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Big Bucks for Small Business Health Insurance

Sep 6, 2007
Health insurance for small businesses is among the most flexible health insurance products for employers. Large employer's rates are determined by the claims experience of their particular employees. Small employers are generally pooled with other small employers within a given industry or in a general pool of businesses of many industries.

The best news is that health insurers cannot decline coverage for qualified employers with between two and fifty employees. In accordance with the Health Insurance Portability and Accountability Act (HIPAA), small employers who provide a reasonable contribution towards the cost of health insurance for their employees (typically at least 50% of the single cost) cannot be declined coverage so long as 50% of the eligible employees participate in the health plan.

As a small employer the ability to get coverage is viable and can be affordable. Health insurers must comply with the 50 departments of insurance within the 50 United States and there are differences within each states insurance regulation. Your states department of insurance probably has an employers buyers guide for health insurance that is likely available online.

Now the bad news about health insurance for small businesses: In many states, health insurers have the ability to charge based upon the risk within a given employer. For example, a small employer with 20 employees that has a healthy group of employees with no health risk will be less expensive than a comparable group of 20 employees with a serious medical risk such as cancer or other serious health condition. In fact, in many states the range of rates from low to high can be as much as 107.8% rate increase from the lowest point to the highest point.

Health insurance for small businesses will allow for much flexibility in plan design. Remember that the lower the deductible and out of pocket liability, the higher the pricing. Going with a higher deductible plan and using a health savings account or setting up a health reimbursement arrangement may enable lower employer costs than a low deductible plan such as a $250 or $500 deductible plan.

So the choices are many and the price will be reflective of the choice you make and the risk within your company depending upon the state in which your business is domiciled. Be sure to evaluate on your plan choices and understand how the plan works so that your employees will be able to gain a full understanding of the plan's core attributes. And remember to reassess your plan at least every other year if not each year.
About the Author
Scott is a partner in ESP Benefit Design, an employee benefits insurance firm based in Westerville, Ohio. (614-882-8535) Scott has an MBA from Franklin University. Scott has worked with over 6,000 customers. Email Scott at scott@espbd.com

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