Small Business Health & Disability Insurance

Providing health insurance for employees – by far the single most expensive benefit offered by employers – is one of the greatest challenges many small businesses face today.

Small group health insurance provided by insurers is regulated by the states. However, federal law mandates that an insurer cannot deny coverage to a small business due to the health status or illness of its employees or their dependents. In addition, self-insured health plans (where an employer insures itself), are regulated by a federal law called ERISA (Employees Retirement Income Security Act of 1974). It is rare for a small company to self-insure its health insurance.

Small business owners are not legally required to offer health insurance. However, in an effort to provide health insurance to those citizens without it, several states recently introduced legislation focused on providing universal health coverage. Check with your state insurance department to understand the current laws in your state and how they might affect small businesses.

Small businesses commonly offer several different types of health insurance. Major medical plans typically cover a comprehensive array of healthcare needs, including doctor visits, prescription drugs and hospital care. These benefits can be delivered in several different ways:

•Indemnity plans – These major medical plans typically have a deductible – the
amount you pay before the insurance company begins paying benefits. After
your covered expenses exceed the deductible amount, benefits usually are paid
as a percentage of actual expenses, often 80 percent. These plans usually
provide the most flexibility in choosing where to receive care.

•Health Maintenance Organization (HMO) plans – These major medical plans
usually make the insured choose a primary care physician (PCP) from a list of
network providers. Your PCP is responsible for managing all of your
healthcare. If you need care from any network provider other than your PCP,
you may have to get a referral from the PCP to see that provider. The insured
person must receive care from a network provider in order to have the claim
paid through the HMO. Treatment received outside the network is usually not
covered, or covered at a significantly reduced level.

•Preferred Provider Organization (PPO) plans – In these major medical plans,
the insurance company enters into contracts with selected hospitals and
doctors to furnish services at a discounted rate. As a member of a PPO, you
may be able to seek care from a doctor or hospital that is not a preferred
provider, but you will probably have to pay a higher deductible or copayment.

•Point of Service (POS) plans – These major medical plans are a hybrid of the
PPO and HMO models. They are more flexible than HMOs, but do require you to
select a PCP. Like a PPO, you can go to an out-of-network provider and pay
more of the cost. However, if the PCP refers you to an out-of-network doctor,
the health plan will pay the cost.

To help you choose which health insurance policy best fits the needs of your employees and your business’ financial resources, here are some important factors to consider:

◦When reviewing the health insurance options presented, make sure you compare
the costs of equivalent coverage from several insurers to be sure you’re
getting the best deal.

◦Ask about premium cost increases over the past 5 years.

◦Talk to other small business owners to find out about their experiences with
different kinds of health plans and insurers.

◦Health insurance is complex; don’t hesitate to ask lots of questions before
you decide on a health plan. If you fail to get the answers you need from one
insurer, contact others.

◦If you shop for insurance online, make sure your online source has approved
Internet privacy protection.

•Before selecting a health plan, it’s a good idea to survey your employees to
find out what kind of coverage is particularly important to them:

◦Know your employees. For example, if a number of your employees are young
marrieds who may want to have children, pregnancy-related coverage will
likely be extremely important to them. Other companies may have mostly young
employees who rarely see a doctor.

◦Remember, small business group health plans are not standardized, and
benefits may vary greatly from one plan to another. In some states, group
health insurance must cover childhood immunizations, mammograms, pap smears,
prostate screening and diabetic supplies. In other states, these may not be
mandated. Know the law in your state.

As always discuss insurance options with your insurance agent.