As a small business owner, it can be difficult to navigate the health insurance industry and come up with a solution that meets your needs. In a recessionary economic climate, finding the right balance between health insurance coverage and costs can be particularly important. If you're considering providing health care coverage for your employees, here are some guidelines.
Benefits of Coverage
When it comes to health coverage, studies show that companies offering health insurance to employees benefit in the long run. Those companies attract and retain motivated employees, see reduced worker's compensation costs, and enjoy increased productivity due to lower levels of absenteeism.
If you're not sure you want to offer health insurance, consider the big picture for your employees. You should also consider the tax incentives provided to businesses offering health insurance, including being able to deduct 100% of the insurance premiums and reduce payroll taxes.
When looking into health insurance plans, you'll find individual and group coverage options. While individual coverage provides health insurance for an individual and his or her dependants, group coverage is in the form of a single policy that covers all eligible members in the group. While the laws may vary by state, usually a small business that has 2 to 50 employees is eligible to purchase a health care policy as a group.
For individual plans, insurance providers determine eligibility based on the medical history of the applicant. Often, insurance providers are also allowed to refuse coverage for an individual who doesn't have consistent past coverage.
For group plans, a more generalized system is used to determine eligibility (such as average age of the group members), and insurance companies are usually required to approve coverage regardless of group members' past medical histories.
If you're self-employed with no other employees, your state may allow "group of one" coverage. This type of coverage offers the same coverage options and approval process that would be available to a group, but is available to individuals.
You may choose either a small group plan or multiple individual plans to cover all your employees, but most business owners choose group plans. In addition to the eligibility benefits mentioned above, small group plans often have lower premiums.
A March 2009 report released by America's Health Insurance Plans (AHIP), a health insurance trade organization, states that in 2008, the average premium for small group health insurance was around $350 per month for single coverage (about $4,200 per year). For family coverage, the average premium was around $913 per month (about $11,000 annually).
If you'll be offering health care coverage to your employees, most insurance companies require you to pay at least 50% of those employees' premiums. Asking employees to contribute to their insurance premiums by paying the other 50% is one way to minimize your costs and still offer health care options.
For your own health care coverage, the premium rates offered to a group will likely be better than those of an individual plan. This can help lower your personal insurance costs.
As a general rule, the more employees you have covered under your group plan, the lower your premium rates will be. The AHIP report found that businesses with 26-50 employees had an average monthly premium of $311, compared to $378 for those with less than 10 employees. If your business has a small staff you may be able to partner with another company to purchase health care insurance as a larger group. This can reduce the premiums you and your employees would pay as a smaller group.
Do the Research
Before signing up for a health insurance package, be sure to do some research and look for the best coverage options and rates. You'll also want to review the needs of your business—some insurance options may be more valuable to your employees than others and these options could affect your premiums. If you're short on time, you can hire an insurance broker to do the leg work of compiling quotes.
Offering health care coverage as a business owner may seem pricey and complicated, but it is possible. Providing health care coverage for your small business can decrease your personal insurance costs, increase your business's tax write-offs, and help maintain healthy employees. These benefits may offset the up-front costs. Consider your options before you decide health insurance is a benefit you can't afford.
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