Definition: A policy that will pay specified sums for medical expenses or
treatments. Health policies can offer many options and vary in
their approaches to coverage.
Two questions small-business owners face when considering health
insurance are "What kind of benefits should I buy?" and "How much
should I pay?" Regarding the first, buy the benefits that will
protect you, your employees and your families in case of emergency.
Regarding the second, it depends on your age (and your employees'
ages), gender, and whether families will be considered.
Choosing the most suitable and cost-effective selection of
medical benefits can be time consuming. A workforce that's married
with children will have considerably different needs, such as
maternity and dental coverage, than groups of single workers.
People who work outdoors or workers who spend their days at a
computer may prefer an optical program for eye care, safety glasses
and sunglasses.Take a look at your workforce to determine:
- How many workers fall into each age group
- How many heads of households there are
- Where your workers live
- How big their families are
- Any other pertinent information that could affect your
decision, such as the type of work they do
Your medical insurance costs may be determined solely on the
basis of your company's experience, such as the aggregate number
and dollar value of claims submitted by your employees. In other
cases, you'll be a part of a larger statistical group that the
insurance company or health-care provider uses in calculating your
premiums.
Be sure to explore the wide range of options available in
health-care coverage today, including these:
Fee-for-service coverage provides eligible employees with
the services of a doctor or hospital with partial or total
reimbursement depending on the insurance company. Most insurance
companies offer 80/20 plans; the insurance company pays 80 percent
of the bill, and the employee pays 20 percent. The employee can go
to any doctor he or she chooses, and the plan covers any service
that is defined as medically necessary and specified in the
plan.
Health maintenance organizations (HMOs) provide a range
of benefits to employees at a fixed price with a minimal
contribution (or sometimes no contribution) from the employee, as
long as employees use doctors or hospitals specified in the plan.
Usually, HMOs are set up so patients go to the managed-care-plan
facilities. If a patient goes to a doctor or hospital outside the
plan--except in case of an emergency or if the individual was
traveling outside the plan's service area--no benefits are paid at
all. Make sure the HMO has facilities near where your employees
live and get feedback on the HMO's reputation in the community
before you sign up.
Preferred provider organizations (PPOs) are considered
managed fee-for-service plans because some restrictions are put in
place to control the frequency and cost of health care. Under a
PPO, arrangements are made among the providers, hospitals, and
doctors to offer service at an alternative price--usually a lower
price. Many times there's a co-pay amount, which means that
employees pay $5 or $10 for each visit to doctors specified in the
plan, and the insurance company pays the rest. PPOs differ from an
HMO in that if an employee goes to a doctor not specified by the
insurance company, the plan still partially covers it. There's
usually a higher copay amount or a deductible with varying
percentages.
A "flexible-benefit" plan allows employees to choose from
different fringe benefits. If your workforce is largely
white-collar, for example, they may appreciate a health program
that encompasses an executive fitness program. Other health
programs include vision care plans and rehabilitation for alcohol
and substance abuse.
Aside from being concerned about the cost of your
health-insurance plan, you should also look into the
creditworthiness of the insurance provider. Make sure it's rated A
or better by A.M.
Best, an insurance industry rating service whose rankings are
available online and at your library. When choosing between two
providers, go with the higher rated, established company, even if
its cost is a little higher. That way, you can protect yourself
from "insurer flight," which when an insurance carrier packs up its
bags and leaves rather than meeting new mandates in your state.
If you've narrowed your choices down to two HMOs, ask each to
name a private firm you can speak to that's already using their
services. Given equal price and medical services, maybe one HMO has
a simpler billing method or a superior consumer service division
than the other does.
Growing enterprises need to know that government legislation
requires businesses to offer continued coverage in health insurance
benefits even after an employee has left. The Consolidated Omnibus
Budget Reconciliation Act (COBRA) calls for this privilege to be
extended to any worker in a firm with 20 or more full-time
employees. Signed into law in 1986, COBRA demands compliance in
both union and nonunion plans. Only two groups are exempt from
complying with COBRA: churches or church-operated, tax-exempt
organizations and federal or District of Columbia employers.
You, the employer, need only offer continued coverage--you don't
have to pay for their coverage. Any ex-employee who elects to
continue coverage must pay the full cost of that coverage. This
includes both the employer and employee's share. Employees may
elect to remain covered under the firm's plan for up to 19 months,
and dependents can maintain coverage for up to 36 months.
COBRA has imposed additional administrative burdens and
potentially higher plan costs on virtually all group insurance
plans. Managing and monitoring COBRA compliance procedures is
necessary to avoid costly financial penalties involved with
noncompliance.
One penalty is loss of the corporation's tax deduction for its
group insurance plan. The plan administrator, in a small firm, is
subject to a personal fine for failing to notify an employee of his
or her COBRA rights at each step of the termination or hiring
process. COBRA provisions include advising all new and terminated
employees, and all spouses, of their COBRA continuation rights in
writing. Be sure that those electing continued coverage are removed
from the plan as soon as they become covered under a new plan.