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October 19, 2009

Choosing the Right Health Plan for Your Small Business

Filed under: General HR Buzz11:58 am

Some say it’s like the Clinton health care fight all over again. Check out any news source and you’re likely to get an eyeful about the ongoing health care debate. While the situation is far from resolved, it’s clear that the solution is likely to have a huge impact on small businesses. As a result, there’s action you may need to take while you’re waiting for this to get untangled (if it ever does).

Even — or especially — in this economy, it’s no secret that employees value health insurance benefits. Surveys have shown that workers value health insurance coverage only second to monetary compensation, according to eHealthInsurance, a licensed health insurance agent. By offering such coverage, companies are better able to attract and retain talent. The problem, of course, is the cost.

Today, many small companies are either cutting back on health care coverage they provide or choosing not to offer it at all, says Sam Gibbs, a senior vice president at eHealthInsurance. Small-business owners reported that the cost and availability of health insurance is their No. 1 concern, according to a National Federation of Independent Business survey. In some cases, employers have switched to a contract workforce to avoid providing health care.

It is possible, however, for small-business owners to provide health care coverage at a reasonable cost.  To do it, “employers should help their employees to understand the reasons for rising health care costs and get them involved” in how much they should pay for their own health care, says Michael McGuire, chief executive officer of UnitedHealthcare of New Jersey.

What that means: When it comes time to figure out what coverage to provide, business owners should sit down with employees and ask what coverage is important to them. Try to determine what benefits are required versus what benefits they can live without.

“Tell them you only have so much money to spend on health insurance and ask them to help you prioritize what is important,” says Gibbs. “When they are part of the process they are better able to understand the costs and help control.”

Why get employees so involved?
Insurers figure that hitting consumers in their pocketbooks will cause them to be more frugal, which will drive down the cost of health care. This is the idea behind the increasingly popular consumer-driven health care trend in which companies offer high-deductible health plans (HDHPs): low-premium/high-deductible plans, in conjunction with health savings accounts (HSAs) or health reimbursement accounts (HRAs). An HSA allows employees and employers with an HDHP to contribute to a tax-exempt account to pay for uncovered medical expenses. Unused funds can be carried over into subsequent years. With an HRA, employers set aside money to reimburse employees’ deductibles or qualified out-of-pocket medical expenses up to a certain amount. While the money can be rolled over for use in future years, it technically belongs to the employer.

In keeping with its name, a high-deductible health plan has deductibles of $1,000 to $4,000 before the insurance begins to pay for expenses. So one way these plans work is for an employer to put money into an HSA or HRA for each employee to be used toward his or her deductible. For example, say the deductible was $1,800 for an individual and $3,600 for a family. The employer could implement an HSA and put in $1,500 per individual and $3,000 per family. That leaves the more traditional (and palatable) $300 deductible for the individual and $600 for the family, says Myron Jucha, vice president of Brooks, Jucha & Associates, a San Diego-based employee benefits company that actually implemented this plan for a small business.

These plans put the responsibility of costs on employees. When employees are in charge of their health care dollars, they are much more likely to question doctors and fight harder to save money. In one instance, says Jucha, a client had a sinus problem and needed surgery. He had an MRI from another facility but the surgery center wanted to do another MRI at its own facility. That person fought to use the one he already had and avoid additional cost. “That never would have happened under an HMO,” says Jucha.

Another example: A client went to get an X-ray and offered to pay cash. The cost of the X-ray went from $200 to $100. “We have seen a reduction of 30 percent in health care costs when we implement a high-deductible health care plan with an HSA,” says Jucha.

Don’t wait for President Obama’s health care reform to buy coverage. At best, implementation of new rules and regulations won’t take effect until 2011. When looking for an insurance plan, Gibbs recommends shopping around to get as many quotes as possible. Also, always buy from a licensed agent or broker, and make sure the insurance carrier is rated B-plus or better from rating company A.M. Best. Finally, understand the policy and read the fine print. Some policies are minimal medical coverage plans in which the plan pays the first $500 and the policyholder pays the remainder of the expense.

Source: Toddi Gutner


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