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How Do I...Pick a Health Insurance Plan
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By Sharon McLoone |
August 23, 2007 found at blog.washingtonpost.com
It can be a headache for a very small business trying to find the best health
insurance, but there are a variety of tools and resources available to help
alleviate the pain.
A little more than 50 percent of the 18 million firms in the U.S. with fewer
than 10 employees are uninsured, according to a 2005
study (pdf) conducted by the National
Association of the Self-Employed, a small business advocacy group
based in Washington, D.C.
The association is updating that data with new results due out shortly. Kristie
Darien, executive director for the group's legislative office,
anticipates that the number of uninsured will increase. "Costs have
continued to rise, and there's been no relief on the issue within the industry
or marketplace," she said.
A sole proprietor of a business who earns an annual salary of less than
$50,000 a year spends about 18.7 percent of annual revenue on health insurance,
according to NASE. A business generating more than $500,000 annually spends
about 2.3 percent of that money on health insurance.
A one-person business generally has health care options that are restrictive
and costly, according to Darien, whose group represents 250,000 small firms.
Darien points out that a 5-person firm may have difficulty affording
insurance for all staff if even just one employee is a smoker. "That one
smoker can cause the cost of a business's plan to skyrocket and likely be
unaffordable."
"Entrepreneurs are experts in their field or industry, but not
necessarily experts in the field of benefits and human resources," said
Darien. "It's a whole different skill set."
Here are some tips from NASE on choosing a health care plan:
1. State departments of insurance. Each state has one that
is responsible for regulating and approving all health policies within the
state. These offices offer resource guides on companies providing health
insurance within a particular state. Additionally, anyone in the market for a
plan can find out if companies have had a lot of complaints. Click here for the
departments in Virginia
, Maryland and D.C.
2. Web guides. Darien suggests ehealthinsurance.com
as a good tool. A user can enter personal data and the site will return price
quotes for the particular state where a business is located. "It's a good
first step and it gives you a ballpark figure for what your policy might cost,
but you really do need to speak to an agent or broker about your specific policy
before you purchase one," she said.
3. Trade associations. Many offer discounts on health plans
for members. While Darien's outfit offers discounts on insurance, she also
recommends searching for very specialized associations. For example, a
self-employed plumber might find the best plan through a national plumbing
association.
4. Smart shopping. Buy coverage that fits your specific
needs. Choose to have a higher deductible, if that makes sense for you, because
the monthly premium is likely to go down. A lot of high-deductible health plans
cover annual physicals and some preventative care at no additional cost. Many
NASE members shop for health insurance two to three times a year. If a business
owner's current health condition is good then he likely will be able to secure
insurance. But if you're an entrepreneur that has high blood pressure or heart
issues, you may be rejected or denied coverage due to a preexisting condition.
"Your current health condition is a bigger issue than shopping around a
lot," said Darien.
5. Analyze your health risks. Identify which criteria to
give to your insurance firm. "If you tell a health insurer that you'll
raise your deductible and cover certain associated costs, the company may be
more inclined to work with you," she said.
6. Get involved. Health care costs are high, so don't be
afraid to say something to local policy makers. It may be the only way to effect
change.
When a small business can't afford health insurance, some firms turn to
health reimbursement arrangements.
HRAs are a type of health insurance plan that reimburses employees for
qualified medical expenses.
An HRA is a written document created by a business owner that must be
consistent with IRS
guidelines. A small business owner could fashion a form that says, for
example, "I will contribute $500 toward allowable medical expenses for each
of my employees." If an employee buys a pair of glasses, she can submit the
invoice and form to her employer, who will then reimburse her for the cost of
the glasses up to $500.
"It's not health insurance, but it's a great tool because a business
owner doesn't have to deal with the administrative issues and large costs of a
health plan [for employees], according to Darien.
In response to NASE's 2005
study (pdf), the group last year published a free 44-page guide to
understanding health coverage for micro businesses, which can be ordered
online.
Among the information and resources it provides, the guidebook offers a
simple explanation on how to set up an HRA.
While it's a great solution in many cases, according to Darien, there's a
major problem with HRAs. Self-employed people aren't eligible. If you're the
sole proprietor of your firm, you are not considered an employee and that means
you can't participate. The NASE is seeking to expand the rule to include the
owner.
The booklet covers a gamut of issues such as defining health insurance terms
and helping the self-employed determine whether to shop for health insurance
online or in person. The guide also focuses on "wellness" and how it
can boost staff health and a company's bottom line.
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