Conventional wisdom in recent years has held that launching a small business today faces an almost insurmountable hurdle: obtaining health coverage for the principal(s). While conventional wisdom is often pooh-poohed, there's some truth to this bit of it. Premiums have skyrocketed as coverage has become less robust. However, if you are truly determined to go your own way, you shouldn't let health insurance rule your destiny. And, this may be a propitious time for new business ventures with health care reform measures set to kick in Jan. 1, 2014.
This option has been available for some time and is often overlooked…
First, let's look at some of the currently available options to obtaining health coverage for yourself as you start your business. Remember, all health plan premiums vary according to your age, your state of health, the deductible you choose, and how broad you want your coverage to be. The options vary state-to-state as well, so make sure you see what type of coverage is available in your state before you choose a plan.
Set up a small business group plan.
This option has been available for some time and is often overlooked as a way to manage health coverage while you start your business. You'll need at least two people to qualify; family members who work with you (or might at some point) will fill the bill. You could also strike a bargain with another self-employed person seeking coverage. One benefit of the group plan is that you'll have one in place that you can expand over time, and if you decide to add employees, it becomes an instant recruiting tool for you.
Keep existing coverage as long as you can.
If you're covered by COBRA from a previous job, you can opt to continue that coverage for 18 months. It'll be more expensive than it was when your employer was paying part of it, but it provides a cushion as you start your business until you identify a better option. If you have a pre-existing condition that makes conventional coverage impossibly expensive or unobtainable, COBRA may carry you through until health care reform fully kicks in in 2014.
Spouse's health coverage.
If you're married to someone covered by a company health plan, add yourself to that coverage. Again, it will be expensive, but it is another way to solve the health insurance problem.
Pay for coverage through an individual health plan.
If you have no pre-existing conditions and you are in general good health, there are affordable health coverage options available. Consult an insurance broker and choose the plan that best meets your startup needs.
And now we come to what may be the most strategic way to get coverage while hanging out your shingle:
our friends at eHealthInsurance.
Wait until January 1, 2014 to launch your business.
Of course you're fired up to break out on your own. But the details of the rollout of health care reform as of January 1, 2014 suggest that anyone who can wait until then to kick off a new business will be well served to do so.
That doesn't mean you can't start creating your business now, and even get it off the ground. Just don't quit your day job yet. Hang on to your company subsidized health care benefits, and bank the money you'll save for other business related expenses. The benefits of waiting for small businesses are considerable.
For instance, if you purchase health coverage through your state exchange program, you get a tax credit of up to 50% of your contribution toward an employee’s health insurance premium if you contribute at least 50% of the total premium cost. Thus, if you create a small group plan, these credits, available for two years, can be quite meaningful. Businesses with ten or fewer employees and wages of less than $25,000 get the full credit. These credits do phase out as your company grows, but for a start-up, they're advantageous.
If you have a pre-existing condition, you cannot be denied coverage after Jan. 1, 2014. Other options for individuals and small businesses should emerge as well as insurers compete under the new system. While no one can say for certain how dramatically the health insurance landscape will shift next year, clearly it will be a better environment for the entrepreneur than we've experienced in at least a decade.