Two questions small-business owners face when considering healthinsurance are “What kind of benefits should I buy?” and “How muchshould I pay?” Regarding the first, buy the benefits that willprotect 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 ofmedical benefits can be time consuming. A workforce that’s marriedwith children will have considerably different needs, such asmaternity and dental coverage, than groups of single workers.People who work outdoors or workers who spend their days at acomputer may prefer an optical program for eye care, safety glassesand 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 yourdecision, such as the type of work they do
Your medical insurance costs may be determined solely on thebasis of your company’s experience, such as the aggregate numberand dollar value of claims submitted by your employees. In othercases, you’ll be a part of a larger statistical group that theinsurance company or health-care provider uses in calculating yourpremiums.
Be sure to explore the wide range of options available inhealth-care coverage today, including these:
Fee-for-service coverage provides eligible employees withthe services of a doctor or hospital with partial or totalreimbursement depending on the insurance company. Most insurancecompanies offer 80/20 plans; the insurance company pays 80 percentof the bill, and the employee pays 20 percent. The employee can goto any doctor he or she chooses, and the plan covers any servicethat is defined as medically necessary and specified in theplan.
Health maintenance organizations (HMOs) provide a rangeof benefits to employees at a fixed price with a minimalcontribution (or sometimes no contribution) from the employee, aslong as employees use doctors or hospitals specified in the plan.Usually, HMOs are set up so patients go to the managed-care-planfacilities. If a patient goes to a doctor or hospital outside theplan–except in case of an emergency or if the individual wastraveling outside the plan’s service area–no benefits are paid atall. Make sure the HMO has facilities near where your employeeslive and get feedback on the HMO’s reputation in the communitybefore you sign up.
Preferred provider organizations (PPOs) are consideredmanaged fee-for-service plans because some restrictions are put inplace to control the frequency and cost of health care. Under aPPO, arrangements are made among the providers, hospitals, anddoctors to offer service at an alternative price–usually a lowerprice. Many times there’s a co-pay amount, which means thatemployees pay $5 or $10 for each visit to doctors specified in theplan, and the insurance company pays the rest. PPOs differ from anHMO in that if an employee goes to a doctor not specified by theinsurance company, the plan still partially covers it. There’susually a higher copay amount or a deductible with varyingpercentages.
A “flexible-benefit” plan allows employees to choose fromdifferent fringe benefits. If your workforce is largelywhite-collar, for example, they may appreciate a health programthat encompasses an executive fitness program. Other healthprograms include vision care plans and rehabilitation for alcoholand substance abuse.
Aside from being concerned about the cost of yourhealth-insurance plan, you should also look into thecreditworthiness of the insurance provider. Make sure it’s rated Aor better by A.M.Best, an insurance industry rating service whose rankings areavailable online and at your library. When choosing between twoproviders, go with the higher rated, established company, even ifits cost is a little higher. That way, you can protect yourselffrom “insurer flight,” which when an insurance carrier packs up itsbags and leaves rather than meeting new mandates in your state.
If you’ve narrowed your choices down to two HMOs, ask each toname a private firm you can speak to that’s already using theirservices. Given equal price and medical services, maybe one HMO hasa simpler billing method or a superior consumer service divisionthan the other does.
Growing enterprises need to know that government legislationrequires businesses to offer continued coverage in health insurancebenefits even after an employee has left. The Consolidated OmnibusBudget Reconciliation Act (COBRA) calls for this privilege to beextended to any worker in a firm with 20 or more full-timeemployees. Signed into law in 1986, COBRA demands compliance inboth union and nonunion plans. Only two groups are exempt fromcomplying with COBRA: churches or church-operated, tax-exemptorganizations and federal or District of Columbia employers.
You, the employer, need only offer continued coverage–you don’thave to pay for their coverage. Any ex-employee who elects tocontinue coverage must pay the full cost of that coverage. Thisincludes both the employer and employee’s share. Employees mayelect 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 andpotentially higher plan costs on virtually all group insuranceplans. Managing and monitoring COBRA compliance procedures isnecessary to avoid costly financial penalties involved withnoncompliance.
One penalty is loss of the corporation’s tax deduction for itsgroup insurance plan. The plan administrator, in a small firm, issubject to a personal fine for failing to notify an employee of hisor her COBRA rights at each step of the termination or hiringprocess. COBRA provisions include advising all new and terminatedemployees, and all spouses, of their COBRA continuation rights inwriting. Be sure that those electing continued coverage are removedfrom the plan as soon as they become covered under a new plan.
