If you are just spinning up a new company and considering offering Health Insurance or Employee Benefits to the employees, there are a few things you should consider; first off, the Employee Benefits have to pass the “non-discrimination” rules. This means that it must be offered to any w-2 wage earning employee working at least 30+ hours a week. The same benefits have to be offered across the board to all. The only exception is when you have a company that have different classifications such as Management vs. Non-Management, Union vs. Non-Union, Salary vs. Hourly, etc. In these cases, the Employee Benefits can be different depending what your role is within the company. The “contribution” that an employer puts towards each employee can also differ with things like tenure within a company. As an example, an employer can contribute 50% of the premium for new employees, hired within the last year, and set the contribution at 100% of the premium for tenured employees that have been with the company more than a year. This is done frequently to entice employees to stay with the company for a longer period of time.
A very important issue with Start Ups and setting up their Health Insurance is for the business to create, and have on hand, their Employee Handbook. An Employee Handbook is crucial to making sure that the company is protected, in case there is a question about favoritism as it relates to the offering of Employee Benefits. The Employee Handbook defines and documents all of the “rules” within the company, including the Employee Benefit structure, who it’s offered to, the employer’s contribution and waiting periods for new employees. Any litigation that occurs with an employer, you can bet the Employee Handbook is the very first thing that is questioned.
Sometimes new Start up companies elect to use a PEO type arrangement for their Health Insurance and Employee Benefits. A PEO is a Professional Employer Organization. A PEO is usually a large company that “hires” people and then “leases” them out to various companies for a fee. The PEO handles most of the HR function that would normally be the responsibility of someone within the company. This alleviates the company from having a true HR department, doing payroll, etc. The PEO handles all of that. The “downside” to a PEO is that it is a very expensive way to go and the employees do not really belong to the company, it’s kind of a control thing. The upside is that it frees up the company to focus on doing what they do best.
Health Insurance and Employee Benefits for small Start Ups is not as expensive as you might think. A typical Health Insurance plan for someone in their 20’s or 30’s starts at about $200 a month, with the “minimum contribution” for the employer to pay about $100 a month per employee. Dental plans are about $65 a month….the employer can either contribute to that, or chose not to. Vision plans are about $10 a month. Health Insurance for a business is based on the employees age, where they live, and if they have any dependents. Pre-existing conditions are not an issue because the Group coverage is done on a “guarantee issue” basis, per State law.