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Small Business Health Insurance

Health insurance for a small business is often provided for the employees by the employer, although it is not required. In good business practices, it is often used as an incentive to hire the best people. For the sake of definition, a small business is considered to have an average of two, but not more than 50, employees.

What types of small business health insurance are available to me?

Most small business owners provide health insurance through group plans which use organized medical networks. There are several types of networks: HMOs, PPOs, POSs, and the new Health Savings Accounts. You should know about each of them because each has characteristics that will affect your choice for new health insurance.

HMOs often have lower premiums but they must be available in close proximity to your employees and the workplace. PPOs and POSs tend to cost slightly more but are flexible for your employees, allowing them additional choices of doctors and medical care. Choices often make people happier. The Health Savings Accounts (HSAs) are new and can provide a means for tax-free savings for you and your employees. For your convenience, each type of group health insurance network has detailed descriptions elsewhere in the website, as well as in the Glossary.

What are purchasing groups?

Small businesses can also join together to form a pool which then acts as a purchasing group for health insurance. There are many types of pools or alliances, some of which can be statewide. Information about these pools is often available from your Chamber of Commerce or your state insurance commissioner. Much depends on which state in which you live, as to whether these alliances will work for you.

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How can I lower the cost of my insurance plan?

To lower the cost of an insurance plan, you will soon learn that changing the deductible affects the premium more than anything else. Other coverages in an insurance plan affect cost also. There are optional coverages that can be included in group plans. Some small businesses include dental, vision, and alternative medicine options. Of course, more options mean higher premiums. Also, there are two maximum limits in insurance plans that can also affect the premium price: the maximum limit for each claim and the maximum limit over a person’s lifetime. The higher the limits, the higher the premium will be for you.

For the small business owner looking for health insurance, these are the main points to consider:

  • Most small businesses provide health insurance through a group plan.
  • You should understand the various types of networks used in group health policies (HMOs, PPOs, POSs and new Health Savings Accounts).
  • The amount of the deductible (which you choose when setting up the plan) greatly affects what you will pay for the premium.
  • It might help to compare your final two possible plans by running some totals: compare the annual premium you would pay and the speculated amount your employees would pay out-of-pocket yearly with both final choices. See what the differences are money-wise and if both you and your employees can live with the amounts.
  • Your decision about which type of group health insurance will probably come down to a compromise, considering your total costs for the policy, the services provided, and the probable ability of your employees to pay out-of-pocket expenses.
  • Some states allow small businesses to form alliances which then purchase group insurance at a savings.

TIP: To make the quote process faster and easier, you'll need to have the following information on hand:

  • the zip code of your business
  • the number of employees you want to enroll in the plan
  • the date your company started
  • the date you'll like coverage to begin
  • the names/initials of each employee
  • the home zip code of each employee
  • each employee's date of birth
  • each employee's dependents, including spouse and number of children

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