As a small business owner, it’s important to understand your health insurance choices and find the right match for your personal needs and budget. Although the choices available to small business owners are similar to those available to self-employed individuals, small business owners have unique concerns and opportunities when it comes to selecting a health plan. For example, the money small business owners spend on health insurance for their employees may be tax-deductive in certain situations. To select the best health insurance plan for yourself, your family and your business means knowing your priorities and gaining enough insight to make an informed decision. You should be asking questions like: Which benefits are the most valuable to me and my employees? Who will be covered under this plan? How much cost-sharing can I really afford? Answering these questions and others like them will help you better assess your needs.
Assessing and Understanding Your Needs
The first step towards choosing a health plan for your business is prioritizing your needs based on your circumstances. Offering great flexibility to employees, traditional health insurance is the choice of most small businesses. With traditional health insurance, employees can visit any doctor or hospital. However, it’s typically more expensive than managed care plan that can offer “fee for services” options that “mimic the freedom of traditional insurance”, according to a FindLaw article. The potential drawback of a managed care plan is that employee co-pays and deductibles can be very high.
When considering your options, a whitepaper published by eHealthInsurance recommends using the following four criteria to determine which plan best suits your needs:
Health Benefits:
Be sure to only purchase what is critically important to you and your employees. You can save money by avoiding plans offering expensive and unnecessary benefits, such as maternity or prescription drugs, if you know it’s highly unlikely that you’ll need them.
Cost:
Look into your budget to determine which plans may work when you factor in cost sharing between employer and employees, monthly premiums, deductibles, copayments and coinsurance. If you’re primary concern is a low monthly premium, consider a high-deductible plan.
Brand:
Do your research when it comes to brands to find out if there are certain carriers you like or want to avoid.
Add-Ons to Your Coverage:
Decide whether or not you want to offer your employees dental or vision coverage. Some group health insurance plans allow you to add additional coverage onto your existing plan rather than buying them separately.
Self-Insured Health Plans
Many small business owners still provide health coverage through fully insured healthcare plans, but with the implementation of the Affordable Care Act (ACA), rising premiums are making it a challenge to be cost-effective. To overcome these new hurdles, some business owners have adopted self-funded group plans, which can increase cash flow and keep employees happy while also limiting financial risk. Here’s how it works: With a self-insured policy, the business owner pays a specific amount into a claims fund each month that covers your employees under your plan. Contrarily, with a self-insured plan, the business owner only pays for what they need and can further protect themselves with stop-loss insurance to avoid unexpected expenses in the event of a major claim like $50,000 or $100,000. Companies who are self-insured assume most of the financial risk of providing health benefits to employees, instead of paying premiums to insurers.
Is Third-Party Administration Right for Your Business?
A Third Party Administrator (TPA) is an organization that manages employee group benefit plans on behalf of an employer. Until recently, this responsibility typically fell on the shoulders of group insurance carriers. Changing or selecting a benefits provider can be a time consuming and complex process that can be disruptive to employees and administrators. A TPA can make this process a lot easier and free up time for you to focus on running your business.
Due to the fact that TPA’s are buying up health plans in such large volumes, they have the ability to negotiate large discounts with carriers. TPA’s have a significant advantage in negotiating contracts and renewals. They can also introduce new carriers to an employer’s plan with generally little disruption to a company and its plan members, which makes complex and time consuming implementation a thing of the past. Because they oftentimes represent significant blocks of business, TPA’s can spread your risk over their entire business, giving you greater cost certainty and reduced vulnerability relative to dealing directly with an insurance company. By having access to multiple speciality insurance carriers through your TPA, you can minimize increases to your company plan. It’s less of an uphill battle for a TPA to negotiate a renewal with a carrier that it has thousands of employees under contact, in comparison to a negotiating with broker/advisor when you only have dozens.
Reducing the Complexity of Selecting a Health Plan with a TPA
Along with the reasons listed above, a using a TPA can also simplify and consolidate billing, which means only one bill to manage and pay regardless of the number of carriers you use on your plan. You also typically receive privacy protection and fraud prevention services, which can save your company from a catastrophic and costly data breach down the line. With the implementation of the ACA, the benefits business is becoming increasingly complex. Without a knowledgeable administrator to help you navigate the process, there can be disastrous financial repercussions. With a TPA leading the charge, you can minimize risk and financial exposure for your company and streamline the management and administration of your health plan.
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