Healthcare has been a hot topic of late - what it costs, the rights of consumers and how much power insurance companies should have. But most of these discussions relate to individuals. What about business owners? Although it isn't talked about as much, small business owners have several options for insuring both themselves and their employees. Without a thorough understanding of what they are, you can easily wind up paying too much (or receiving too little.) If nothing else, make sure you are familiar with the following:
Ability to Deduct Costs
The biggest difference between business owners and employees (as it relates to healthcare) is that businesses can deduct their medical expenses. This includes not only insurance, but any out-of-pocket expenses for hospital stays, non-elective surgery and other necessary medical procedures. In fact, this is largely why businesses came to provide health insurance to their employees instead of employees buying their own policies.
Yahoo! goes so far as to list this as one of the top ten deductions business owners have at their disposal, noting that you can also deduct such things as 'nonprescription medication, acupuncture and eyeglasses.' In short, it pays to utilize all the healthcare-related tax deductions your business is entitled to.
Group Purchasing Discounts
Business owners also have the opportunity to reap substantial savings through group buying. Depending on how many employees you have, negotiating for a lower rate as a group can save your business thousands of dollars per year in healthcare costs. The reason insurers offer lower rates to groups is similar to why local businesses give deals to pools of shoppers on Groupon. It's in their best interest to trade preferential treatment for guaranteed income from many buyers.
Unsure of how to negotiate for a group discount? Start by getting free online quotes from websites like NetQuote. While you may not end up buying from one of their suggested providers, you can use their quotes as bargaining leverage with the insurer you do choose.
Health Savings Accounts
Another way small businesses can make health insurance available to their employees is via health savings accounts. For those unaware, health savings accounts allow employees to save tax-free money - as long as it only gets spent on medical expenses. Think of it as a 401(k) for healthcare. In addition to saving pre-tax dollars, your employees can also take their account with them should they ever change employers.
These accounts also benefit business owners because company contributions to employee accounts are exempt from payroll taxes. Perhaps most importantly, health savings accounts change the incentive structure of employee/employer healthcare. When the employer pays most or all expenses (as is the case with traditional employer-sponsored health insurance) there is little reason for employees to shop around. But when the employee pays (as they do with HSA's) it is in their best interest to lower costs and pay as little as possible.
High Deductible Policies
Health savings accounts are frequently used in conjunction with high deductible policies. As the name implies, these policies carry high deductibles and cover only catastrophic medical expenses (like hospital visits or emergency surgeries.) Routine matters like doctor's office visits and yearly physicals are paid out of pocket. By purchasing a high deductible policy, an employee is essentially gambling that they can pay for all but the most devastating medical emergencies by themselves.
It's easy to see why these policies are attractive for business owners to offer. For one thing, true medical emergencies are statistically unlikely to happen. More importantly, even if they do, the employee is responsible for paying out a huge deductible before the policy kicks in. 'About 20 percent of large employers offered such plans last year, and 24 percent said they were “very likely” to offer them this year', according to Reuters.
Health Reimbursement Arrangements
A similar option at the disposal of business owners is the health reimbursement arrangement. Here's how they work: you, the employer, define in advance what types of medical expenses your employees are eligible to be reimbursed for. These can include copays, coinsurance, deductibles and medical services. Then, you simply reimburse these permitted expenses as they arise for each employee covered under the arrangement.
There is no limit to how many expenses you can reimburse - the only restriction is that the money cannot be deducted from an employee's salary. Health reimbursement arrangements can also be extended to spouses and dependents of your employees (including deceased employees.)
Short-Term Health Insurance
If your business hires temp or seasonal workers, short term health plans are worth considering. As eHealthInsurance.com explains:
'Short-term health insurance plans provide you with coverage for a limited period of time, and may be an ideal solution for those between jobs or those waiting for other health insurance to start. Typically, short-term plans offer coverage up to six months, although some plans may offer coverage up to 12 months.
The application process for short-term health insurance is usually simpler than standard, longer-term health insurance. Short-term health insurance plans are designed to protect against unforeseen accidents or illnesses, rather than to provide comprehensive coverage, and, as such, typically do not include coverage for preventive care, physicals, immunizations, dental or vision care.'
Because of their short duration and limited coverage, short term plans are not the ideal solution for a permanent workforce. Consider them only when hiring employees for brief stints on the job or during trial runs when you are evaluating someone for permanent employment.