
Ask HN: How do you offer your startup employees 100% health insurance? - adntigger710
Hey all!<p>Coming from one startup to another and trying to assist with growth and recruiting. We really would like to offer 100% paid health insurance (100% employee, and possibly couple&#x2F;family, but likely a percentage of couple&#x2F;family.) When speaking to brokers&#x2F;PEO&#x27;s I&#x27;ve been advised that if we offer 100% it becomes a non-contributory plan, and ALL employees must enroll. We were planning on offering a salary stipend if they didn&#x27;t need it, but seems with 100% that&#x27;s not possible. Has anyone run into this? How do you offer your employees 100% insurance without redundantly paying for it for those who don&#x27;t actually need it (i.e. on spouses&#x27; plan, etc.) Thanks so much!
======
tyingq
Be careful. Insurance premiums have been rising at a crazy rate. I own my own
company, so I see the all-in cost. It's a "gold plan", so at the high end, but
the cost for one employee plus their family has risen from $1200/month to
$2200/month over a span of 6 years. Not kidding...$2200/month. I was well into
my mid 20's before I even grossed $2200/month, total.

You might be better off stating the fixed amount you will contribute for each
"class" (employee only, employee + spouse, employee + family). That will give
you some leeway in the future if costs get out of control.

~~~
rdtsc
In a company of about 40 we saw the same. Costs went up when ACA was expected
to pass and has been going up pretty rapidly since. Insurance rep mentioned
ACA legislation as the reason. Whether true or not I haven't verified.

~~~
tptacek
This predates the ACA, for what it's worth: in a third of the 10 years prior
to ACA, California's small group market saw double-digit increases.

~~~
kobeya
Yes, but in that time "double-digit" meant 1X%. Now it has been 3X% growth
year-over-year.

~~~
tptacek
Based on a bit of casual research, my sense is that you are drastically
overstating the post-ACA cost growth, and significantly understating the pre-
ACA growth. And, putting that aside, when looking at pre-ACA coverage you have
to factor in actuarial value (insurers could quietly reduce the value of their
insurance while holding premiums constant; part of the post-ACA cost increase
is that there's now a floor on actuarial value, so premiums most more closely
reflect value).

~~~
tyingq
It's difficult to get good statistics, because the cost is rising primarily
for those that don't get subsidies via the ACA. When you mix costs to those
that get subsidies with costs for those that don't, you get mud. Similarly,
they will show "employer costs" over time, when they know well that some
employers are passing increased costs down to employees.

In short, it's the usual situation for statistics. You can show pretty much
any story you want. My story of $1200/month to $2200/month (over 6 years) is
real, with apples-for-apples coverage. Of course, it's just one data point.

~~~
tptacek
Insurance in the small group market isn't subsidized; it's employer-provided.
So subsidies can't be confounding those statistics, can they?†

I'm not disputing that you experienced a barely-tenable increase in insurance
premiums since 2011. But if your premiums had been increasing 30% YOY since
Obamacare went into effect, you'd be paying something closer to $5000/mo, not
$2200/mo. What you experienced instead looks closer to 13% YOY.

The distinction is important because:

* The California small-group market, which like most group markets was guaranteed-issue prior to ACA, was _already experiencing increases at that scale_ before ACA.

* Not only was that happening, but further cost increases were easily hidden by terms and conditions that reduced actuarial value for policies at the same premium. The ACA prohibits that practice; if the broader narrative about ACA was true, you'd expect _even steeper price increases_ because insurers have fewer ways of hiding them. But we don't see that.

So to me, you're telling a story about broad dysfunction in the health care
marketplace that is orthogonal to ACA. I find that narrative very easy to
believe! Either way, though: I might be wrong (and would love to hear about it
if I am), but these issues aren't unknowable.

† _This is one of several reasons you know you 're in trouble when you read an
analysis of the ACA that insists on comparing the pre-ACA and post-ACA
individual markets, or suggests that comparisons based on the small group
market is somehow shenanigans: in addition to being the insurance market most
of us startup founders actually participate in, the small group market is the
closest we have to an apples/apples comparison: an unsubsidized guaranteed-
issue marketplace for small numbers of people in both eras._

~~~
tyingq
That's the thing though... I don't have access to statistics that are solely
for small group coverage. I don't happen to be in the California market
either.

Edit: I'm in the Texas market. And, if you're looking up statistics, be sure
to watch out for:

\- Only the employer's costs being shown, versus also showing what's passed
down to employees. We pay 100% of the premium. It's common for employers to
pay around 40-60%, and of course, shift that percentage as costs go
up...hiding actual cost hikes in the stats.

\- Mixing in employers that get the signficant ACA tax break if the average
annual wages are below $50,000 per FTE. Not common in small developer centric
companies.

\- Keeping in mind the average could look flatter than it actually is, as some
companies raise deductibles or drop the percent of in/out patient covered
specifically to keep costs flat.

In short, it's very hard to see the actual cost for a specific policy over
time in any kind of large scale.

~~~
tptacek
Ok, let's find out. What state are you in?

\---

The Texas small group marketplace saw double-digit increases in 36% of the 10
years prior to ACA (and a whopping 55% if your firm had between 25-99
employees) --- higher than that of California.

Of the statistical concerns you expressed:

1\. The percentage of premiums passed to employers is orthogonal to the
comparison we're making and so doesn't impact the statistics.

2\. Tax breaks on employers are also orthogonal to this comparison, but I'll
add that they'd work against the overall argument about ACA driving costs,
because those tax breaks are a feature of the ACA, not of the pre-ACA regime.

3\. Deductibles and network sizes would affect statistics, and what we're
looking at here is an overall average. So yes, keep that in mind.

~~~
tyingq
The percentage isn't orthoganol when the employer can raise or lower
it...assuming the stats show employer cost only. Which some stats I have seen
do.

Edit: some of the available statistics are employers reporting solely their
costs, not the part of the premium they pass down. You haven't specified a
source, so I have no idea where your numbers are coming from.

~~~
tptacek
I'm not following. I'm not looking at consumer costs, but rather average total
premiums. This includes both the employer and employee's costs; it's based on
the raw cost of the plan.

I'm not sure how anyone could sanely collect statistics on employee cost for
health insurance, since every company handles that differently. But that
doesn't matter for this discussion.

------
fuhrysteve
One way to do this is to setup an HRA (Health Reimbursement Arrangement). The
most common way to do this is to buy cheap high-deductible insurance plans,
then setup a tax-advantaged account with which you can reimburse employees for
eligible medical expenses out of (in your case, you could choose to pay out
100% of expenses before they hit the insurance deductible). There are a lot of
different ways to do this, but the way to set it up is to contact a third
party administrator to do the administration for you (depending on the size of
your company it's usually somewhere in the range of $5-$15 / employee / month
to manage the administration). I believe there are significant tax advantages
to this approach as well, but I'm less familiar with that area.

If you PM me your general location, I can probably give you a few companies to
contact in your area who do this sort of arrangement.

------
inopinatus
Access to a free/dirt-cheap universal healthcare service is one of the
relatively few upsides of launching a company in a country other than the US.
Or to phrase that as a somewhat flippant answer to the question, "we did it by
being in Australia".

~~~
joshuaheard
You pay higher taxes in Australia which probably offsets the cost of the
"free" health insurance you receive.

~~~
JonoBB
Isn't the cost of healthcare (whoever ends up paying for it, whether it's tax,
national insurance, medical aid, self pay) is cheaper in any country compared
to the US?

~~~
toomuchtodo
Yes. Americans pay the most of any first world country, with worse outcomes.
[1] [2] [3]

[1]
[http://www.slate.com/articles/health_and_science/new_scienti...](http://www.slate.com/articles/health_and_science/new_scientist/2013/07/health_in_the_u_s_and_other_rich_countries_we_pay_more_in_health_care_but.html)

[2] [http://www.pbs.org/newshour/rundown/health-costs-how-the-
us-...](http://www.pbs.org/newshour/rundown/health-costs-how-the-us-compares-
with-other-countries/)

[3] [http://www.cnbc.com/2015/10/08/us-health-care-spending-is-
hi...](http://www.cnbc.com/2015/10/08/us-health-care-spending-is-high-results-
arenot-so-good.html)

------
mneil
I receive 99% coverage and wife/kids get 50%. At 99% the cost to me is so
minimal it doesn't matter.

------
lisper
Pay 99%, or whatever the maximum is. Then if you really want to, make up the
difference with bonuses.

However: there isn't much of a difference between giving people the option of
having the company pay 100% and taking the cash, and paying for the coverage
themselves. The only real advantage is that the insurance premium is not
subject to payroll taxes (but it still counts as taxable income so they still
have to pay income tax on it -- EDIT: this turns out to be wrong. See child
comments.)

~~~
URSpider94
"Health insurance is not taxable income, even if your employer pays for it"

Source: [http://finance.zacks.com/health-insurance-benefits-
considere...](http://finance.zacks.com/health-insurance-benefits-considered-
income-irs-7128.html)

~~~
lisper
You're right. I was looking at the IRS site:

[https://www.irs.gov/businesses/small-businesses-self-
employe...](https://www.irs.gov/businesses/small-businesses-self-
employed/employee-benefits)

but I didn't read it carefully enough. Health insurance is excluded. Sorry.

~~~
lotsofpulp
The stupid (or corrupt?) thing is that if a company (especially smaller ones)
who want to avoid that administrative overhead of dealing with health
insurance nonsense can't simply reimburse the employees some amount for their
health insurance without it being subject to tax.

This gives larger employers an advantage over smaller ones, and quite frankly
keeps up this stupid tradition of having your employer tied to your health
care. The right way to conduct this healthcare subsidy experiment we're doing
in the US is to have everyone purchase insurance through healthcare.gov and
eliminate the pre tax benefits period so as to level the playing field and
expose the costs more clearly.

Sources:

[https://www.irs.gov/affordable-care-act/employer-health-
care...](https://www.irs.gov/affordable-care-act/employer-health-care-
arrangements)

[https://www.irs.gov/pub/irs-drop/n-13-54.pdf](https://www.irs.gov/pub/irs-
drop/n-13-54.pdf)

------
keithnz
I wasn't really aware this was an issue, but I guess in the US it is, seems
like countries with free healthcare ( like where I am, New Zealand ) should
have a Startup Visa program where people can come here and do a startup.

~~~
toomanybeersies
We do have an entrepreneur visa [0]. We also have the global impact visa [1],
which is brand new.

[0]: [https://www.newzealandnow.govt.nz/move-to-nz/new-zealand-
vis...](https://www.newzealandnow.govt.nz/move-to-nz/new-zealand-visa/visas-
to-invest/entrepreneur-visa)

[1]: [https://www.immigration.govt.nz/new-zealand-
visas/options/st...](https://www.immigration.govt.nz/new-zealand-
visas/options/start-a-business-or-invest/i-want-to-invest-or-do-business-in-
nz/the-global-impact-visa)

~~~
keithnz
the EV is a bit heavyweight for a startup, but that GIV looks promising!

------
techsupporter
Ask your proposed insurer about exemptions for demonstrating proof of primary
insurance from another source. Most often, the 100% rule applies to "100% of
participants _eligible to receive coverage_ " and already receiving coverage
from another source--like Medicare or an employer plan from a spouse--makes
someone "ineligible."

(FWIW, the 100% rule is to avoid adverse selection where the employee will not
sign up until becoming ill, so the plan receives no premiums from the
employer. I've also heard that some insurers do it to avoid potential
liability if a person _does_ try to make a claim on the grounds that no
reasonable individual would intentionally decline "free" insurance from his or
her employer.)

------
chrisgoman
We use Trinet (a PEO) and you can have different "classes" of plans that have
different trigger points. For example, when you qualify (how many days later),
how much % is contribution by the company vs the person and their dependents,
etc.

------
rvpolyak
I would be very cautious as once you offer 100% there is no going back. It may
seem like a small cost when you have a small number of employees but as you
grow the costs go up quickly and largely.

------
uiri
A high deductible health plan is usually optimal for the unattached 20s crowd
that startups tend to attract. This caps an employee's annual health
expenditure to the amount of the deductible. Employer contributions to an HSA
will further lower their health care costs.

That is likely the most cost effective way to offer full health insurance. It
is also competitive with what larger companies tend to offer their employees
although larger companies tend to also offer an HMO option too.

------
cowkingdeluxe
Normal plan + reasonably allotted medical debit card to cover medical expenses
is how some companies do it.

------
yousifa
Find a broker that will help with your problem. We provide 100% coverage and
as long as the employee has a waiver, we don't pay for them. A waiver could be
spouse, their own insurance or parents insurance.

------
liveoneggs
best small company insurance I had was when we were using ADP for everything
(TotalSource, maybe?). I think my background checks and things even say "ADP"
even though I was working for a regular small company.

We had regular big-company style plans (80% coinsurance and opt-in 100%
coinsurance) with very reasonable rates and good coverge compared to what
we've had after going self-insured.

I think they took a cut of everyone's pay.

------
fdik
Good that we're a startup with offices in Luxmenbourg, Switzerland and Spain.

In Europe it is unthinkable not to offer 100% health insurance.

------
bluedino
Charge some token amount like $1

------
supercoder
Move them to Australia

~~~
sien
Or Canada. Or the UK. Or Ireland. Or Germany. Or .....

~~~
vog
I don't understand why this comment was downvoted. Australia is by far not the
only choice here. From what I've heard so far, the situation about health
insurance in the US is so bad that it is not hard to find countries were the
situation is hugely better.

------
robbiep
The fasecious answer is to startup in a (edit)country with universal
healthcare

Edit: before the downgotes get too wild, it is actually a valid solution that
shouldn't be dismissed off the cuff. Do the math.

~~~
pjc50
An advantage of the French visa programme currently also being discussed on
HN.

