1. An Introduction to Health Insurance
Offering a good health plan is a time-proven method of both attracting and retaining good workers. In addition, good health benefits also help keep your workers healthy, which increases productivity by reducing sick leave and staff turnover.
Unfortunately, fewer and fewer small businesses are offering health benefits to their employees now. According to the nonprofit Kaiser Family Foundation, in 2007 only 59 percent of firms with less than 200 employees provided health insurance. That’s down from 68 percent in 2000, and much less than the 98 percent of large corporations that offer such benefits. The reason? As health care costs escalate, small business owners are finding it harder and harder to afford to provide insurance to their employees. Moreover, small business rates are typically higher than for larger companies. That’s because big companies can spread the costs of a few employees’ chronic and acute health issues across larger pools of workers. In the absence of large numbers, the premiums for small business health care packages are higher.
This isn’t a minor problem. In a survey released in January 2009, credit card giant Discover reported that 33 percent of small business owners said that high health care costs were making it hard for them to grow their businesses. Two-thirds of the business owners surveyed said that obtaining affordable health care was either “very” or “somewhat” difficult. While the numbers are scary, health insurance is not an impossible dream. By doing research, carefully considering the options, and taking cost-saving measures, you can provide health insurance packages to your employees. And while the idea of universal health care, or at least some kind of health care reform, is currently active in this country, it will no doubt be years before it is implemented. That means the most prudent measure to take now is finding some kind of health benefit package for your employees.
2. Group Insurance vs. Individual Insurance
Health insurance policies come in all shapes and sizes. But the two largest categories are individual and group.
Individual health plans are created for and purchased by individuals and their families. They generally require a detailed medical history and sometimes a medical exam to rule out any preexisting conditions. The plan’s cost depends on the applicant’s medical condition and lifestyle (e.g., smoking or not); applicants with serious medical problems may be denied coverage.
Group health insurance covers a number of individuals under one master policy, which is “owned” by an employer, a professional organization, a union, or other group. In most cases, no medical exam is required to take part in the insurance.
The cost of a group’s policy is based on the group’s demographics (including gender, age, health status, and number of dependents) and the nature of the group itself. In the case of a small business, for instance, the location and type of the business will affect the rates, with a tree-cutting service probably having to pay more than, say, a transcription service. But in general, group insurance is cheaper than individual insurance and the bigger the group, the lower the rate.
Don’t rule out individual insurance entirely, however. Because the rates of health insurance for small businesses are rising so rapidly, individual workers may be able to get coverage at a cheaper rate than the group policy can provide. And with individual plans, your employees can choose for themselves the services they want.
3. Group Insurance: Defined Network Plans