Health sharing for small business owners

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Running a small business comes with plenty of expenses you can control — and a few you can’t. Healthcare is often one of the biggest expenses in the latter category. Unlike an employee with employer-sponsored coverage, a business owner is responsible for the entire monthly cost of their own healthcare. That can make health coverage particularly painful when you’re paying an unsubsidized ACA Marketplace premium while also trying to keep cash inside the business.

Health sharing can be an alternative worth considering, particularly for business owners who are generally healthy, don’t qualify for a significant ACA subsidy, and are comfortable trading some of the legal protections of traditional insurance for a lower monthly cost.

Why Healthcare Is Different When You Own the Business

Employees often see only a portion of their healthcare premium on their paycheck because their employer pays part of the cost. A business owner buying coverage independently doesn’t have that luxury.

If you’re a sole proprietor, LLC owner, independent contractor, or another self-employed business owner, you may be shopping for coverage as an individual rather than through a large employer group plan.

That creates three common problems:

• You’re responsible for the full monthly premium.
• Your cost can be heavily influenced by your age and household size.
• A higher income can eliminate or reduce ACA premium subsidies.

For a small business owner whose household income is too high for Marketplace assistance, the difference between an unsubsidized insurance premium and a health share contribution can become substantial.

Our health sharing vs. traditional insurance guide breaks down the broader differences, including the important distinction between an insurance policy and a health sharing membership.

Health Sharing Can Reduce the Fixed Monthly Cost

One of the biggest attractions of health sharing for a business owner is predictable monthly pricing. Health share contributions aren’t calculated from your business revenue or household income. Instead, pricing typically depends on factors such as age, household size, plan selection, and the Initial Unshareable Amount (deductible) that you select. That means a particularly good year for your business doesn’t automatically make your health share contribution more expensive. For an entrepreneur trying to manage cash flow, that is an important distinction.

Consider a business owner whose traditional insurance premium has climbed to hundreds of dollars a month. Reducing that fixed expense can free up money for hiring, equipment, marketing, inventory, or simply building a larger business cash reserve.

Of course, lower monthly cost isn’t the only consideration. Health sharing isn’t insurance, and sharing is governed by the organization’s membership guidelines rather than the contractual payment obligation that comes with traditional insurance. That’s why the decision should be based on both cost and risk tolerance, not price alone.

What If You Have Employees?

This is an important distinction for small business owners. If you’re a one-person business or have no employees who need coverage, choosing a health share for yourself can be relatively straightforward. Once you have employees, however, the question becomes more complicated.

A health share membership is not the same thing as a traditional employer-sponsored group health insurance plan. You shouldn’t assume that putting employees into a health share membership is equivalent to offering an employer health benefit. Instead, separate the decision into two questions:

1. What should I use for my own healthcare as the business owner?
2. What healthcare benefits, if any, should I offer my employees?

You may decide that health sharing makes sense for your own household while evaluating traditional group coverage, individual coverage, an ICHRA, or another employee-benefit arrangement separately.

The right structure depends on your business, employees, tax situation, and benefit objectives. Talk with a qualified benefits or tax professional before setting up an employee health benefit strategy.

The HSA Opportunity for Business Owners

This is where health sharing can become particularly interesting for self-employed people. A health share membership by itself does not make you eligible to contribute to an HSA. An HSA requires qualifying HDHP coverage under IRS rules. However, as a small business owner, you are eligible to pair a standalone HSA-eligible plan with any health share. That can create a two-part strategy:

• Health sharing handles eligible major medical expenses through the membership’s sharing guidelines.
• HSA-eligible coverage establishes eligibility to contribute to an HSA.
• The HSA provides the tax-advantaged savings component for eligible medical expenses.

For a business owner who previously had an HSA through an employer-sponsored HDHP, this can be especially attractive because you don’t have to give up the HSA strategy simply because you leave traditional employer coverage. See our MEC and HSA eligibility guide and self-employed HSA + health share savings guide for the specifics.

Don’t Confuse MEC With Major Medical Coverage

Small business owners researching health sharing will often encounter the term MEC, or Minimum Essential Coverage. MEC and major medical coverage serve different purposes. MEC is primarily concerned with satisfying the ACA’s definition of minimum essential coverage and providing specific preventive services (e.g. mammograms, colonoscopies, etc.). Major medical coverage on the other hand covers unexpected medical bills (e.g. a trip to the ER). Although they aren’t insurance, health shares are an alternative to major medical as they pay for unexpected medical bills. MEC coverage comes with some health shares plans or a standalone plan can be paired with a plan from any provider. Our MEC and HSA guide explains how the pieces fit together.

What About the Self-Employed Health Insurance Deduction?

This is another area business owners need to be aware of. Traditional health insurance and health sharing don’t receive identical tax treatment. A self-employed person may be able to deduct qualifying health insurance premiums under applicable tax rules, while health share contributions generally aren’t tax deductible. That means that while you will still likely pay significantly less for a health share plan overall, you need to factor in tax impacts to determine your actual savings.

Your business structure also matters. A sole proprietor, single-member LLC, partnership, and S corporation owner can face different tax considerations. If the tax consequences are material to your decision, have your CPA or tax adviser evaluate the specific arrangement before making the switch.

Health Sharing Can Be Particularly Attractive Without an ACA Subsidy

The biggest cost difference occurs when comparing health sharing to unsubsidized traditional insurance. If you qualify for a substantial ACA premium tax credit, a Marketplace plan can be surprisingly inexpensive and may be the better financial choice.

Business owners with higher household incomes can find themselves paying the full Marketplace premium. That’s when health sharing becomes more compelling. The question isn’t simply:

“Is health sharing cheaper than insurance?”

The more useful question is:

“What would I actually pay for comparable options after considering subsidies, taxes, HSA benefits, and the differences in coverage?”

If your Marketplace premium is heavily subsidized, traditional insurance may win. If you’re paying the full unsubsidized premium, the calculation can look very different. Our ACA subsidies and health sharing guide explains why health sharing doesn’t qualify for ACA premium tax credits and how to compare the alternatives.

What About Pre-Existing Conditions?

This is one of the most important questions for any business owner considering health sharing. Traditional ACA-compliant insurance cannot exclude coverage because of a pre-existing condition. Health sharing organizations aren’t subject to the same requirement and commonly have waiting periods and phased-in sharing for pre-existing conditions.

If you or someone in your household has an active medical condition requiring expensive ongoing treatment, don’t make the decision based solely on the monthly premium. The potential savings may not compensate for limitations on sharing related to an existing condition. This is one of the situations where traditional insurance can be worth the additional cost. See our health sharing vs. traditional insurance comparison for a more detailed discussion of pre-existing conditions and the other major differences between the two models.

What If You Missed Open Enrollment?

Business owners don’t always make major healthcare decisions at convenient times. You might leave a job to start a company in February. Your business might grow significantly in July. You might lose employer coverage when you transition from W-2 employment to self-employment. Traditional Marketplace insurance generally operates around annual open enrollment and qualifying special enrollment events.

Health sharing organizations generally don’t use the same ACA enrollment calendar and often allow members to enroll outside the Marketplace open enrollment period. That flexibility can be useful for entrepreneurs whose employment and business circumstances don’t fit neatly into the traditional insurance calendar.

Secular Health Sharing for Business Owners

Some business owners are interested in health sharing but don’t want to participate in a program requiring a religious statement of faith. That doesn’t automatically eliminate health sharing as an option. The industry now includes non-religious health sharing alternatives. See our non-religious health sharing guide for the full picture.

How Small Business Owners Should Compare Their Options

Before switching from traditional insurance, compare the options using your specific household numbers.

At a minimum, look at:

Factor	Traditional Insurance	Health Sharing
Monthly cost	Depends on age, location, plan, and subsidy	Generally based on age, household, plan, and IUA (deductible)
ACA subsidy	May be available	Not available
Legal payment guarantee	Yes, under the insurance contract	No equivalent contractual guarantee
Pre-existing conditions	Generally covered immediately	Restrictions or phase-ins may apply
Provider network	Usually defined by plan	Often no network required, but varies
HSA eligibility	Available with qualifying HDHP coverage	Requires a separate or bundled option
MEC	Generally included in ACA-compliant plans	May require a separate or bundled option
Enrollment	Open enrollment or qualifying event	Generally sign up and cancel at any time
Tax treatment	May qualify for deductions	Generally not tax deductible

The numbers will be different for every business owner. Your age, household size, income, state, health situation, and plan selection can all materially change the result. See our ‘how much does health sharing save you’ guide for a comparison.

Is Health Sharing Right for Your Business?

Health sharing tends to be most compelling for small business owners who:

• Don’t qualify for a meaningful ACA premium subsidy
• Are generally healthy and don’t need immediate comprehensive treatment for significant pre-existing conditions
• Want to reduce their fixed monthly healthcare expense
• Are comfortable with a guidelines-based sharing model rather than the contractual guarantees of insurance

It deserves more caution if you have significant ongoing medical needs, qualify for a large ACA subsidy, or place a high value on the legal protections and regulated appeals process that come with traditional insurance.

If you have employees, evaluate the employee-benefit side separately. A health share that works well for the business owner isn’t automatically the right solution for the company’s workforce.

Bottom Line

The best choice is not simply the plan with the lowest monthly price. It’s the option that gives your business and household the right balance of monthly cost, tax advantages, medical coverage, flexibility, and financial risk.

If you’re a small business owner considering the switch, start by comparing your specific insurance cost with the available health share options — then evaluate the coverage differences before making the decision.