Offering employee health benefits is essential for attracting and retaining top talent, especially for fast-moving startups in Texas. If the thought of navigating group health insurance gives you a headache, you're not alone. Starting a business shouldn't require you to become a health insurance expert. So, what exactly do startups do?
The unfortunate reality is that most of the shopping process falls on your shoulders. (As if you have time to dedicate over 40 hours across several weeks to manage the process and paperwork!)
But here's the good news: there are three health benefit options that work particularly well for startups: a pre-tax fixed benefit (using an ICHRA), an all-in-one PEO, or going the traditional fully-insured group health insurance route. Yes, we just threw around a lot of technical jargon and acronyms but we’ll explain more. Let's dive in and explore these options in simple terms
Why health benefits shouldn’t be overlooked by startups
Having a great idea and funding is crucial to get startups off the ground. But what propels that idea forward? Your team. Recruiting and retaining talented individuals can feel like a challenge, especially when you're up against fancy perks like chef-prepared meals and meditation pods. And for Texas cities like Dallas and Austin, where unemployment rates hover around 4%, competitive benefits become essential.
Here's the thing: health benefits matter a lot to workers. According to a 2022 US Chamber of Commerce report, health benefits surpass all other perks (like retirement plans and family care), by a big margin. That's why offering access to health insurance is vital for startups in Texas to attract and keep top-tier talent.
Top group health benefits for Texas startups
Now that it’s clear that offering access to health insurance is important to your current and future team, which option would be the best fit?
For Texas startups with under 10 employees: Pre-tax, fixed health benefit (also known as ICHRA)
A pre-tax fixed health benefit is a straightforward approach to health benefits. The technical description (a real mouthful to say) is individual health reimbursement arrangement or ICHRA. We’ll stick to the high-level description for this article, but if you want all the juicy details about this fixed benefit arrangement, check out this article: the Not-So-Boring Guide to ICHRA.
Here are three main features of an ICHRA:
- Tax-advantaged: Employers give pre-tax dollars to their employees each month for healthcare expenses. This tax-advantaged arrangement helps stretch the benefits budget for the employer and gives more dollars to the employee.
- Affordable and flexible: Choose a uniform allowance for all of your staff or adjust the amount based on category of worker (like full-time or part-time or individual versus family coverage.) This type of flexibility is possible with an ICHRA.
- Cost control: Set a budget that you can afford (rather than the price being set for you.)
- Super simple: As a fast-moving startup, you don’t have extra time to wade through broker meetings about group benefits. There are also no minimum participation rates or minimum contribution.
For startups with 15+ workers: Professional Employer Organization (PEO)
If you're running a startup with more than a dozen employees, particularly if you have workers in different states (which can make payroll a bit complicated), you might want to consider a PEO. Companies like Justworks, Rippling, and Insperity are well-known players in this space, serving fast-growing startups.
So, what exactly is a PEO? It's a service provider that essentially takes over many of your payroll and HR compliance tasks, becoming the employer on record. Here's why you should consider this option:
- All-in-one support: Texas startups, especially those with team members spread across the Lone Star state or across the country, have a great option to lighten the load of payroll processing - partnering with a PEO. Not only that, PEOs can also take care of the boring tax filing tasks for employees in multiple states. On top of that, they can help simplify benefits administration, like offering group health insurance.
What PEOs usually can’t do, is offer you a much better rate on your small group plan. The good news is that for many PEOs, health benefits are not a core product and they are flexible about allowing customers to add other options — like an ICHRA as a cost-effective, simple solution.
- Compliance assistance: PEOs sweet spot is helping with all of the compliance requirements that go into managing people (taking a big load off your shoulders.)
For startups with 50+ employees: Traditional group health plan
A traditional group health insurance plan has been the go-to choice for small employers to get health coverage for decades. In the early days, it was a pretty good deal - group health insurance rates were generally cheaper than individual plans.
But times have changed. The costs have shot up on the small group premium side, especially for super small employers, while the individual market has seen some improvements and added some cost control. So what seemed like a better deal in the past, turns out not to be a deal at all.
Startups with a larger employee base have other incentives to choose a traditional group health plan. Namely, they have a dedicated HR team to help oversee the process and, at this size, can offer more health plan options to employees.
- Compliance ease: At this size, offering health insurance is a requirement, and dealing with compliance issues might make going for a fully insured plan worth considering. Oh, and you also likely have an HR professional with 50 or more employees.
So how can StretchDollar help?
Ultimately, the best health benefit option for your startup depends on factors like the size of your team, budget, and how customized you want it to be.
For smaller-sized Texas startups with fewer employees (think less than 15), traditional small group health plans can be costly and come with a ton of administrative work.
That's where StretchDollar's pre-tax fixed health benefit (ICHRA) comes in! We've designed our plans specifically for smaller-sized startups. Enrolling is a breeze with our templated plans that take 10 minutes or less. Plus, we help employees find a health plan that suits their needs, so there's no need to stress about whether a one-size-fits-all plan is good enough for everyone.
Remember, offering quality health benefits not only takes care of your employees' well-being but also contributes to the long-term success and growth of your startup.