How much is health insurance for startups?

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New York Health Insurance Rates

One of the biggest challenges for startups is finding a solution for employee health insurance – without bankrupting the company.  In order to grow your company you are going to have to be able to attract and retain the best talent.  Sure, a nice salary will go a long way, but everyone is going to want to know that they will have a good medical insurance plan in place if they work for you.  This is especially true if they have a family (including children – who spend a lot of time in doctor’s offices), or they are coming from a company (or are being recruited by other companies) where they had extensive benefits.

Why you might as well start smoking

The first thing you need to understand is that, as a startup, you will have fewer than 50 employees.  This means that you will be subject to NY State’s community rating guidelines…..these dictate that any company with fewer than 50 employees can purchase medical insurance and the rates cannot deviate from one employer to another.  So your firm of 3 healthy people in their mid-20’s that never go to the doctor and never have medical claims will get the same rate as the three 60 year old chain smoking, former coal miners running an asbestos removal company next door.  So for obvious reasons the insurance companies are not inclined to provide their best rates to employers with less than 50 employees.

(once you reach 50 employees your company stands on its own performance – insurers will negotiate their rates, and as a “healthy company” you will have lower rates….lower than the community rates)

One solution is a PEO, where you can get broad employee benefits packages as part of their large group of employees.  The downside is that you have to buy everything else the PEO is selling plus pay their administrative fees.  The alternative:  Do it yourself.

The million dollar question – answered

That brings us back to the original question:  How much does health insurance cost for a startup?  The rates vary by insurer and change quarterly.  Therer are also variables that will affect your bottom line expense (employee contribution, increasing deductibles and copays, etc).  If you are interested in the current rates for a NYC company follow the link above.


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