Few small businesses have the problem of too much revenue or excessive amounts of cash reserves. In fact, most smaller enterprises must watch every penny, as they say. With smaller budgets and the need to constantly juggle or offset increasingly rising costs, any purchasing decision must be weighed and decided with cost-savings in mind.
However, there are also many costs and expenses that cannot be negotiated nor reduced.
Fortunately, when it comes to the costs of small group coverage health insurance, there are steps that a business owner can take to keep them to a minimum.
A BRIEF LOOK AT SMALL GROUP COVERAGE COST FACTORS
Businesses with fifty or fewer employees are rated under the Affordable Care Act small group guidelines, while businesses with a greater number of employees are “medically underwritten.” This term means that each company is individually evaluated based on its risk factors and past claims.
A “small group employer” is generally defined as a business with 2 to 50 full-time employees. In addition, the business owners are generally counted as employees, so sole proprietorships with one employee usually fall into this category, as do partnerships with no employees. Partnerships are defined as having two or more partners.
Some of the major small group coverage cost factors that small business owners should consider include the following:
Monthly Premiums
For those businesses with 50 or less employees, unlike larger enterprises, are usually not able to negotiate with insurance companies over their group health insurance premiums.
And monthly premiums are a significant portion of the overall costs related to health coverage.
As one article points out,
“According to the Kaiser Family Foundation (KFF), annual group health insurance premiums average around $7,739 for single coverage and $22,221 for family coverage. 29% of small organizations (defined in the Kaiser Family Foundation study as those employing under 200 workers) paid between 25% and 50% of the family coverage premiums, which is about $463 to $926 per month. Premiums run higher for certain health insurance plan types, like preferred provider organization plans (PPO) and health maintenance organization (HMO) plans.”
Demographics and Location
As HealthCoverageGuide.org notes, for groups such as small businesses, the insurer determines a premium price based on risk factors balanced over the entire group, using general information on members of the group, such as age or gender.
Fortunately, providers are required by law to offer coverage to small groups.
Small employers are guaranteed group coverage if they choose to offer it, regardless of their employees’ health status. In addition, spouses and children can be included in these demographic calculations.
All participating employees in a group plan are allowed to include their spouses or children under the plan. And the Affordable Care Act requires group insurance plans to extend coverage to adult children through age 26. In addition, small group employers have the option of expanding the definition of child dependent to include employees’ children older than 26. These age limits will vary by the plan type.
Self-funded vs Traditional
While there is no “one-size-fits-all” approach for reducing health care costs, self-funded insurance, also known as self-insurance, can be an important consideration for your overall strategy.
According to one provider,
“Self-funded plans may be more flexible than traditional, fully insured plans. They’re subject to less regulation and offer business the opportunity to customize their health care plan to meet their unique business needs. And because companies are paying only for the health care costs of their own employees, there may be money left over at the end of the year that can go toward other business needs.”
Type of Insurance
Your choice of health coverage insurance approach can affect your company’s health insurance costs.
For example, the most expensive are indemnity plans. Indemnity plans allow employees to direct their own health care and visit almost any doctor or hospital they like. The insurance company then pays a set portion of the total charges. Indemnity plans are also referred to as “fee-for-service” plans.
Managed care in an HMO, or health maintenance organization, on the other hand, is usually the least expensive health insurance. An HMO limits members to network providers with few exceptions. There are also combination plans such as the point of service (POS) plan. A preferred provider option (PPO) usually costs more than an HMO.
With a POS plan, the provider receives a fixed amount per patient, while in a PPO plan, the plans’ network providers accept reduced fees. A PPO usually costs more than a POS plan.
Choice of Coverage
Your choice, or extent, of coverage also affects costs.
For example, if your company pays a higher percentage of the monthly premiums, your cost increases. Lower caps on your employees’ out-of-pocket costs can also increase your payments, while higher deductibles will generally lower them. In addition, higher employee co-payments tend to reduce the costs for your business.
J.C. LEWIS FOR YOUR EMPLOYEE GROUP COVERAGE HEALTH INSURANCE NEEDS
At J.C. Lewis Insurance we want to work with you to be your insurance partner. With over 40 years of experience, we offer quality health insurance plans only from the leading health insurance carriers licensed to do business in the states that we operate in.
We are a family-owned and operated health insurance agency located in Sonoma County, California. As specialists in finding and managing medical insurance plans for small businesses, we are licensed and certified by each insurance carrier we represent.
So, whether you’re considering medical insurance for you and your employees, or you are looking to make changes to your existing plan, you’re quite likely to have several questions and concerns.
At J.C. Lewis, we always welcome your questions about health coverage insurance and you can be confident that J.C. Lewis Insurance Services will help you find the right solution.
J.C. Lewis – the right choice for helping you make the right decision for your health coverage needs.