If you’re starting your own family child care business, you might be worried about losing health insurance coverage when you leave your full-time position to pursue self-employment. You want to make sure you’re covered not only for routine doctor’s visits for health maintenance but in case of any health emergencies as well.
Many new and prospective in-home preschool and child care directors ask us what their health insurance options are for themselves and their employees in their small business. Here we’ll answer that question so you can have peace of mind and focus on the parts of running your preschool that you love.
You can use our decision tree as an overview of the health insurance options for family child directors in California and explore the details of each option below:
I don’t have any employees – what are my options?
Insurance through a spouse or partner
Your best option if you don’t have any employees in your family child care is to get covered on your spouse or partner’s employee-sponsored insurance plan. This is the simplest option that will usually offer you the best coverage.
If you aren’t married, you may still be able to do this if you live with your partner. Ask your partner’s employer about “domestic partner benefits” under their health insurance. You can read more about domestic partner benefits here under the “Health Insurance” section.
Insurance through the Healthcare Marketplace
If you aren’t married and don’t have a domestic partner with employee-sponsored health insurance, you can get coverage through the Healthcare Marketplace (also known as the Affordable Care Act). Each state has its own Marketplace; in California, it’s called Covered California.
To apply, go to the Covered California website and register for individual coverage. You will be enrolling under “special enrollment” due to a qualifying life event (changing jobs).
The main benefit of getting coverage through the Marketplace is you may be eligible for federal tax credits depending on your family size and income. These tax credits can lower your monthly premium significantly, meaning you’ll pay less for your health insurance.
Insurance through a provider, directly
Lastly, you can apply for coverage with a provider directly. Kaiser Permanente offers HMO plans that may have lower premiums than the PPO plans you find in the Marketplace (if you don’t qualify for tax credits. If you do, the Marketplace will likely be cheaper for you). This makes Kaiser plans some of the most cost-effective, especially for Californians where Kaiser is based.
One drawback to HMO plans, though, is less flexibility in terms of choosing providers and getting care out-of-network. You can find a more in-depth explanation of the difference between HMO and PPO in this Humana article.
Director Sherie James with her students at Little Seedlings Preschool
I have employees – what are my options?
No employer is required to offer health insurance to its employees, but the Affordable Care Act includes an “employer mandate” that penalizes larger businesses with 50 or more employees for not offering insurance with a tax penalty.
If you have fewer than 50 full-time equivalent employees, you are not required to offer health insurance to your employees. You might still want to provide insurance though, or might find lower premiums for group options than individual options.
Offering health insurance can be a great way to attract top quality teachers to work with you; however, the cost of providing healthcare can be high for a small business, so make sure you understand the total expected cost of providing healthcare to anyone you hire before offering this as a benefit.
Provide a stipend
If you have employees, you can choose one of the abovementioned ways to get individual coverage for yourself, and offer your employees a stipend to cover their own individual plans or healthcare needs. We help our Wonderschool directors budget a stipend amount based on their individual business plan and accounting.
Small Business health insurance through Covered California
You may qualify for Covered California’s Small Business insurance plans as a family child care director with employees.
You are eligible if you meet all the following conditions:
- You have at least one but no more than 100 eligible employees and meet certain contribution and participation requirements
- You have at least one employee who receives a W-2
- The majority of your eligible employees live in California
If you have employees that work less than 20 hours per week, receive a Form 1099, or are seasonal or temporary employees, they are not eligible for coverage through this plan. Learn more about your and your employees’ eligibility on the Covered California site.
Once you sign up for Covered California’s Small Business insurance, you will choose two levels (e.g. silver, gold, bronze…) to provide to your employees. They then get to choose the plan that’s right for them within one of those levels.
The major benefit of getting coverage through the government Marketplace is you may qualify for federal tax credits to offset the cost of providing health insurance to your employees.
Playing with seashells in Kids Collage home preschool
Small business health insurance through SimplyInsured
Lastly, if you have employees, you may qualify to apply for small business insurance through SimplyInsured.
SimplyInsured is a nationwide health insurance broker that allows you to get an instant online quote for all plans available in your area. They sell private insurance directly from insurance companies, as opposed to a government entity managing the plans from insurance companies like in the Healthcare Marketplace.
SimplyInsured’s plans are “off-exchange” whereas Marketplace plans are “on-exchange”. SimplyInsured says off-exchange plans offer more expansive coverage than on-exchange plans because insurance companies have certain expectations about the type of people accessing insurance through the Marketplace (that they are less healthy).
Still, the Marketplace is the only way you can get tax credits, so if you qualify for them, you might be better off shopping there.
To qualify for coverage through SimplyInsured, you must meet the following requirements:
- You must employ at least one other person
- At least one of your employees must be a W-2 full-time employee
- The only other person you employ cannot be your spouse (even if he or she is a W-2 full-time employee)
If you have a part-time employee in addition to a full-time employee, you can choose to offer them coverage under your group plan if you want. And you can enroll in the plan as well as a non-W-2 employee if you’re the owner.
Check out SimplyInsured’s California Small Business Health Insurance Guide for a lay of the health insurance land.
Health insurance and taxes
When you pay your taxes, whether you’re established as a sole proprietorship or LLC, be sure to write off health insurance costs as cost of business so you don’t have to pay taxes on that income. For more details, see Tom Copeland’s post about insurance deductions for family child care homes.
To learn more about setting up your child care in your home, read our comprehensive guide to family child care licensing in California. Or if you’d like to know more about starting your own Wonderschool, you can learn more here.