24 Feb Health insurance for a new business

Q. I plan to start a new business and I would have two full-time employees. One is my wife, the other is a friend. I will also have part-timers. We will need health insurance. Do I have to arrange insurance for my friend or is he on his own? And how can I pick a plan. We have three kids.
— Needing coverage

A. Congratulations on your decision to start a business.

Starting a business can be very rewarding and can also bring a new world of things you probably never had to deal with, said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

That includes sponsoring a medical insurance plan for the business being one.

New Jersey has certain rules that need to be coordinated with federal rules for Obamacare, Gaelick said.

“Under the rules, you may not have a group plan if only you and your wife are the only ones covered even though she’s a full-time employee,” Gaelick said. “Spouse/spouse groups are not recognized.”

But, he said, your company has another full-time employee so you could be okay. You need all your W-2 employees to add up to 30 hours under the federal rules, which you clearly do, he said.

“Your friend would then need to work a minimum of 25 hours per week to be eligible for benefits,” Gaelick said. “Anyone working under 25 hours per week would be considered part-time and ineligible, so it seems as though you can have a plan.”

Your question is: “Do I have to arrange insurance for my friend or is he on his own?”

Gaelick said if you want group-sponsored coverage, your friend has to be on your plan. That doesn’t necessarily mean you need to pay for it, but at least one non-owner, non-spouse W-2 employee must be enrolled.

“That means you need to make their participation a bit more attractive by sharing in the cost,” Gaelick said. “That would be the only way to establish a plan.”

In the event your friend is not interested or is covered elsewhere and happy with his coverage, your business would not qualify for group coverage and your family would default to the individual market, which has fewer choices and local networks only.

“The group market has more carriers, more plan choices and the option to have a national network,” Gaelick said. “There are also plans that include out-of-network benefits, unlike the individual market, which does not. Clearly the group market is better in most cases.”

Picking a plan is nowhere near as important as picking the right broker, Gaelick said.

“The rules are mind numbing and constantly changing,” he said. “Getting the proper advice and guidance is critical in keeping you compliant with no surprises.”

Be sure to do research on brokers, and then the broker can help you pick a carrier, a plan or plans and do all the necessary paperwork to enroll your company.

“Getting a newly-established company covered in the group market is a bit more challenging than working with an established company,” he said. “Wage reports are required with submission and again, a broker needs to know their stuff for a successful enrollment.”

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This post was first published in February 2017.