For now, most small businesses are not required to offer health insurance, but there are insurance regulations in certain states. However, offering health care benefits will do more than keep up with regulations; it will attract new employees and help reduce turnover. Additionally, many small businesses can feel like a second family to both owners and employees. A caring business owner wants to keep their employees as good as possible without going broke. The key to providing health insurance is choosing the best type of policy possible.
States regulate health insurance providers, but there are federal laws that protect small businesses from discrimination. A provider, for example, cannot deny coverage to a small business because of a health condition or illness of the employees or their dependents. The Employee Retirement Income Security Act of 1974 (ERISA) established federal regulations for self-insured health plans, should small business owners choose to insure themselves. However, most small businesses do not choose to self-insure.
Types of small business health insurance plans:
The National Association of Insurance Commissioners (NAIC) has compiled information on different types of insurance plans to help small business owners choose the best plans for their employees. Major medical plans include indemnity plans, Health Maintenance Organization (HMO) plans, Preferred Provider Organization (PPO) plans, and Point of Service (POS) plans.
Indemnity plans are major medical plans that allow patients more freedom to choose their doctors than others. This plan generally has a deductible that the insured must pay before the insurance company begins making payments. Once the deductible is met, the insurance covers a predetermined percentage of medical expenses, usually 80 percent.
HMO insurance plans do not offer the same flexibility as indemnity plans. HMOs require the insured to choose a preferred care provider (PCP) from a list of approved or network providers. The PCP chosen by the insured is responsible for all patient care. Seeing an out-of-network doctor is not covered by an HMO, or is covered at a much lower rate than network doctors. If a patient needs to see a specialist, the preferred health care provider will need to issue a referral for the insurer to honor any claims made by the specialist.
PPO plans offer more flexibility than HMO plans in choosing a doctor. Preferred Provider Organizations contract with doctors and hospitals. People with PPO insurance plans can visit the doctors and hospitals of their choice, but will pay more to use someone outside of their preferred provider network.
POS plans are a mix of PPO and HMO. Point of Service plans require the insured to choose a PCP much like an HMO. However, they are allowed to pay more and see a doctor outside the network. The unique difference is that the insurance company will pay for an out-of-network visit if it is the result of a referral from your primary care physician.
Choosing a health insurance provider for your small business:
Part of choosing a health insurance plan is choosing a provider. Only deal with licensed professionals and look for agents who have experience working with small businesses. Be sure to talk to multiple agents to ensure the best possible rate is negotiated. Always ask the agent to explain the insurance rates for the last five years, as well as the differences between the types of plans the agent has to offer. An agent who is unwilling to answer questions should not be trusted to handle your accounts.
When choosing an agent and insurance plan, ask other companies about their experiences with their agents and insurance companies. It’s also important to find out what employees need from their health insurance policies. Host a meeting and let employees discuss their concerns. Consider the demographics of your employees and what their medical needs may be.
Small business health insurance requirements:
State governments regulate insurance plans for small businesses. Different states require different levels of coverage, so it’s important to be aware of state regulations. States also regulate the premiums an insurer can charge by determining the methods used to calculate premiums. This can be done with a community rating or employee characteristics such as health, number of smokers, etc. There is little a small business can do to control insurance premiums, but there are some options employers have to lower costs.
The type of plan a small business uses is the best way to control costs. For example, HMOs are often cheaper than other major health insurance plans. PPO insurance plans are more expensive than HMOs, but they are less expensive than indemnity plans. Employers also have control over certain aspects of insurance policies, such as deductibles, copays, lifetime medical coverage, maximum out-of-pocket limits, and other health coverage that can impact premiums.
Deductibles are the best way for employers to lower insurance premiums. Typically, the deductible is between $50 and $250. However, there are some larger deductibles available, such as $1,000. These are used for “catastrophic coverage”, but the higher the deductible, the lower the insurance premium. The same goes for copays for PPO or POS insurance policies. Higher copays will lower your insurance premium. It is up to the employer to determine the best deductible and copay for the employees and the business.
Lifetime medical coverage is the amount used to cover an employee throughout their life with an insurance policy. The typical recommended amount is $1 million to cover serious health problems. The maximum out-of-pocket limit is the maximum amount a person is supposed to pay in a year for health care expenses.
Many companies offer other forms of health care coverage to their employees, such as dental or prescription drug benefits. These benefits greatly increase employee morale and well-being, but each additional health benefit will increase the cost of the premium. If employees need additional benefits, it may be appropriate to increase the amount of the cost of insurance that is passed on to employees. The practice of passing on part of the cost of insurance to employees is a typical business practice that usually ends up saving money for both the company and the insured employees.
Small businesses can do more than provide health insurance for their employees. Educating employees about healthy lifestyle choices and encouraging healthy diets and activities will greatly improve the health of workers. Healthy workers can do more than help lower premiums; their attitudes and productivity could also increase.
