If you’re a small business owner, searching for insurance policies for small business can be a difficult task. Traditional healthcare insurance group policies work for large companies but aren’t the best fit for a small business looking for cheap business insurance online.
Insurance policies for small business
If you’re a small business owner looking for an alternative to group health insurance, you’re in the right place! There's a growing trend among small business owners to forego the traditional, one-size-fits-all employer-sponsored group plans and opt for a health reimbursement arrangement (HRA), which is the best cheap small business insurance.
Business insurance requirements by state
If you’re a small business owner you’re probably wondering – do I need business insurance if I have an LLC? When it comes to covering the business itself, small business insurance will cover the business assets since an LLC only protects your personal assets from lawsuits.
Certain types of coverage will vary depending on where you live, like business insurance requirements by state. For example, workers’ compensation is the only type of business insurance required by some state laws. Most businesses with one or more employees need to have workers comp because it is business insurance required by law.
Separate from business insurance requirements by state is health insurance requirements for small business required by federal law. The Affordable Care Act (ACA) mandates that businesses with 50 or more full-time employees offer healthcare coverage to all. The problem many small business owners find themselves in is not being able to afford group insurance plans, or that the group plans don’t fit their needs.
Does your business have employees working in more than one state?
This scenario is very common in todays workforce. Remote work was on the rise even before the pandemic, and covid firmly solidified this trend in place for the foreseeable future. Remote work has many benefits to both employees and employers. Employers benefit from the ability to pull from a larger talent pool. And with new benefits models like HRAs, employers can offer their employees benefits regardless of their location and specific business insurance requirements by state.
Instead of trying to find a group plan that works in multiple states, offer employees an Individual Coverage HRA (ICHRA) and let employees purchase plans in their local markets that best fit their needs.
An ICHRA gives employers an incredible ability to design and customize a plan that’s tailor-made for their organization.
ICHRA gives employers the flexibility to cover various types of employees (called classes) from full-time, part-time, seasonal, remote, and more. And since insurance rates vary by state, you can set your classes up by state.
Health insurance policies for small businesses
Small business health insurance costs are just one reason why many small business owners are looking for an alternative. HRAs give businesses the flexibility and freedom they need to offer healthcare coverage in a way that works for them. In fact, we think it’s the best health insurance for small business!
HRA plans are an excellent alternative to traditional health insurance policies for small business. There are many advantages to HRAs for both the employer and the employee, including:
- HRAs are competitive employee benefits offerings.
- HRAs are an effective retention strategy for employees because of the flexibility they offer for insurance coverage.
- There are no participation requirements for offering coverage.
- There are no annual premium raises with an HRA .
- HRAs reduce small business health insurance costs.
These are some advantages of HRAs for your employees:
- HRAs allow the employee to choose from multiple insurances plans.
- Employees get reimbursements for health insurance premiums and cost tax-free.
- Health insurance is portable because it’s only reimbursed by the employer, not completely paid for by the employer.
- HRAs improve employee retention and provide competitive benefits that are flexible for each of your employees.
- What is an HRA plan?
- HRA for dummies: easy explainer
- What is an HRA health plan?
- Employer health insurance 101
Connect with our team of experts to discuss why offering an HRA is worth it for your company.
Small business insurance requirements
As a business owner it can be challenging to keep up with small business insurance requirements. Some small employers (or nonprofits) may opt to not offer health coverage at all to avoid the insurance mess. But, the ACA requires that employers with 50 or more full-time employees must offer an affordable health coverage benefits option.
So if your business fits that criteria, there are small business insurance requirements for you. Fortunately, you have options! Here are your small business insurance options:
- Small group insurance (small business group health insurance)
- Self-funded plans
- Medical stipends
- Health reimbursement arrangements (HRAs)
To get the full details on each one of these options, check out our Health Insurance for Small Business blog. But if you just want a quick breakdown, here it is.
- Businesses with 50 or more full-time employees must offer affordable health coverage.
- Group plans can be rigid and don’t work well for small employers.
- HRAs offer benefits in a tax-advantaged way to both employers and employees, without the hassle of traditional group health plans, and employees get to choose the plan they want.
- Even if you have fewer than 50 employees, there are HRA options that fit your small business and can be a huge advantage when it comes to talent recruitment.
Key takeaway – you don’t have to get stuck with the group insurance plans. Opt for an HRA – an excellent alternative to group insurance that fits the modern workforce.
Small business insurance for LLC
If you’re a small business owner there are a few ways to get small business insurance for LLC and some things to consider.
You may be eligible to purchase small business health insurance for LLC for yourself, depending on how you set up your LLC tax structure.
If you have no employees (other than yourself), you usually can’t get small business health insurance or a group plan through your LLC, but you can still get individual health insurance.
If you get an individual health insurance plan, you can qualify for a single person HRA. This is great news!
How does a self-employed person or small business LLC qualify for an HRA?
It depends on how the plan and business are set up. In order for a business owner to participate in an HRA, they must be considered an employee of the business. Here’s a breakdown of business structures and what that means for your small business health insurance for LLC and HRA qualification.
- C- Corps are legal entities separate from the owners. Under a C-corporation the business owner and dependents can utilize an HRA!
- S- Corps prevent businesses from being taxed by passing any profits and losses through shareholders personal income tax returns. Because of this set-up an S-Corp owner that owns more than 2% of the company is considered self-employed and not an employee. The bad news? Since S-Corp owners are not employees, they typically cannot participate in an HRA. The good news? Self-Employed individuals can already deduct some health insurance expenses without an HRA.
- Partnerships also are not subject to income tax. Partners are directly taxed, making them self-employed and not eligible for participation. The Loophole: if the partner’s spouse is a W-2 employee (and not a partner spouse) then the owner can participate in the HRA as a dependent of the spouse.
- Sole-Proprietorships are unincorporated businesses owned and operated by one individual with no distinction between the business and owner. The owner is not an employee and will not qualify for the HRA unless their spouse is a W-2 employee, then the owner can access the HRA as a dependent of the spouse (for QSEHRA only).
- If you’re self-employed with no employees and you’re married, this post walks you through the steps you can take to participate in an HRA.
If you’ve determined you’re eligible for an HRA through one of the qualifications listed above, check out this post to learn more about the types of HRAs that could work for you.
Easy small business health insurance for LLC
When you’re ready to get started with your small business HRA, you can get setup in just one afternoon. Talk with the knowledgeable team at Take Command about your specific situation, and we’ll help you determine which HRA plan is best for your small business. Take Command is the seasoned HRA administrator you need in your corner to help you select the best HRA for your business and enroll all eligible employees, manage reimbursement requests, and ensure you’re checking all your legal boxes.
Susanne is a copywriter specializing in the health and wellness industry. Before starting her own business, she spent nearly a decade at a marketing agency doing all of the things – advisor, copywriter, SEO strategist, social media specialist, and project manager. That experience gives her a unique understanding of how the consumer-focused content she writes flows into each marketing piece. Susanne lives in Oklahoma City with her husband and two daughters. She loves being outdoors, exercising and reading.