November 1 was the first day of open enrollment for health insurance. If you’re a small business owner, it can be overwhelming to determine what kind of group coverage will keep you in the good graces of government mandates, plus balance that with your desire to help your employees as much as possible without breaking the bank. Or, if you’re a solopreneur, you might only be aware of individual plans.
I’ll be the first to admit that I don’t know everything there is to know about health insurance, but I’ve done enough research over the years to know a fair amount. So I was surprised to hear the term “participation holiday” from an insurance broker I spoke with.
The United States government requires a 50% employee participation rate in order to qualify for group coverage. But during a special period each year (my understanding is that it’s from November 15 – December 15, one month during the open enrollment period), the Affordable Care Act (aka Obamacare) allows for a participation holiday. This participation holiday waives the minimum participation requirement. So, according to this broker, a business with 10 employees can qualify for group rates even though only one employee signs up. Also according to this broker, a solopreneur can get group insurance this way.
Here’s a blog that explains a bit more about the participation holiday.
In addition to the participation holiday, you might also ask questions about HSA’s and tax implications.
For the past couple of years, my CPA has encouraged me to sign up for and utilize a Health Savings Account (HSA). The problem is, a health insurance plan must be deemed HSA eligible in order to utilize it, and when I’ve searched the Marketplace (aka Obamacare shopping cart), none of the plans I’ve been offered are HSA eligible. When my CPA realized I’ve only been shopping through Healthcare.gov, he recommended I reach out to a health insurance broker who could get me the quotes I wanted.
Here’s an article from Kiplinger about the benefits of an HSA account.
If you’re a solopreneur, you might have several 1099 contractors working for you. A possible consideration is to reclassify them as W2 employees so that you qualify for group health insurance if the participation holiday doesn’t allow you to get a group policy for one. On the surface, that seems like a no-brainer switch, but here are a few questions you’ll need to get answers to:
Do the contractors want to become employees? This changes their legal and tax relationship with you. They’ll no longer have the right to complete work on their terms or during their selected work hours. They also will have less take-home pay.
How much will your tax expenses increase? You don’t pay any taxes to the government when you issue payment to contractors, but you will need to withhold taxes if they become employees.
How much will your payroll expenses increase? You might have paid your CPA a small fee to handle the 1099s they sent to your contractors at the end of January each year. How much will your accountant charge to handle your monthly payroll and monitor your payroll tax payments to state and federal agencies?
How much of your employees’ health insurance expenses will you pay for? You are not required to pay for any of it. But will you? If so, how much of it?
Will your estimated expenses be more or less than the savings group health insurance premiums will bring you? If you want to do this because you care deeply about your contractors’ well-being and want them to have access to possibly more affordable healthcare options, this answer might not matter. But if your company’s purse strings are very tight, and you’re looking for a way to save money, you need to scrutinize this answer.
For additional information about navigating the open enrollment period, here’s a post I wrote in 2020 about considerations for health insurance.
I’m all about productivity, so I’d like this process to be as efficient as possible. While I’m a proponent of delegating and letting someone else do all of the work, I also understand that it’s important for me to know enough to determine the questions that need to be asked. Therefore, I’ve decided to work with a broker who can quickly research and narrow down choices for me based on my specific needs, but I’ll be sure to continue educating myself to make sure I do choose the best option for myself and my business at this moment in time.
By the time I finish my research for this period and make my decision, it might be too late to get the information to you, so I’ve decided to share what I can along the way to give you ideas to think about in your research process. Good luck to you!
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