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Medical Insurance Options for Small Businesses

Employees look at benefit packages while interviewing for jobs.

Medical insurance for small businesses is expensive. To stay competitive in the market for good employees, you want to offer them the best benefits. However, you also need to keep it affordable for both you and your employees.

About Medical Insurance for Small Businesses

When employees research jobs, one thing they look for is benefits such as retirement, vacation and medical insurance. It is easier to hire competitively if you have a benefits package that is appealing.

Statistics show that employees who work in smaller companies with fewer than 50 employees (a small business is defined as having two to 50 employees on the payroll) are twice as likely to be uninsured as those working in larger companies. There are numerous benefits to offering medical insurance, including:

  • Reduction in employee turnover
  • Increased productivity
  • Favorable tax treatments for you and your employees

Look for low deductibles and co-pays as well as family buy-in options. Your insurance should include a large selection of doctors, hospitals and pharmacies. Some companies also include dental plans.

Insurance Agents

Most insurance agents can aid you in finding the best medical insurance for small businesses. If you do not have an agent, look for one who will help you once the insurance is bought. An agent should assist you in:

  • Billing
  • Making claims
  • Enrollment eligibility and changes
  • Renewals
  • Membership changes
  • Providers

If you are a newly established business, ask around for referrals to a good insurance agent.

Comparing Health Plans

While researching medical insurance for small businesses, there are a few important facts you should know to prepare you for what questions to ask when comparing health plans.

  • Insurance companies can require that a minimum percentage of eligible workers participate in the group health care plan. For example, if you only have ten employees, they may require 50% participate and get health coverage through work in order for your small business to qualify for their rates.
  • When deciding on eligible workers, you can use full-time (30 plus hours a week) and part-time status to choose who can opt-in. Most businesses do not offer insurance to part-time employees.
  • With group insurance, all participants are required to pay the same amount no matter what his/her health status is. You cannot discriminate against employees with health problems.
  • Some insurance companies require employers to pay a minimum share of your employees' premiums.
  • Insurance companies have the option to make changes to the policy, or refuse to renew your coverage if you commit fraud or do not pay the premiums.
  • Premiums paid by the employer are considered expense and therefore provide a tax advantage.

Medical Insurance Options

As an employer you have four options of medical insurance for small businesses:

  1. PPOs (Preferred provider organizations): Offer a broader network of doctors covered by the insurance
  2. HMOs (Health maintenance organizations): Smaller provider networks like these restrict the doctors included in the coverage and often require referrals to see a specialist
  3. HSAs (Health savings accounts): Must be in conjunction with a high-deductible health insurance policy
  4. HRAs (Health reimbursement arrangements): An alternative to traditional insurance coverage

HSAs and HRAs are alternatives to medical insurance. These programs allow your employees to put aside a certain percent of their income each month to cover out of pocket expenses. This money is non-taxable. HSAs and HRAs are often used in combination with an insurance plan that offers high deductibles or a lower premium policy.

Cost of Medical Insurance for Small Businesses

Medical insurance for small businesses is expensive. Different variables need to be taken into consideration when looking at cost, including:

  • Size of business
  • Location
  • Business type
  • Features you want
  • Health of current employees

Monthly Premium

The monthly premium is the dollar amount shared by the employer and his employers. Plans with lower monthly premiums require higher deductibles while plans with higher premiums have lower deductibles. These rates are set annually and are altered based on:

  • Inflation
  • Medical expenses
  • Number of employees and dependents covered
  • Changes in coverage benefits or other costs.

Most employees have their premiums deducted from the payroll before taxes are taken out.

Online Comparison Websites

Shop around for the best rates and medical insurance for small business plans. These websites can help you do some price and policy comparisons:

HSA Comparison Sites

Compare companies and rates to find the best medical insurance for small businesses.

Medical Insurance Options for Small Businesses