We are looking for a new Company medical insurance coverage. We are a start up with 10 employees in silicon valley.

I would like comments from other CFO's. Please no agents or brokers. Thanks, Fred

In the midwest, there are several organizations that can provide benefits, including health insurance, to small companies. They do this by pooling your employees with others they provide this service for. That larger group, even with some money for the company organizing the service, is often cheaper than you could do on your own.

I've been an employee in this type of arrangement and I've looked at it as a Controller for my employer. I'm now trying to find a provider for a early stage start up with only a few employees.

Hope that gives you one option to consider.

I'm a CEO of a small company and did some research in this area. After finding our initial coverage through eHealthinsurance.com I have recently switched to a different broker due to savings opportunities. I do know someone who specializes in helping smaller companies and if you are interested let me know and I will provide their contact information. I'm confident they can provide excellent service and help you minimize your insurance costs. You can reach me at [email protected].

Fred,

With respect, to receive impartial feedback with regard to both cost and benefits, you might also try an HR forum to round out your expedition.

In my experience, finance executives are sometimes detached from the benefit and HR value received relative to premiums paid, especially in larger organizations. Likewise, HR executives are sometime oblivious to costs and budget constraints.

Not sure exactly what type of feedback you're seeking but it's challenging to find an executive with deep and broad knowledge of both disciplines. Hope you're able to find one here. If not, try an HR forum as well...there are many on LinkedIn as well as start-up groups.

Best,

Rob
[email protected]

I believe you are talking about Professional Employer Organizations (PEO). There are several of these firms in the west, Trinet, Oasis, Administaff, etc. PEO firms have good programs for healthcare and payroll etc. but do not work for a high tech startups because of stock options. Your employees are not your employees they actually work for the PEO but are at your site on your work. They are therefore not eligible for ISO treatment for options only NSO treatment which can get quite expensive for them

Seems to me you are looking for core health coverage at the lowest possible cost. You can certainly try quoting via online insurance aggregators, but i would also work with brokers via a specific RFQ. You can talk to the brokers in the process of putting together your RFQ so that you can learn from them as you are building your requirements. e.g. are you looking for health only, or health and dental? Do you care about liability coverages? Do you want to include a high-deductible HSA in the mix, etc.? There are a ton of brokers in the Valley who could help you out.

My recommendation is to at least get something, anything, even if it is high deductible. What you will find is that the most important thing is the pre-negotiated rates that the carriers have with the health care providers. For instance, blue cross and blue shield really knuckle down on everything from routine checkups to major procedures with any hospital and doctor in their network. So it's not only important to get cost coverage from them, but also simply having the lower cost for the procedures is key. Their rates can be significantly lower than MSRP. While you are at it, though, realize that some medical groups don't stop at the negotiated rates, but will try to bill the delta from the recipient (your employees). You may want to ask Brokers about who does that in your vicinity.

I run finance and operations for a Boulder start-up (20 employees). We opted for an HRA. We contribute a flat monthly amount for every employee and cap it at six months worth of accrual so we always know what our liability is at any given time. Our employees file monthly claims to our benefits management company, who charges $35/employee to set-up and $12/mo per employee to maintain. Employees find their own insurance coverage and file monthly claims for their premiums. Claims are reviewed by our HRA management company, Zane Benefits and approved (or declined) based on eligibility requirements. We reimburse the employee in their paycheck. It couldn't be easier and I've found it to be much less expensive. The only downside is that employees with pre-existing conditions may have trouble getting individual policies. This, however, hasn't been an issue for us (yet).

For a startup I think PEOs makes a ton of sense. In any startup environment, resources are limited so anything that will give you buying power (like a PEO) and reduce the need for "non-core" labor (ask anyone about healthcare paperwork and HR time commitments)is something to strongly consider. I use Insperity (payroll, healthcare, hr, 401K...etc) and think they provide a great service. I've also done it a la carte (paychex with brokered insurance) and find the administrative requirements miserable. One size does not always fit all, but that is my experience. I really can't speak to the earlier requirements of ISO vs NSO....

Andrew

Fred,
I don't think you're getting correct advice on stock option treatment with a PEO. Years ago that might have been the case when it was more of an "employee leasing" arrangement. But because it's considered "co-employment" I believe you can grant ISO's to your employees. I'm meeting with Trinet on Monday and will push them on that point. Maybe others that are currently working with one of these firms can contribute their experience too. If you are correct that is a show stopper for most tech start-ups.

Paul

I have used Inspirity (the old Administaff) for all my HR needs,including medical. Being in a pool with an estimated 100,000 employees provided for affordable premiums and several different options. I believe ADP will also have programs addressing the need of a small business.

I am a consulting CFO working with a number of start-ups. If you have less than 50 EE in the state of California, the premiums charged by health insurers are fixed and the rates are based on the age of the employees; younger population has lower rates. There is an experience factor that can reduce or raise these rates but that is based on the company's history. With no history you get a rating of 1.1 which is 110 percent of the base rates. Not sure if this is true in all states. So a broker in CA really cannot save you much money as the fees are set by the state.

I have looked at PEO organizations which may be cost effective if you have an older population of workers as the rates offered by the PEO is based on the age of the pool of EE in the PEO. Another benefit of a PEO is that you can offer many more plans to your employees so there is broader choice. The monthly fee for a small company can be $100 per person which is much higher than you would pay for a payroll service. However you also get access to HR services, 401k plans with wide choices, EAP's.

You can give ISO options to employees even when using a PEO.

Based locally in Silicon Valley, I would recommend Storz Insurance Services. They focus and service only small businesses like yours. Contact person is Mika Storz, email: [email protected] I'm sure she can help. I would be happy to make an introduction, if needed.

Fred, Joan is correct. You can give ISO options to employees under the co-employment model and the benefits available can be vast depending on the PEO. In the spirit of full disclosure, I currently work for Insperity. However, after 15 years in the industry I’ve come to realize that we are not the best fit for everyone. It’s important to find a PEO that best fits your company culture and objectives. If you are interested in PEO, I recommend you check out www.esacorp.org as part of your due diligence. ESAC (Employer Service Assurance Corporation) is an independent, non-profit similar to the FDIC to banks and provides financial assurance for the PEO industry.