What does the average small business employee health insurance plan look like?

With the cost of healthcare continuing to go up you might be wondering what the average small business health insurance plan looks like. You might also be wondering how the plan offered by your company compares to the national average. While every health insurance plan is different in its details, there are some general things that are common to all of them.

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For purposes of definition it must be noted that federal law defines a small business as one with 50 or fewer full-time workers. A full-time worker is one who works 30 or more hours per week.

For insurance purposes however, states define small businesses differently. For example, the Texas Department of Insurance defines a small business as one with 50 or fewer employees who are both full-time and eligible for health care coverage.

What are the different types of small business plan?

With few exceptions, most health insurance plans offered by employers fall under one of two categories: managed care or indemnity policies.

Managed care is what most of us have, and it utilizes an HMO (health care maintenance organization) and the philosophy of keeping health care costs down by encouraging preventative medicine and tightly restricting access to healthcare services. Managed care is less expensive than indemnity policies, but also more restrictive at the same time.

An indemnity policy is a more traditional one in the same vein as a standard auto, homeowners, or life insurance policy. Most indemnity health insurance policies are written directly by health insurance companies rather than through HMOs. They are more expensive than managed care, but they offer nearly total freedom among subscribers in determining their own health insurance options. Indemnity policies are also intended to cover primarily catastrophic care expenses, so they usually won’t include things like routine doctor visits and childhood vaccinations.

What category does my PPO fall under?

A PPO (preferred provider organization) is just one form of managed care. It is functionally very similar to the HMO in that it requires subscribers to choose a primary care physician who will be responsible for directing the majority of the individual’s health care decisions. For example, if the subscriber desires to see a specialist he will first have to visit his primary care physician to get a referral. Without that referral the patient will be left to pay the majority of the bill on his own.

The PPO is just as restrictive as the HMO, in terms of how individual care is managed, but it also adds another layer of restriction. PPO subscribers are limited to a network of participating doctors and healthcare facilities, and are required to seek care within the network whenever it is reasonably possible. If care is sought outside the network, subscriber might be responsible for a greater portion of the cost. Companies who self insure often use the PPO model because it’s less expensive for them.

Do small businesses offer more than one option?

It is not uncommon for small businesses in America to only offer a single healthcare plan option to employees. According to the National Council of State Legislatures the reason behind this is primarily one of cost.

Small businesses don’t have the buying power of large corporations and thus, pay almost 18% more for their share of employee health benefits than their larger counterparts.

Where group health insurance business options are concerned, if small businesses were to provide multiple healthcare options, they would lose purchasing power for each option. This is based on the reality that health insurance companies set group rates based on the number of people in a given group and the total risk they present.

Therefore, the more options a business offers, the smaller each potential group can be. That leads to a higher cost for each plan. While a lack of multiple options may seem like a lack of generosity on the part of the employer, it’s more a business decision designed to help the company remain profitable.

Is it dental coverage usually offered?

A dental health insurance plan is one of those gray areas along side vision coverage. Whether or not small businesses offer dental comes down to their overall costs.

When health insurance companies offer a dental option as part of an overall package a small business is more likely to offer it to employees. If the company has to seek a separate dental package, the likelihood of them offering one decreases. Thankfully, most of vision and dental plans are affordable enough that many small businesses can offer them.

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