Depending on the size of your startup and how well-funded you are, it can be difficult to offer benefits to employees right of the bat. Only 35% of businesses with 2-15 employees offer health insurance, according to Forbes, but that number almost doubles for businesses with 16-50 employees.
Health insurance and other benefits are becoming things that employees look for in their employer, no matter the size or how long they’ve been in business. In fact, many people would be willing to take a lower-paying job if the benefits were better than a higher-paying one.
So in order to attract the best talent to your startup, it’s worth it to offer some sort of benefits package to keep your employees happy and healthy. Plus, it is actually more economical to offer health benefits than you may realize when you compare the costs of retaining your current employees and hiring new talent.
Some startups choose to offer their employees stipends to offset the employee’s expenses for having individual Marketplace plans. This may seem like a good choice for your business if you can’t afford traditional health care plans because it’s easy to manage and not subject to normal compliance regulations.
However, stipends have serval cons, too, that make it a riskier option. The money for an insurance stipend is treated as taxable income for the employees. In addition, employers must also pay payroll taxes on reimbursements. Individual Marketplace plans are typically more expensive than group health plans. So you will either pay more in stipends or your employees will have more to pay out of pocket, which is not a winning situation for anyone.
With the way stipends are offered, too, there is actually no requirement that your employees use a stipend to get medical insurance, and you can’t ask them to submit proof of insurance. While many people would use a stipend to fill their healthcare needs, it’s not a guarantee.
Not to mention, some potential employees may not view a stipend as a true medical benefit and end up working for a company with a greater benefits package. Taking a shortcut for your business may harm you more in the long run by repelling the talent you want to attract.
Multiple Employer Welfare Arrangements
A multiple employer welfare arrangement (MEWA) is another type of healthcare coverage for employees that works well for startups because it’s a way for smaller companies to offer the same benefits as larger ones. A MEWA is a system of marketing health and welfare benefits to employers that happens when a group of employers combines their contributions for benefits plans.
With this arrangement, employers make contributions to the plan based on the number of employees they have and the estimated costs associated with each employee. By sharing risk with multiple employers, smaller companies, like startups often are, are able to have more power and offer better benefits to employees.
Pros of MEWAs include:
- Competitive rates
- Predictable, fixed monthly payments
- Protection of being part of a larger self-funded pool
- Flexibility in choice of benefit plans
MEWAs only work, however, if every employer does their part and the arrangement is well-managed. To help protect themselves, many participants in MEWAs buy stop-loss insurance to limit their liability.
AgentLink Can Help Your Business
Employees of startups still deserve to be kept happy and healthy. If you’re a small business that needs help making sure your employees are well taken care of, our Benefits Department at AgentLink has you covered.
We can find the right benefits plans for your business that don’t break the bank and still provide your employees with the healthcare coverage they need.
Let us help you. Get started with AgentLink today.