Saving on your small business health insurance can be a
challenge. But there are ways to overcome the financial obstacles and
get the coverage necessary for your business. There are two major
benefits of employer-based coverage. First these plans, although
expensive, usually carry the best all around protection for you and your
employees. Second, providing benefits plays a key role in attracting
and retaining quality employees.
Why is coverage for small businesses so much more than for large corporations?
Health
insurance for small businesses cost so much because of the high quality
coverage concentrated among a small group of people. Every individual
within the group represents a different level of financial risk to an
insurance company, and this risk is added up and spread out among the
group. Large corporations pay considerably less because the risk is
spread to such a large group, where small business owners can see
unreasonably high increases in premiums due to one or two members. Small
businesses also have to insure their employees under state mandates,
which can require the policies to cover some specific health conditions
and treatments. Large corporations’ policies are under federal law,
usually self-insured, and with fewer mandated benefits. The Erisa Act of
1974 officially exempted self-funded insurance policies from state
mandates, lessening the financial burdens of larger firms.
Isn’t the Health Care Reform Bill going to fix this?
This
remains to be seen. There will be benefits for small business owners in
the form of insurance exchanges, pools, tax credits, subsidies etc. But
you can’t rely on a bill that is still in the works, and you can’t wait
for a bill where the policies set forth won’t take effect until about
2013. Additionally, the bill will help you with costs, but still won’t
prevent those costs from continually rising. You, as a business owner,
will need to be fully aware of what you can do to maintain your bottom
line.
What can I do?
First you need to understand the plan options out there. So here they are.
PPO
A
preferred provider option (PPO) is a plan where your insurance provider
uses a network of doctors and specialists. Whoever provides your care
will file the claim with your insurance provider, and you pay the
co-pay.
Who am I allowed to visit?
Your provider will cover
any visit to a doctor or specialist within their network. Any care you
seek outside the network will not be covered. Unlike an HMO, you don’t
have to get your chosen doctor registered or approved by your PPO
provider. To find out which doctors are in your network, simply ask your
doctor’s office or visit your insurance company’s website.
Where Can I Get it?
Most
providers offer it as an option in your plan. Your employees will have
the option to get it when they sign their employment paperwork. They
generally decide on their elections during the open enrollment period,
because altering the plan after this time period won’t be easy.
And Finally, What Does It Cover?
Any
basic office visit, within the network that is, will be covered under
the PPO insurance. There will be the standard co-pay, and dependent upon
your particular plan, other types of care may be covered. The
reimbursement for emergency room visits generally range from sixty to
seventy percent of the total costs. And if it is necessary for you to be
hospitalized, there could be a change in the reimbursement. Visits to
specialists will be covered, but you will need a referral from your
doctor, and the specialist must be within the network.
A PPO is an
expensive, yet flexible option for your small business health
insurance. It provides great coverage though, and you should inquire
with your provider to find out how you can reduce the costs.
HMO (Health Maintenance Organization)
Health
Maintenance Organizations (HMOs) are the most popular small business
health insurance plans. Under an HMO plan you will have to register your
primary care physician, as well as any referred specialists and
physicians. Plan participants are free to choose specialists and medical
groups as long as they are covered under the plan. And because HMOs are
geographically driven, the options may be limited outside of a specific
area.
Health maintenance organizations help to contain employer’s
costs by using a wide variety of prevention methods like wellness
programs, nurse hotlines, physicals, and baby-care to name a few.
Placing a heavy emphasis on prevention cuts costs by stopping
unnecessary visits and medical procedures.
When someone does fall
ill, however, the insurance provider manages care by working with health
care providers to figure out what procedures are necessary. Usually a
patient will be required to have pre-certification for surgical
procedures that aren’t considered essential, or that may be harmful.
HMOs
are less expensive than PPOs, and this preventative approach to health
care theoretically does keep costs down. The downside, however, is that
employees may not pursue help when it is needed for fear of denial. That
aside, it is a popular and affordable plan for your small business
health insurance.
POS (Point of Service)
A
Point of Service plan is a managed care insurance similar to both an HMO
and a PPO. POS plans require members to pick a primary health care
provider. In order to get reimbursed for out-of-network visits, you will
need to have a referral from the primary provider. If you don’t,
however, your reimbursement for the visit could be substantially less.
Out-of-network visits will also require you to handle the paperwork,
meaning submit the claim to the insurance provider.
POSs provide
more freedom and flexibility than HMOs. But this increased freedom
results in higher premiums. Also, this type of plan can put a strain on
employee finances when non-network visits start to pile up. Assess your
needs and weigh all your options before making a decision.
EPO
An
Exclusive Provider Organization Plan is another network-based managed
care plan. Members of this plan must choose from a health care provider
within the network, but exceptions can be made due to medical
emergencies. Like HMOs, EPOs focus on preventative care and healthy
living. And price wise, they fall between HMOs and PPOs.
The
differences between an EPO and the other two organization plans are
small, but important. While certain HMO and PPO plans offer
reimbursement for out-of-network usage, an EPO does not allow its
members to file a claim for doctor visits out its network. EPO plans are
more restrictive in this respect, but are also able to negotiate lower
fees by guaranteeing health care providers that it’s members will use
in-network doctors. These plans are also negotiated on a
fee-for-services basis, whereas HMOs are on a per-person basis.
HSA (Health Savings Account)
An
HSA is a tax-advantaged account used to pay existing and future medical
expenses. HSAs are used in conjunction with high-deductible health
plans (HDHP), which will make some with pre-existing conditions
ineligible. Also, HSAs must be funded with cash. Communicating the terms
of this account to your employees is important, as a large number of
HSAs are underfunded or improperly funded. The health savings accounts
were signed into the law by George Bush in 2003, and have become an
affordable alternative to a group health plan.
When inquiring
about an HSA, there will be a few things you will want to clarify. While
HSAs generally cover routine medical expenses and copays, some can
provide dental and vision care as well. And since HSAs can be combined
with certain compatible plans, it is important to understand how money
from the account will be allocated. And finally, you will want to know
about cashing out your HSA balance. The amount is taxable and could be
subject to a ten percent excise tax.
HRA (Health Reimbursement Arrangement)
An
HRA is exactly what it sounds like. The employer reimburses the
employee for health care. As an employer, you will usually have the
option to contribute to a reimbursement fund, or to pay fees as they are
incurred. These reimbursements can be deducted from your taxes, and are
tax-free for your employees, saving you both money.
Some
providers empower employers by giving them more options. HRAs, unlike
HSAs, don’t have to be funded with cash money, placing a book keeping
entry on your balance sheet is enough. You can usually control aspects
of your arrangement such as reimbursement limits, whether you or your
employee pays first, and if the previous year’s funds roll over.
HRAs
are becoming a more popular option because of the control it has given
small businesses. Combined with a high deductible health plan (HDHP), an
HRA could be the most cost-effective solution to your small business
health insurance problems. It’s always best to compare these plans to
PPOs, HMOs, and EPOs to know what works best.
Fee for Service (FFS) or Traditional Indemnity
A
fee for service plan is the most flexible small business health
insurance option. You choose your doctor, and your hospital. You can see
a specialist without a referral. This flexibility, however, comes with
more out-of-pocket expenses and higher insurance premiums.
The
typical FFS plan has a deductible ranging anywhere from five to fifteen
hundred dollars. After this amount is reached, the provider will pick up
eighty percent of your medical bills, and require you to pay the
remaining twenty percent. Because of the rising costs of health care,
and the potential for a small number of doctor’s visits to cost
thousands, these plans can become incredibly expensive.
Flexible Spending Account (FSA)
A
flexible spending account is a savings account to be used for medical
expenses, and is funded by pre-tax dollars. Using pre-tax dollars means
that your employees will actually show that they have less income, and
will therefore have less taxes withheld. As an employer, you set the
limit on contributions to the account per year. In addition to the
employee contribution, you can also credit the account, or fund it
completely from your general assets.
An FSA, especially if combined with an HDHP, can significantly reduce the costs of small business health insurance.
You
should be forewarned, money from FSA accounts cannot be rolled over.
They are, however, available to use for two years and two and half
months after the benefit year. A terminated employee won’t be able to
use leftover funds, unless there is a positive remaining balance and
COBRA is elected.
Small business health insurance providers have
made significant improvements in their services to simplify the
administration of your plan. With HRAs, FSAs, and HSAs, your employees
can use debit cards for medical transactions. Be sure to research this
thoroughly. You will want to be sure your debit card plan is IRS
compliant, and that you can use a large number of pharmacies. You should
also pick a plan that can verify eligibility on the spot. Talk with
your agent about linking transit, parking fees, and prescriptions to the
same card. When picking the debit card options, please be sure to
clarify the details of the substantion process. This is IMPORTANT! With
other plans, the provider may assign someone to manage your plan. Or you
may have to hire someone. Still, you should be able to login to your
account and print insurance cards, important papers etc.
The next
thing you can do is thoroughly assess your needs. Being that every
member of your small business plays a key role in its success, it is
vital that their needs are met. And understanding these needs is crucial
to finding the right plan. Find out about chronic illnesses, and
additional information related to past health issues. Know what your
employees think about health insurance, and get them involved in the
process.
Hiring an agent or a broker
Finding
and understanding small business health insurance can be a daunting
task. While some choose to go it alone, others need some professional
assistance. You need to understand the difference between an agent and a
broker, and how you can get the most from either of them.
A broker
Brokers
function independently and usually work for several different
companies. Since they have a variety of resources, they can usually
provide more options and a better overall view of the marketplace.
Brokers will assist you by evaluating the costs and designs of plans
from your local major carriers. The cost isn’t everything, you want to
get the coverage that you need.
Ask the broker how he or she is
getting paid for their services. They should readily divulge that
information. Some brokers may charge you a flat free. Some receive a fee
from an employer, while others receive a commission from the insurance
provider. Any commissions could be reflected in your premiums, but not
to the point that you should worry.
An agent
Agents
typically provide services for one company. They have a closer
relationship to the insurance company than a broker would, giving them
more leverage to make alterations to your plan. In some cases they can
offer a particular plan for less than a broker, and may have access to
additional services like worker’s compensation. To find out what
different providers have to offer, talk to more than one agent. It may
be time-consuming, but it could bring you closer to the most
cost-effective solution for your small business health insurance.
One
of the common options presented by agents is the employee-elect option.
This is an arrangement where employees pick the plan they prefer. Those
who don’t need as much coverage won’t be forced to pay so much, and
those who do need it can get it without increasing the financial burden
of the company as a whole.
How to Save On Your Small Business Health Insurance Plan
What’s
important to remember is that there really is no inexpensive solution
to health care. Even if your initial premiums are reasonably low, they
could rise significantly at your next renewal. So saving money on small
business health insurance is about doing a combination of things
simultaneously to get good rates, and to then maintain those rates.. And
it will require a consistent effort from you, your employees, and your
insurance provider.
First, you can save yourself money by reading the fine print.
You need to know exactly what your plan does and DOESN’T cover. There
are also state mandated coverages. For example, in states like Illinois,
your insurance must cover mammograms. Also, understanding the ins and
outs of your plan will give you and your employees a better idea of how
to deal with your insurance.
Next, you should shave unnecessary benefits.
After reading all about your plan, you will find coverage for things
you may not need. Eliminating these benefits can significantly drop
monthly small business health insurance premiums. For example,
eliminating coverage for brand name medications can reduce costs by more
than 25 percent.
Wellness program have worked wonders for small businesses.
A wellness program is any program designed to promote healthy living
within the organization. Weight loss competitions benefit every
participant. Add a financial incentive for further motivation. Stock the
work fridge with water, and leave literature about healthy living lying
around. Search the internet for calorie counting charts. Raising
awareness entice workers to make positive changes. Active, exercising,
diet-conscious employees have stronger immune systems, more vitality,
and more productive workplaces. They also don’t deal with as many health
issues. Fewer doctor visits and hospitilizations will help maintain
lower annual premiums, because it will prove to your insurance provider
that your business is a low financial risk.
Increasing your co-pay and deductible can go a long way towards cutting costs.
For instance, raising co-pays by just ten dollars has saved companies
as much as thirteen percent on their premiums. A higher deductible will
significantly reduce your monthly premium. To lessen the financial
burden of high-deductible health plans (HDHPs), combine them with an
HSA. Combinations like these have saved both business owners and
employees bundles of cash.
Check into getting a nurse hotline.
A nurse hotline is a toll free, 24-hour-a-day, seven-day-a-week
service. Employees can get medical advice from qualified, registered
nurses. This method has deterred a large number of people from emergency
visits, and it can also be used for preventative care as well. Insurers
like Nationwide have them, or you may have to purchase from a
third-party provider.
Increase the size of your group to reduce your monthly small business health insurance premiums.
In a survey by America’s Health Insurance Plans, small businesses who
employed ten people or less paid forty three more dollars on average
than businesses with twenty six to fifty employees. Check around with
other businesses owners, or fellow members of business organizations.
Some states also have small business groups and pools for this purpose.
Check with your state Chamber of Commerce and Department of Insurance.
Beware of heavily discounted plans.
First, there are numerous scammers trying to get your money. They
promise low rates, and usually cover little to nothing at all. The
internet is notorious for swindlers trying to hustle you out of a buck.
If you are going with a company you aren’t familiar with, please do your
research. On another note, even reputable companies present problems.
In an attempt to gain market share, Blue Cross offered small businesses
discounted rates in 2008. For 2009, some of these same businesses were
set to see increases of as much as 47% in their premiums. As the costs
of medical care increases, the costs are shifted from the insurer to the
insured, and discount plans become overpriced plans quickly.
Shop around.
As mentioned before, talking to different agents will expose you to the
best that insurance providers have to offer. Ask other small business
owners about their providers. You can use trusted online resources like
Netquote and Ehealthinsurance to shop around instantly. These services
also let you compare plans side by side, and allow you to purchase your
plan online. Even after you get your initial plan, it’s good to annually
reevaluate your coverage. This will keep you on the up-and-up about
what the market is offering. Keeping costs down is an ongoing effort,
especially with rates and plans changing all the time from company to
company.
Share some of the costs with your employees.
Raising employee contributions isn’t a popular option, but it may be
one of the only ways to absorb costs and maintain small business health
insurance coverage. Communicate with your employees about how to keep
costs down, and remind them that their increase is your increase as
well.
The sad truth is that, no matter how many cost-cutting
methods you apply, your insurance premiums are expected to continually
rise. In addition to this, you can’t prevent every health problem with
exercise and higher co-pays.
The Health Care Reform Bill won’t
kick in until about 2013, so waiting on its benefits won’t do you any
good. There is definitely a need for change, because the current system
discourages competition and growth. With smaller businesses functioning
as the backbone of this ailing economy, company medical insurance must BE affordable, and STAY affordable.