Factors in Small Business Employee Health Insurance Plans
Cost is the primary factor in whether or not small businesses offer their employees health care insurance coverage. As an owner, you must decide if your small business can really afford it. In reality, small business owners cannot afford NOT to offer it. Good employer based health insurance coverage is often essential to recruiting and retaining the best employees.
Benefits
There are special tax incentives for employers who offer health insurance. The costs of setting up a health care plan are often tax deductible for the small business owner. Plus, neither employers nor employees are taxed for the employer’s contribution toward the premiums (monthly or quarterly payments to the insurer in order to receive coverage). Both employees and employers are searching for affordable, quality healthcare. Unfortunately, small businesses have often been stuck paying more for employee health insurance than big employers. That may be changing with the rise of association health plans (AHPs).
AHPs
Part of an insurance underwriter’s job is to analyze the risk factors associated with small businesses (one with 2-50 employees). In small businesses, if any one member of the staff is considered a greater risk, all employees may be asked to pay higher premiums. Association health plans (AHPs) reduce the costs of small business health insurance because associations spread risk over a much larger group of people. As larger groups, associations get more leverage when bargaining with insurers for lower rates. APHs are often run statewide through a Chamber of Commerce, the state insurance commissioner or other trade organizations and associations. Participating in AHPs is a major way small businesses can lower their health insurance costs.
Comparing Plans
It is important for small business owners to understand the types of managed care.
Fee for Service - Traditional “fee-for-service” health insurance provides employees the freedom to choose their own medical care providers. These policies vary in coverage (what the insurer will pay and what the patient is expected to pay) and vary in deductibles (what the patient has to pay out of pocket each year before the insurance company starts to pay anything).
HMO - A considerably cheaper option for health insurance is managed care. Under Health Maintenance Organizations healthcare arrangements are made with selected doctors, hospitals and clinics that have a contract with the HMO network. Managed care reduces medical costs and often includes coverage for more services than traditional “fee-for-service” insurance, especially preventative medical care services.
PPO - Preferred Provider Organizations allow the patient more flexibility in choosing heath care providers. However, insurance benefits will be reduced when using medical providers outside the plan.
POS - With Point-of-Service insurance it is not necessary for the patient to see the primary care physician first. This is a more flexible plan for the patient, but POS premiums are more costly.
HSA - The newest model for health insurance involves Health Savings Accounts. Used in conjunction with health insurance policies, HSAs also offer some tax benefits.
Some small businesses offer their employees a choice of plans. Usually the employer pays for a cheaper plan and employees have the option of paying more to upgrade it. There are many viable options out there, so before a small business owner decides on a health insurance plan, it is important to research, research, research.
