This article, Health Insurance Tips for Small Business Owners, by Victor Hazy, was originally published in the August 2010 issue of the North Central Florida Business Report.
You know the feeling: Your small group health insurance anniversary is coming, and with it the usual question: “How much are rates going up this year?” Many small-business owners are understandably concerned about the price of insuring their employees and themselves, especially with the new federal Health Care Reform law kicking in. Here are some key things to consider as you plan for your business.
Health Care Reform Protects More, Costs More
Starting in September, the new federal law requires health insurance companies to keep adult children on their parents’ policy until age 26. The law also eliminates annual and lifetime caps on coverage. These mandates will provide more protection but also will drive up insurance company costs, which they will likely pass along in the form of premium increases. From the information I’ve seen, health insurance rates are increasing 20 percent to 25 percent because of these changes.
Coverage Required, But Small Businesses Exempt
To help pay for expanded access to health care, the federal law requires every individual to have coverage. Starting in 2014, penalties will be imposed on individuals who do not carry health insurance. Families earning up to 400 percent of the poverty level will qualify for help in paying their premiums.
Fortunately, small businesses with fewer than 25 employees will not be required to provide health insurance for employees. It is too soon to tell what the impact on rates will be because, while more people will be paying into health plans, which could potentially lower rates, more people with pre-existing conditions will be covered, which could potentially raise rates.
Individual Policies Could Save Businesses Money
If you do offer employees health insurance and you’re looking for a way to control costs, you might want to consider shifting to individual policies, with you contributing a portion of the cost. Often, employees can purchase individual policies with their own money for less than a group policy that your business may be helping to fund.
There are a couple reasons for this. First, individual policies are “medically underwritten,” meaning the insurance company verifies that a person is in good health before it issues an individual policy. Because of this, it has a better idea of its risks and can charge less. Second, with an individual policy, your employees only buy the coverage they need, whereas a group policy covers broader potential needs. Also, the group policy may include a premium for maternity benefits for all female employees, but in an individual plan, you can choose to pay for this coverage or leave it out.
Even better, your employees can reduce the premium by choosing a higher deductible. In many cases raising the deductible by $1,000 can lower the premium by about 20 percent.
Group Policies Better for Those with Health Concerns
If you have employees with major health issues, a group policy is a better option because the members of a group can get coverage without having to answer questions about pre-existing conditions. You can even qualify for a group policy with a group of one person but enrollment is limited to once a year (in August). The “group of one” rates will be significantly higher than an individual policy. That is the price you pay to avoid the underwriting questions. The downside of group policies is the insurance rates tend to rise faster than for individual policies because insurance companies are covering unknown health risks.
If you’re looking for group or individual coverage, be sure to check with several reputable companies, because rates can vary widely, as can underwriting. One company may not want to insure a diabetic on pills, for example, while another company would cover that same person with no problem.
Download the full August 2010 issue of the North Central Florida Business Report.
- Read Consumer-Directed Health Care; Insurance Plans That Can Save You and Your Employees Money that also originally appeared in the North Central Florida Business Report.
- Find more recent articles.
