While some venture capitalists require their portfolio founders to get life insurance and many startups opt for disaster insurance (server loses all the data, hackers attack, etc.), startups, founders and freelancers often skimp on health insurance. “It’s called DontGetSickOrDie.ly,” tweeted* a local founder after Songsicle founder Frank Denbow posed the question on Twitter (asking for a friend, he said, although he also needs it himself, he told Betabeat).
In part the dearth of health insurance is due to the fact that “lean startup”-leaning founders and freelancers don’t have funding to pay their salaries, let alone benefits (and they’re all 25-year-olds on the 4 Hour Body diet anyway, right?**). But it’s also because the process is complicated and no really great options exist. Sounds like a market ripe for disruption! But in the meantime, Betabeat did a bit of research.
Charles Smith of Ex.fm wrote in to point us to his startup’s provider, Rollins Insurance’s InnovationGuard program, which provides a variety of products catering to startups in New York including Gilt Groupe, Etsy, Business Insider, Savored and others. We spoke to Lisa Bocchino of the employee benefits division at the Rollins Agency, based in Westchester, to ask what options founders and freelancers have.
The first thing she tries to do is hook people together into a group, she said. New York state requires at least two eligible people—they don’t necessarily have to be employees on payroll—but as long as a company has two eligible candidates, the broker can establish a “group” status that gives access to discounts from carriers like Empire or Oxford. You can do it as a sole proprietor, she said, but it’s “very costly.”
The plan Ms. Bocchino normally sells is $441 per person for month, she said, and she’s done ten in the last six months or so. Although it’s tempting for startups to put off the expense, health insurance is increasingly necessary for recruiting. “I think most people find that it’s definitely necessary to have in place to recruit good people,” she said.
There are plenty of options, though, she said, from a basic HMO with a $30 copay to a high deductible plan. Employers can also give their employees options for how much to pay and which plan to buy, although she said the trend in New York seems to be for startups to cover the bulk of the benefit cost.
For founders who are starting their own companies in New York, what are their basic options for health insurance? You mentioned COBRA, join an association, try to get a few people on a plan.
This varies so greatly—employers who have payroll can establish their own group plans or join a PEO. A sole proprietor can find a sole proprietor plan or search for those associations that focus on certain professions such as the arts.
What is the first step in getting health insurance as a founder?
After establishing what your budget is for employee benefits, reaching out to someone to help you through the process “a broker or agent” is the next step.
An employer can go directly to a carrier however they will only give you that carriers rates and that carriers’ plans. A broker is going to be independent of any loyalty to a carrier and should be focused on the employer.
Who are some of the insurance agents in NYC who deal with startups?
Any insurance broker that writes health insurance would be able to help a startup. As the industry changes, however, more agents are declining to write small business plans because of the limited options and carriers are paying less and less commissions. Word-of-mouth is definitely the best way to find an agent that can help.
What if you can’t get more than one person on a plan, join an association and for whatever reason don’t do COBRA—what options are you looking at then?
Anyone can go directly to the insurance companies, Oxford, Aetna, Emblem and ask for a individual health contract—NY carriers are not allowed to ask medical questions or refuse someone coverage—this option is very costly however. NY also provides something called Healthy NY which based on certain criteria, income, residence and employment someone may qualify for this option. There are also a number of “discount cards” that someone can obtain—these are not considered insurance but would supply some relief from the cost of doctors visits and prescriptions. A startup however with more than one person involved even if only one person enrolls in the coverage could establish a group plan. Sole Proprietors and 1099 persons will be limited in their options but they too can likely obtain a plan.
Did health care reform affect founders’ situations at all?
I think the biggest thing health care reform did was really bring the subject of health care into the light. So many business owners we talk to never look at the benefits they do have and if they are overpaying for items that aren’t needed.
Health care reform has also allowed approx 2.3 million young adults (under the age of 26) to be covered as dependents.
What plans do you usually recommend?
The most important part of recommending any kind of employee benefits plan is to get an idea of budget, usage of plan, location of employees and access to network. A company with a generally young population may not need the same benefits that an older population and companies with employees in other states may need a different plan then companies that have only NY employees.
Thankfully NY has always been one of the few states that does not reject or surcharge people for health conditions.
So, New York Startupland, do you have health insurance? What do you do? Tell us in the comments.
*Paraphrased, as the tweet was deleted (de-tweeted?)
CORRECTION: This post originally implied that Foursquare gets health insurance from Rollins; in fact, Foursquare gets corporate insurance from Rollins and health insurance from Koss Benefits, based in Maryland.