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How a small business health insurance plan can help
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.
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