plans, the employer typically pays at least 50% of the premium costs, which depending on your budget, may limit your options. For example, you may opt for a high deductible plan with a lower premium to save money or go with an HRA to set up a reimbursement stipend that employees can spend on health insurance.
Insurance FAQs
Health insurance is complex, but here are some answers to common questions business owners have.
How to Compare Small Business Health Insurance Plans
The best way to compare small business health insurance plans is to utilize an insurance exchange or marketplace, such as SHOP. Healthcare.gov has a lot of helpful information about small business insurance.
Another method to compare options is to get quotes from private insurance companies. Additionally, you can get quotes from an insurance broker who can help you find an ideal policy that fits your business’s needs at an affordable rate.