Health insurance is a major benefit provided by employers for employees. Comprehensive health insurance is often viewed as an incentive that supplements an employee’s salary. A business is eligible to purchase small business health insurance when it has from two to fifty employees.
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According to the U.S. Census Bureau in 2010 over 55% of the U.S. population had health insurance coverage provided by an employer. Small businesses should get health insurance coverage for employees when they want to:
- Protect the health of their workforce.
- Offer benefits to valued employees to supplement income.
- Reduce employee turnover.
- Recruit potential employees with attractive health benefit packages.
What kinds of health insurance are available?
There are many different options for employers looking to provide health coverage to employees. The benefits that a small business chooses to offer should be based on the needs of the business’s workforce.
Group insurance works by a set of participants sharing the cost of premiums. Someone who has expensive health needs can get the same coverage because there are other participants who do not use the coverage as much. In this way, small businesses can provide benefits for hospital visits, exams, prescriptions, and doctor visits.
Indemnity plans use a deductible as a way for participants to pay for services. A deductible is a set amount that must be paid out-of-pocket by the insured employee. Payments that count towards the deductible include copays, prescriptions, and office visit charges. The insurance begins to pay a percentage of the medical costs once the deductible has been met. Participants usually have the option to choose their own doctors and hospitals.
Health Maintenance Organization plans, or HMOs, restrict participants to a network of preferred doctors, hospitals, and pharmacies in order to reduce costs. You must get a referral from your primary care physician to see a specialist; providers seen outside of the approved network will likely not be covered by the insurance.
Preferred Provider Organization plans, or PPOs, are similar to HMOs in that there are preferred health providers you must utilize to receive full coverage. The insurance creates an agreement with a medical group or hospital to provide services at reduced rates. Those providers who are not on the preferred list can be seen with reduced coverage.
A Point of Service, or POS, plan is like an HMO and PPO in that it has a preferred network; but the insurance will cover services from a provider who is outside of the network as long as they were referred by one within the network.
What are other health benefits can employers provide?
Additional benefits that are not part of most group health insurance plans are vision and dental. These insurances cover:
- Visits to the dentist and optician
- Dental work
- Contact lenses (sometimes covered with these benefits)
Another option is a flexible-spending account, or FSA. A portion of an employee’s pay is deducted and deposited in the account. The money can then be used for any medical service that is not covered by insurance; medical supplies qualify if they are prescribed by a doctor. The employee profits from FSAs because the money is deducted prior to taxation, lowering the employee’s taxable gross earnings. Money in an FSA must be used by the end of the calendar year.
Are small businesses required to provide health benefits?
No company is required to provide health benefits to employees. However, once an employer offers health benefits, there are laws set by HIPAA governing the availability of coverage.
All businesses, except those in Texas, are required to provide workers’ compensation insurance according to the Insurance Information Institute. Workers’ compensation provides medical coverage and lost wages for employees who are injured while on the job. States set their own requirements for workers’ compensation benefits.
What is HIPAA?
The Health Insurance Portability and Accountability Act set rules and standards governing group health insurance. In essence, coverage cannot be denied to individuals because of poor health. Small businesses or insurance companies cannot impose higher premiums for those with disabilities, pre-existing conditions, or other health history issues.
Small businesses and health care providers must also provide confidentiality to participants concerning their health issues. Further information can be found at http://www.hhs.gov/ocr/privacy/ concerning HIPAA regulations.
How can a small business find the best rates?
With smaller budgets and fewer participants to share liability, small businesses face greater obstacles to finding affordable coverage for employees. The Affordable Health Care Act of 2010 was aimed at making health care more affordable for individuals and small businesses.
The National Association of Insurance Commissioners offers the following tips for small businesses looking for health coverage:
Find out what kind of insurance coverage will work best for your employees. The coverage should provide what employees need. Compare coverage from a few different insurance companies to find the best options and rates.
Understand the factors that insurance companies use to determine premiums. This is important for keeping cost down; factors vary from state to state. Further information can be found at http://www.insureuonline.org/smallbusiness/.
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