Posted on 27 Aug 2009
While the debate over national health care reform continues to rage, many small business owners say they are struggling to provide health insurance for their staff and lack the confidence to correctly determine the health insurance that best matches the needs of their employees, says a survey by the National Association of Insurance Commissioners (NAIC).
In the NAIC survey, among a participant sample of 500 small business decision makers, 64 percent of small business owners responded that they are not confident picking a health insurance policy that fits their budgets and their employees’ needs. One-third admitted that they cannot afford to provide health insurance to their employees.
Additionally, the study found a clear gap in understanding the fiscal responsibilities associated with offering health insurance. Of the small business owners surveyed, 60 percent said they are not confident they understand the tax implications of paying for a portion of their employees’ health insurance premiums. Only 27 percent say they understand all the factors that can affect their small group health premiums.
“In this economic environment, small business owners need to be especially mindful of any decision that will affect their financial future,” said NAIC President and New Hampshire Insurance Commissioner Roger Sevigny. “Now, more than ever, it is important they get smart about their choices and consider the implications that making a bad decision could have on their business and their employees’ future.”
These tips can help small business owners better understand their health insurance needs and requirements:
• Before purchasing any insurance policy, interview several licensed insurance agents specializing in the health insurance needs of small businesses.
o Compare the costs of equivalent coverage from several insurers to ensure you are getting the best deal.
o Ask how premiums have increased over the past five years.
o Talk to other small business owners about their experiences with health plans and insurers.
o Confirm with your state insurance department that the agent or broker you are dealing with is licensed. Visit www.naic.org/state_web_map.htm for a link to the state insurance department Web sites.
• Before selecting a health plan, survey your employees to find out what coverage they consider particularly important.
o For example, if a number of your employees are married and plan to have children, pregnancy-related coverage likely will be extremely important to them.
• Understand the factors that influence the cost of the small group coverage in your state.
o States vary with respect to the methods they permit for calculating premiums. The range of premium rates an insurer can charge a small business are typically set by state law for employers offering plans with the same benefits design and which have similar “case characteristics” (e.g., age and sex of employees, geographic location of the business and other objective information). In other states, a method called “community rating” is used to determine premiums, where everyone in a specific geographic area pays the same rates for health insurance.
• Take advantage of the tax benefits available to your company.
o Businesses can generally deduct 100 percent of the premiums they pay to qualifying health plans for their employees. Be sure to discuss this matter with your accountant or tax advisor.
• Tap the resources of the NAIC and your state insurance department.
o Know your rights with health insurers by checking with your state insurance department. Typically, small group health plans must treat equally all of your eligible employees (generally full- or part-time employees who work at least 30 hours a week).
o Determine if your state has a special program to assist small business owners with providing employees and their dependents with health insurance.
o Understand COBRA and other federal regulations for small business employers offering health plans.