As an adviser / broker, one of the most common misunderstandings I hear from small business clients is that their company is “so small” or even “too small” to be able offer health insurance. Often times this assumption comes in the form of a question, “Why would my company offer health insurance? After all, it’s just me and I’ve already got a plan.”
No, your company is not too small to offer health insurance. If you are a real estate broker of even a guitar instructor (I once had a client who as a piano teacher earned under $10,000.00 a year), as long as you can show a 1099 statement from your last year’s taxes, proof of having earned income from your endeavor, you can and should run your health insurance through your business. A single person running such a business is what is considered a “group of one.” But are there advantages and is it cheaper?
100% tax write off. Yes, it may be slightly cheaper (maybe) but this isn’t the greatest advantage by far. As a “group of one” you are able to write off 100% of your monthly premiums as a business expense.
Flexibility of changing carriers / changing plans throughout the year. Jan owed a small business, worked by herself out of her house and made $59,000.00 per year. She had an “individual” or “non group” plan. Because of the rising cost of health insurance, Jan had chosen a high ($2,000.00) deductible plan because of its low monthly premium, but she was concerned that if she required a hospital stay or a visit to the emergency department she would need to meet the deductible plus a thousand dollar co-pay, a total of $3,000.00 before her plan covered anything. Beyond this, when I first met Jan, she had just signed on to the “individual” plan and was “locked in” for the next twelve months or so she thought.
I advised Jan that as a small business owner she should run the plan through her company as a “group” or more specifically, as a “group of one” and that she could do this at any time of the year without having to wait twelve months. Doing so would allow her to write 100% of her premiums off and also allow her to change carriers or plans throughout the year** as necessary.
During the course of the conversation Jan also revealed to me that she would be needing surgery. I advised Jan to let me know well in advance of the surgery and that her new status as a “group” would allow me to temporarily switch her to a different plan (zero deductible) in time for the operation. Upon my switching her to a new plan, there would be no $2,000.00 deductible plus $1,000.00 co-pay, saving her a total of $3,000.00 minus the difference in monthly premium between the old high deductible plan and the new (temporary) zero deductible plan. After the surgery was complete I would switch her back to the former high deductible plan and she would again enjoy a lower monthly premium.
**some stipulations may exits for certain carriers.
The value of using a broker. As an adviser / broker, it is my responsibility and mission to provide the best guidance available in order maximize your benefits and reduce your potential costs associated with all of your insurance needs, health, life, retirement, home and auto. Please feel free to contact me today for free consultation.