If you own or belong to a business or
organization of between 2 and 50 people, chances are you qualify
for (and would benefit from) a group health insurance plan.
Small business health insurance has lots of benefits. Besides
providing medical care for yourself and your employees, a small
business health insurance plan helps spread the financial risk
between all the members, which usually means lower premiums and more extensive coverage for everyone.
But group health insurance has tax advantages too. Employer
contributions to a small business health insurance plan are
generally 100% tax deductible, and employees save on payroll
taxes.
Small businesses (and certain organizations, like non-profits) are
generally eligible for group health insurance so long as they can
show two or more full-time taxable employees.
How group health insurance works
A small business health insurance plan provides
its members with a set coverage with rates calculated using the
group and individuals. Employees may be able to add policy riders
and additional coverage to fit their specific needs, but the basic
policy format will remain the same.
Likewise, although small business health insurance comes in a
variety of shapes and sizes (fee-for-service, HMO, PPO, POS), the
format that's chosen will apply to all members. (And although it
is technically possible to purchase a group indemnity policy, the
managed care plans are much more common.)
Although rate calculations vary both from state to state and
from company to company, the cost of a group health insurance plan
is based on the characteristics of each member, including:
• age
• health status
• occupational hazard
• business and/or residential location
Employees of a business that offers group health insurance are not
compelled to join the plan, but the group must maintain a minimum
number of insured (as few as 2 people, depending on the policy) to
guarantee coverage.
Sidebar
No insurance company in any state can refuse to sell you small
group health insurance if they offer coverage to other small
groups. Find out about the rules and protections applicable to
small group insurance in your state by reading our guide to
group insurance regulations in your state.
The cost of small business health insurance
So what about the bottom line? Well, group health
insurance is less expensive than a bunch of individual policies
bound together, but it's not cheap. No health care in America is.
Depending (again) on the state and the insurer, you, as the
employer, will be required to pay some percentage of an employee's individual premium (often 25% or 50%). If the employee
wants to extend coverage to a spouse or dependant, you may
choose to pay a percentage of that cost, but that's not
required. You'll probably have a lot of policy and payment options
to choose from. Getting right to that . . .
Designing a small business health insurance plan
To get an accurate quote on a small business
health insurance policy, you'll need some reliable information
about both the type of coverage you seek and about the vital
statistics of the group members who want to be insured (including
the number of dependant they'd like to include).
If you don't have all the right info on hand, don't worry. You can
use estimates to shop quotes, and fill in the gaps as you continue
the process. Just keep in mind that the more accurate the info,
the more accurate the quote.