Nailing down a health-care policy for your startup business can be like the timeless, fruitless search for the Holy Grail. Entrepreneur after entrepreneur can testify to the frustrations of trying to find an insurer who is willing to take on his business.
But health insurance policies are available – though usually at high cost – to most small businesses. The key is in knowing how and where to look for them.
Understand the varieties of health insurance plan design
Entering the world of health-insurance plans is like wading into thick alphabet soup. You need to start with a basic understanding of the coverage possibilities that you might see.
Indemnity or fee-for-service (FFS) plans are the traditional policies your parents grew up with. Go to whatever doctor you want; the doctor sends the bill to the insurance company and you’re covered, maybe having to pay only for an office visit. FFS plans are still around today, but you’ll pay far more out-of-pocket expenses and higher premiums in exchange for the maximum flexibility.
Managed care is the reigning paradigm in health insurance today. Preferred provider organizations (PPOs), point-of-service plans (POS) and health-maintenance organizations (HMOs) are all variations on this theme. These plans use “networks” of physicians, hospitals and other providers that have agreed to provide comprehensive services to plan members in exchange for group discounts. You must stay “in network” to get your medical care, or pay financial penalties.
Try the traditional route for getting a group health insurance plan
Major health-insurance companies are increasingly sensitive to the needs and difficulties of entrepreneurs, and are more and more interested in finding ways to offer you traditional group coverage. They can offer you reasonable premiums if somehow they can insure the risks for you, your family and your employees as part of a larger group.
Aflac, for one, now has plans offered through employers that are “portable” after employees leave the company – to start their own business, maybe? Physicians Mutual offers something it calls an Integrated Health Portfolio that puts together the crucial basics of health insurance for small businesses. And in California, Kaiser Permanente has just launched a program that provides seven different options, including several network plans, for companies of two to 50 employees.
To learn whether you can qualify, contact a local independent insurance agent who represents a broad line of insurance plans and let him do his job trying to match you to one. Or you can do the legwork yourself by hopping online and talking with customer service at insurers you select.
Find a group for your business
There are other ways of gaining the actuarial power of belonging to a group for health-insurance purposes. State-based associations are one of the best routes; so far, the federal government doesn’t allow national trade groups to make health insurance available to their members.
Local chambers of commerce, state-wide industry associations, plans sponsored by college alumni groups, the National Association for the Self-Employed – there’s an increasing variety of options here. The common denominator is that you must qualify for the organization and pay its dues.
Also, more and more small businesses are joining forces to create group purchasing alliances of their own. The best way to locate one of these is to find your state’s Department of Insurance website or call the department directly. The National Association of Insurance Commissioners has a list of state DOI websites. Or you can call your local Small Business Development Center or chamber.
Sometimes, your small business can qualify for group rates that states have mandated as part of their overall push to reduce their ranks of uninsured citizens – “last resort” coverage. A few states are even requiring the same insurance plan that covers government employees to be available to sole proprietors. Contact your state insurance commissioner to see if you qualify.
And in some states you can form your own “group” with as few as two employees, including yourself, as long as your business meets certain criteria and you pay the employer’s share of Social Security taxes for your employees. Check with your state insurance commissioner on this, too.
Resort to individual health insurance coverage
Individual health insurance is medically underwritten, meaning you cannot get coverage if you – or one of your dependents – aren’t healthy. Or, an insurer may exclude coverage of some conditions. Or your policy issuer may simply charge you outrageous premiums. At least in some “guaranteed-issue” states, individual insurers must offer everyone a policy regardless of their health history – but it’ll cost a pretty penny.
The good news is that if you don’t have any pre-existing conditions, you can get individual policies from any number of insurers. They can’t take it away from you as long as you pay your premiums. And because these businesses don’t extend coverage to those who are already sick, they can keep individual-policy premiums in line with group premiums.
Christopher Cameron is CEO of Main Street Insurance.