Business Health Insurance Plans:
What You Should Know
you are one of the millions of people who are self employed and/or
an owner of a small business, you are faced with making a difficult
decision when it comes to group health insurance. With all of the
different types of health plans to choose from, you may just feel
like flipping a coin and hoping for the best. It is important, however,
that you make an informed decision as to which plan will be best
for both you and your employees.
Fortunately today, there
are a number of tax laws that can work to your benefit when it comes
to group insurance. One of the first decisions you should make,
however, is how you want to structure the benefits of your plan.
Typical "major medical" based group plans will include
the treatment of illness, disease, accidents, and medical, emergency,
and surgical care. Options include prescription coverage (which
sometimes can be capped at specified amounts), vision, dental, pregnancy,
and specialty care.
Today, employers are
offered a wide range of insurance products and plan options for
their employees. Many of these products permit you to make adjustments
so that the cost is not so overwhelming. With deductibles and co-insurance,
it is easier to tailor a program that can fit both your needs and
those of your employees without breaking the bank. It's interesting
to note that according to the National Survey of Employer-Sponsored
Health Plans 2004, which is conducted annually by Mercer Human Resource
Consulting, the average total cost of health benefits for all medical
and dental plans offered, averages around $6,679 per employee. This
amount includes the premium contributions of both the employer and
Three popular types of
group health are:
- Indemnity or Traditional
- Health Maintenance
Organization Plans (HMO's)
- Preferred Provider
also referred to as "indemnity" or "fee-for-service,"
allow you to select the doctor, hospital or medical facility of
your choice. With a traditional plan, whenever you seek treatment,
you usually have to pay the bill up-front and then submit a claim
to the insurer for reimbursement. Generally, these plans require
that a deductible be met before coverage can begin. Moreover,
once the deductible is met, insurers predominantly will only pay
about eight percent (80%). While this type of program may be attractive,
it can be quite expensive and the scope of coverage for well care
is often limited.
Health Maintenance Organizations
policies, the medical care of Health Maintenance Organization's
(HMOs) is provided by the HMO's network of providers. What is
referred to as the "primary care physician" (PCP) is chosen from
among a number of contracted physicians, and he or she oversees
all medical care. With a typical HMO, most medical care must start
with the PCP who then authorizes referrals to specialists as deemed
necessary. Note that it is not a requirement that emergency medical
care have PCP authorization. There is a concern that with this
type of insurance, coverage will not be extended outside of the
network. However, if medical necessity mandates it, the HMOs will
generally cover it. HMOs also encourage preventive care and often
cover it either with a low co-payment or at no cost.
Preferred Provider Organizations
As with the HMO, the
Preferred Provider Organizations (PPO) products offer co-payment
options and deductibles. These types of policies help employers
balance the costs between themselves and their employees. The
difference between the PPO and the HMO is that a primary care
physician does not need to be chosen. However, medical care is
provided by a PPO network of physicians. You, or a family member,
are able to receive coverage outside the network, but as a rule,
higher co-insurance or deductibles will need to be met before
With managed care insurance (HMO or PPO), there is no guarantee
that the physician or hospital you want will be a part of the
network. Additionally, physicians and hospitals can participate
or withdraw from the network at any time.
An Insurance Carrier
The three things to
keep in mind when shopping around for an insurance carrier are:
low cost, stability, and service. Costs for coverages can vary
from one company to the next for the same type of plan. Thus,
get quotes from three to four different companies. Insurence carriers
are evaluated and rated by several different rating services.
The most common are: A.M. Best, Standard & Poor's Insurance
Rating Services, Weiss Research, and Moody's Investor Services.
You should check with these rating services and inquire about
the carriers' evaluations and ratings. Lastly, it is important
that you choose an insurance carrier that provides you with fast
and efficient service. You want a carrier that will answer your
questions quickly and will respond to claims in a fair and timely
manner. Generally, quality insurance carriers pay out at a rate
of 75-80%, so be sure that the one you choose does.
While the task of choosing
affordable group insurance can seem daunting, armed with the basic
knowledge of the different types of plans, you should be able
to begin your search for an insurance carrier with more confidence.
Be sure that you compare rates and coverages from at least three
to four different carriers. In addition, you will want to inquire
as to their ratings with the above-mentioned rating services.
Remember, "cheap" should only apply to the premiums,
not the benefits. And yes, quotations can also be requested by
Texas, Florida, New York, Illinois and California residents.
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