Ten Ways for Small Business Owners to Save on Health Insurance
By W. Adam Clatsoff
The cost of employee health insurance is one of, if not the largest expenditure a small businessperson faces. Most small business owners buy health insurance poorly. Luckily, the situation can be improved 70-80% of the time. By purchasing health insurance properly, it is possible to drive thousands, even tens of thousands of dollars to the bottom line. Imagine how many pizzas cooked, lawns cut, or cars washed a small business would have to deliver to put $10,000 on the bottom line. Here are 10 health insurance savings tips for the small business owner with 1 to 10 employees.
1. Purchase Health Insurance Properly - It is not the responsibility of insurance agents to teach their clients how to buy health insurance properly. It is not the responsibility of accountants to advise their employers. This is a task for the business owner and the business owner alone. A business owner should invest the time to consider all options.
2. Think Individual Health Plans - For small business owners, group insurance will always end up being far more expensive than individual health insurance will ever be. Avoid group insurance and purchase a rate-regulated individual medically underwritten policy. Consider buying individual health insurance yourself, and if applicable, give your employees money toward the purchase of their individual policies. If you buy medically underwritten policies for your employees, you cannot deduct the premiums as a business expense and will have to include it in the employees' income. You could, however, set up a health reimbursement plan.
3. Avoid First Dollar Plans & Co-Pays? - The original purpose of health insurance is to pay for the more catastrophic (and expensive) care that most consumers cannot afford. Why focus on physician co-pays? Insurance purchasers think they are getting a good deal with $10 or $15 co-pays, yet consider that the insurer may overcharge on the insurance premium to pay all of those small claims based on the low co-pays. If you avoid co-pays and take care of your smaller healthcare bills yourself, your health insurance plan can be structured to pay for the major medical issues when you really need them.
4. Beware of the Lowest Cost Plan - You get what you pay for. Some plans, called out-of-state or association plans, are able to sidestep Florida state regulations, charge a low price to attract you, do very little underwriting up front, and then at the time of claim, underwrite with an eye toward denying the policy and/or raising premium rates through the roof in the future when their low rates can't hold up.
5. Judge the Insurer Carefully - Beware of illegitimate programs targeted to small businesses that offer low premiums and easy enrollment that are marketed through a professional organization or association that does not answer to state regulations. Be sure the company is recognized by the State of Florida. You can verify an insurer's license by calling (800) 342-2762.
6. Know the Difference between a Policy & Certificate - Take a look at the document you receive when you have been approved for coverage. A Policy is a unilateral contract between you and the insurance company. It outlines the binding promises that the insurance company makes to you as the policy owner. A Certificate is nothing more than a description of a master policy that exists between a third party and the insurance company, and is not a contract.
7. Consider a Consumer Driven Health Plan - The program consists of a qualifying high deductible health insurance policy with a minimum $1,150 deductible for an individual ($2,300 for a family) and a maximum out-of-pocket spending cap of $5,800 for an individual and $11,600 for a family, as well as a separate health savings account limited to maximum contributions of the lesser of the policy deductible above or $3,000 for an individual and $5,900 for a family.
8. Choose your Deductible Wisely - Self insure from the routine, non-threatening expenditures, and save the insurance for major medical issues. Determine what deductible is right for you. Estimate how much you spent last year in all categories of care including prescriptions, dental and vision. Subtract that from the savings in premium for a high deductible health policy. See how much you overpaid for your low deductible health insurance. Is this money better in your pocket or the carrier's?
9. Understand Each Insurer's Practices - Be careful to understand in network vs. out of network terms. Does out of network coverage mean a percentage of what the physician charges or of what the insurer says the service is worth? Also, compare PPO (Preferred Provider Organizations) discounts. It is not the higher discount that is as important as what is eventually paid on your behalf when you have a claim.
10. Don't Buy Health Insurance on the Internet - You will almost always buy absolutely the wrong coverage. Health insurance rates are regulated. The rate is the same wherever you buy it. Educate yourself and purchase it from a live person.
If you are well informed, health insurance can often be remarkably affordable.
- (W. Adam Clatsoff is president and owner of Adcahb Medical Coverages in Coral Springs, Florida and author of HEALTH INSURANCE 50% LESS.)
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