Small Business Health Insurance

Small Business Health Insurance

If you’re thinking about starting your own small business, one of the important things to consider is small business health insurance. Whether it’s just you and a secretary, or if you have an office full of employees, determining the best options for insurance companies is a process that can’t be ignored. In this article, we’ll explore the various facets of insuring your small business.

Companies that Specialize in Small Business Health Insurance

There are an incredible number of insurance companies ready to serve the need- of small businesses. Selecting from among them may seem like hard work, but overall, it’s important to go with a company with a track record and long-term reliability. There’s no sense in spending the next five-to-ten years switching from one insurance company to another. By doing your homework, you can hopefully eliminate this problem. Hiring a good accountant can actually save you a lot of time in finding the right insurance packages for your small business. Still, it’s important to be informed.

The Rising Cost of Health Care

Many people are discouraged from starting their own small businesses because of the rising cost of health care. In fact, the cost of healthcare in 2005 increased by abut 10% nationwide, according to the National Business Group on Health. Apparently these costs have increased for the last five or six years, making it tough for small businesses to stay afloat.

With rising costs, small businesses need to consider alternatives like Cafeteria plans, co-pays, employee contribution to health care and etc.

Understanding the HMOS and PPOS

HMOs

A Health Maintenance Organization or HMO is a full fledged organization of healthcare providers. This includes the whole gamut of doctors, hospitals, and other health agencies that contract with insurances companies. They usually offer their services at a fixed price.

HMO plans are rather rigid and restrictive. They offer good care, but have many rules that must be followed. An insured person who is a member of an HMO, has to choose a primary care physician, who in turn manages all aspects of the person’s healthcare. Individuals are limited to choosing a physician who is a member of the HMO network. This primary care provider is the only physician who can refer the member to a specialist, if one is needed, and that specialist must be part of the network as well.

Small businesses often go with HMOs because they are cost effective. Premiums are lower than most plans.

PPOs

A Preferred Provider Organization, or PPO, is less rigid and restrictive. Because PPOs have contracts with the insurance companies, the member is allowed to see any physician he or she likes, but if the physician is not part of the PPO network, the member will probably pay more out of pocket costs. The whole premium isn’t covered. Unlike an HMO, you do not need a referral to see a specialist.

Although PPOs cost more, they are often the preferred choice of many employees because there are fewer rules.

Self-Insurance, Another Option

There’s an option to small business health insurance called self-insuring where companies do not buy health insurance for their employees, but take full responsibility, through their company assets, to cover claims. If no claims are made during the year, the small business saves money, and can also provide rewards to employees with better health. Many small businesses are switching to this option, which also provide wellness programs to help people stop smoking, lose weight, and get into shape to decrease their chances of illness.

Of course, there are major risk factors involved with self-insuring. For example, if a program member employee, becomes ill and their health care expenses very high, the small business can run into major expenses it cannot cover. This is where a “stop loss” insurance company comes in. This gives the small business a safety net if claims are over a certain predetermined level.

Health Care Scams

Because small businesses are especially concerned with saving money, there are health care scam artists out there that target entrepreneurs. These companies use professional marketing techniques, brochures, selling points, and they may even pay small claims, but when a large claim comes in, they refuse to pay, and often disappear. This is why it’s important for the small business owner to do his homework and only go with a company that has credibility and a track record.

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