 One of the main financial factors in operating a small business is the cost of health insurance. The increasing premiums of health insurance have many smaller businesses looking for ways to cut costs or looking to cull benefits entirely.
For many employees, health benefits are a key to their employment and small businesses may find themselves with fewer or less-skilled employees if they don’t find a solution to the economics of small business health insurance fast.
More than 45 million Americans are currently uninsured, putting them and their families in peril should illness hit. These are the main reasons why health insurance is crucial, even for small businesses to maintain and retain employees.
On average, health insurance costs 18 per cent more for small businesses than it does for larger businesses, according to the New York based Commonwealth Fund. This is largely due to the fact that larger businesses have more employees to shoulder the overall cost of the premiums, making each person’s portion smaller but with larger effect on the policy cost to the business.
Small businesses shoulder a higher percentage of the policy premiums simply because there are less employees contributing to the premiums; this can take a large portion of revenues out of the small business financial statistics, eventually making health insurance a financial risk that needs to be culled. However, there are ways to reduce the costs of health insurance for small businesses:
Healthy employees
By keeping your employees healthy, you will have fewer costs associated with time off for illnesses. You can help to keep your current and newly hired employees healthier by offering flu shots, smoking cessation sessions, cancer screenings and disease management for illnesses such as diabetes and asthma. Wellness programs such as these can save you in the long term and will also keep your employees happy.
Reduce the health insurance coverage
Cutting down on the coverage that is offered or asking employees to increase their contribution per paycheck will definitely help to reduce the costs, however you may find that your employees are none too happy with the decision. Health benefits are a key to many people choosing a job – workers are more likely to accept a position where benefits are offered than one where no benefits exist. You can find a common ground with your employee base though – ask then which benefits are best for them – perhaps you’ll find that vision isn’t as important as dental and that they would opt to have vision coverage deleted.
Offer the option of a health savings account
Health savings accounts are incredibly popular with many small businesses; however the deductibles can be quite high. For most policies, the minimum deduction for individuals is around $1,100 and $2,200 for families – this is the money that the employees will have to pay out of pocket for expenses such as prescriptions and visits to the doctor before they are reimbursed for expenses. However they can contribute funds to the health savings account they use which are used for health care expenses; up to $2,850 for individuals and $5,650 for families tax-free (according to 2007 statistics). These funds do not expire and can travel with the employee if they leave their employment.
Partner up with other small businesses for insurance
Due to the fact that the less employees who contribute to the premiums means higher expense per employee and for the company, many small businesses are partnering up to get better deals on health insurance, especially businesses with fewer than 10 employees. By partnering up with close-by businesses, you can save hundreds of dollars per month on premiums, for the company and the employees.
Research plans
Health insurance plans and policies are far and wide and differ greatly from one company to another. By shopping around and getting quotes on small business health insurance, you can easily reduce the costs by finding a better deal than your current company is offering you. Talk to neighboring businesses about their health insurance plans and find out how much they pay on average. An insurance agent can be of great help to you as well – looking and researching to find you the best deal on insurance.
The Internet is a great place to obtain information and a plethora of free health insurance quotes as well – just be sure that when you’re comparing information, that it is similar – same coverage, equal deductibles and more – if it isn’t the same, understand that even the slightest change in coverage or a higher deductible can greatly impact the overall cost of insurance.
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1. What insurance company do you represent and are you a "captive" agent, "independent" agent or insurance "broker?" (e.g. A "captive" agent usually represents ONE insurance company and can usually only sell that company's insurance products. An "independent" agent or insurance "broker" usually represents many insurance carriers and can sell a variety of insurance products.)
2. What is the plan's calendar year deductible and would I have to pay a separate deductible for each family member if everyone in my family became ill at the same time? (e.g. The majority of health plans have a per person calendar year deductible, for example, $250, $500, $1,000, or $2,500. However, some plans will only require you to pay a 2 person maximum deductible each calendar year, even if everyone in your family needed extensive medical care.)
3. What is the plan's coinsurance percentage and what dollar amount (stop loss number) is it based on? (e.g. A good plan with 80/20 coverage means you pay 20% of a certain dollar amount of medical bills that you incur, after you have paid your calendar year deductible. Afterwards the insurance company pays 100% for the rest of the calendar year. This dollar amount is also known as a stop loss number and it can vary significantly based on the type of policy you purchase. Stop loss numbers can be as little as $5,000 or $10,000 or as much as $20,000 or there are some policies on the market that have NO stop loss number at all!)
4. What is the plan's maximum out of pocket expenses per year? (e.g. This expense is a total of all deductibles plus all coinsurance percentages plus all applicable "access fees" or other fees.)
5. What is the plan's lifetime maximum benefit if I become seriously ill and does the plan have any "per illness" maximums or caps? (e.g. Some plans may have a $5 million lifetime maximum, but the policy many stipulate that there is a maximum benefit cap of $100,000 per illness. This means that you would have to develop many separate and unrelated life-threatening illnesses costing $100,000 or less to qualify for $5 million of lifetime coverage.)
6. Is the plan a schedule plan, in that it only pays a certain amount for a specific list of procedures? (e.g. Mega Life & Health & Midwest National Life, endorsed by the National Association of the Self-Employed, N.A.S.E. agents are known for selling schedule plans.)
7. Does the plan have unlimited doctor co-pays or is there a limited number of doctor co-pay visits per year? (e.g. Many plans have a limit of how many times you can go to the doctor per year for a co-pay and, quite often, the limit is 2-4 visits.)
8. Does the plan offer prescription drug coverage and if it does what type of coverage? (e.g. Some plans offer prescription benefits right away, other plans will require you to pay a separate drug deductible before you can receive prescription medication for a co-pay. Today, many plans offer no outpatient prescription drug co-pay options and only provide you with a discount prescription card that gives you a 10-20% discount on all prescription medications.)
9. Does the plan have any reduction in benefits for organ transplants and if so, what is the maximum the plan will pay out for an organ transplant? (e.g. Some plans only pay a $100,000 maximum benefit for organ transplants for a procedure that actually costs $350-$500K and this $100,000 maximum may also include reimbursement for expensive anti-rejection medications that must be taken after a transplant. If this is the case, you may be required to pay for anti-rejection medication out of pocket.)
10. Does the plan have any separate deductible or "access fee" for each hospital admission or for each emergency room visit? (e.g. Some plans, like the Assurant Health's "CoreMed" plan have a separate $750 hospital admission fee or "Access Fee" that you pay for the first 3 days of a hospital admission. "Access Fees" are in addition to your plan deductible. Also, many plans have benefit "caps" or "access fees" for out-patient services, such as, physical therapy, speech therapy, chemotherapy, radiation therapy, etc. Benefit "caps" could be as little as $500 for each out-patient treatment, leaving you a bill for the remaining balance. Access fees are additional fees that you pay per treatment. For example, for each outpatient chemotherapy treatment, you may be required to pay a $250 "access fee" per treatment. So for 40 chemotherapy treatments, you would have to pay 40 x $250 = $10,000.)