Small Business - Health Insurance Information
Small business - group health insurance
The cost of health insurance for employees – by far the single most expensive benefit offered by employers – is one of the greatest challenges many small businesses face today. As business owners know, health insurance is a powerful tool for hiring and keeping the best workers.
Business owners are not required to offer health insurance to their employees.
Small group health insurance provided by insurers is regulated by the state of Missouri. Federal law also mandates that an insurer cannot deny coverage to a small business due to the health conditions of its employees or their dependents (although insurers can consider this when setting rates). In addition, self-insured health plans (where an employer insures itself), are regulated by the federal ERISA (Employees Retirement Income Security Act of 1974) law. It is rare for a small company to self-insure its health insurance.
What kind of health insurance best fits your business?
Small businesses commonly offer several different types of health insurance. Major medical plans typically cover a comprehensive array of health care needs, including doctor visits, prescription drugs and hospital care. These benefits can be delivered through several different types of plans:
Managed care plans – These plans offer a network of preferred health care providers. While those covered by the plan don’t have to use these providers, they get better benefits if they stay in the network. A managed care plan might be labeled HMO, PPO or POS. A 2006 survey of U.S. small businesses with health insurance showed that more than 90 percent had a managed care plan.
Hospital / surgical plans – These plans are not “comprehensive” or “major medical” coverage, meaning they generally only cover hospitalization and surgery. They don’t cover prescription drug costs, doctor’s office visits and other services.
Self-insured arrangements – Your agent may suggest one of these arrangements for your business. By self-insuring, you collect premiums on a regular basis and use these funds to pay health-related claims filed by your employees. Be advised that the DIFP reviews these arrangements on a case-by-case basis and may determine that some such arrangements violate state law.
Limited mandate plans – These plans do not offer some coverage that comprehensive plans are required by state law to offer, such as mammograms and colorectal screenings. This may result in a lower-cost plan. Missouri law allows small businesses to choose limited mandate plans if they currently have no coverage or if they cannot afford to maintain their current plan because of the price.
- The average Missouri premium for small group health insurance was $365 per month ($4,385 per year) per employee and $790 per month ($9,476 annually) for family coverage, according to 2006 data from the federal government.
- For PPO plans, individual deductibles averaged $849 with annual out-of-pocket limits of $2,700 and co-payments of $21 for in-network physician visits.
- HSA plans had an average deductible of approximately $2,220 and average annual out-of-pocket limits of approximately $2,800.
The deductible data comes from a 2006 survey by America’s Health Insurance Plans, the association of health insurance companies. AHIP surveyed 21 of its member insurers that offer coverage to more than 650,000 small groups (defined as firms with 2-50 employees) that employ 4 million workers and their 3.2 million dependents. For more information, visit www.ahip.org or www.statehealthfacts.org.
Shopping for health insurance
Before purchasing, interview several licensed insurance agents who specialize in serving the health insurance needs of small businesses.
- Shop around: compare the costs of equivalent coverage from several insurers to be sure you’re getting the best deal.
- Ask about premium cost increases over the past five years.
- Talk to other small business owners to find out about their experiences with different kinds of health plans and insurers.
- Ask lots of questions before you decide on a health plan. If you fail to get the answers you need from one agent or insurer, contact others.
Before selecting a health plan, it’s a good idea to survey your employees to find out what kind of coverage is particularly important to them.
- Know your employees. For example, if a number of your employees are young and married, they may want to have children. Pregnancy-related coverage will likely be extremely important to them. Other companies may have mostly young employees who rarely see a doctor.
- Remember, small business group health plans are not standardized, and benefits may vary greatly from one plan to another. In Missouri, group health insurance must cover childhood immunizations, mammograms, pap smears, prostate and colorectal screening.
Understand the factors that affect your premium costs.
Missouri law allows insurers to calculate premium rates based on age, sex, industry, geographic location, family composition and overall health of the group.
Some cost factors are clearly outside of your control. Other cost factors can be managed, such as:
- The type of health plan you select. For example, HMOs are typically less expensive than
PPOs; both are less expensive than indemnity plans.
- The specific benefits you select. For example, choosing higher deductibles, co-payments and maximum out-of-pocket limits can lower monthly premiums. On the other hand, choosing lower lifetime medical limits can lower premiums.
- The costs you transfer to your employees. Most small businesses ask their employees to bear a portion of the cost of their health insurance premiums. While this doesn’t affect the premium charged by the insurer, it does affect the amount the employer pays.
Know your rights
Small group health plans are typically required to treat all of your eligible employees (generally full- or part-time employees who work at least 30 hours a week) equally and may not discriminate against those who are ill or become ill.
Small employer plans can exclude coverage for pre-existing conditions for up to 12 months after an employee’s enrollment date.
Explore joining a trade association for small businesses in your industry operating in your state
By joining a trade association, you may be able to join a larger group, which may offer a more affordable plan than you could purchase on your own.
Missouri allows small and large businesses to pool together to purchase health insurance for their employees, but the plans must be underwritten and rated as a single employer, uphold a uniform health plan design, guarantee issuance to all members and comply with all other federal and state insurance requirements.
Consider individual health insurance
Many insurance companies offer individual health insurance policies. You should compare several policies with comparable benefits to see which you prefer.
You may be able to get more affordable individual health coverage through a trade association or small business organization in your state.
Consider tax-protected accounts for your employees
These accounts include flexible spending arrangements (FSA – cafeteria plans), health savings accounts (HSA) and health reimbursement accounts (HRA). Get more information on these accounts.
Do some other research on the insurer and agent. Cost is not the only important factor.
Check to verify that both your agent and the insurance company are licensed in Missouri. You can do this online or by calling the Missouri Insurance Consumer Hotline at 1-800-726-7390. (Some agents work for one insurance company, while others are independent and can sell policies from several different companies.)
Look into the complaint history of the insurer you’re considering. You can find that out using our complaint index page or calling the Missouri Insurance Consumer Hotline at 1-800-726-7390.
Understand COBRA and other federal regulations for small employers offering health plans.
Under federal and state law employers that have a group health plan are required to offer their employees (and their dependents) the option of continuing their membership in the group plan at their own expense after they leave their job. This is known as "electing COBRA," and these employees are entitled to continue coverage for 18 months.
Events that qualify for continuation of coverage:
- Voluntary or involuntary termination of employment for any reason except gross misconduct - employee entitled to continuation.
- Death of a covered employee - spouse and dependent children entitled to continuation.
- Divorce or legal separation of a covered employee - spouse and dependent children entitled to continuation.
- Covered employee becomes eligible for Medicare - spouse and dependent children entitled to continuation.
- Loss of child coverage due to age - child entitled to continuation.
Federal COBRA law governs employers with 20 or more employees, while state “mini-COBRA” law governs employers with fewer than 20. The laws are identical.
Take advantage of the tax benefits available to your company.
Businesses can generally deduct the premiums they pay to health plans for their employees. Discuss this with your accountant.
Beware of “alternative” types of health insurance – or outright fakes
Medical discount plans are not insurance
These plans claim to offer discounts for members who use certain doctors, pharmacies and hospitals. Verify these claims with those providers before buying.
While these plans are not insurance, they are regulated by the department. Call our Insurance Consumer Hotline to verify the plan is registered as required by Missouri law.
Bogus health plans
You may see ads on late-night TV, in spam or in junk faxes offering “unbeatable” low prices on group health coverage. Many of these are unlicensed, illegal operations. You can find out with a quick phone call to our department. As with most products, if a deal sounds too good to be true, it probably is.