Utah Business Magazine - February 2006
The Right Health Plan
Check out this article a close friend of mine wrote.
It takes more to draw in quality employees than just a competitive salary. As health costs rise, your small business will need a good health plan to stay in the game. If your business doesn’t have a health plan, the question becomes “where do I begin?”
Company owners never have to search far to find someone who wants to sell you insurance—just type “small business health insurance” into Google. Do the 49 million results seem daunting, or just a bit ridiculous? The Internet is a great way to compare prices and plans, but it’s often difficult to know what you should be looking for.
Know Your Employee Base
Randy Schouten, director of the Salt Lake Regional Small Business Development Center says the first step in finding a plan is to take a retrospective look at the current and future employee base and ask, “How attractive do I want my company to be?” Schouten says that if the employee base is mostly composed of entry-level workers who aren’t used to receiving coverage, high-end health benefits won’t be much of a draw and may not even be necessary. However, Schouten says, if a business owner is trying to draw in senior-level employees, the benefits he offers may be the difference between a potential employee choosing to work for him or for his competitor.
Trade associations can be a great source of information on industry standards for pay and benefits and may offer some insight into what the competition may be offering. Many trade associations also offer health insurance plans for small business owners and their employees. Because trade associations cover so many people, they can negotiate better coverage and lower rates. By aligning your small business with a trade association policy, you can enjoy the same amount of health care options as a big company.
Another question to ask yourself, Schouten says, is a bit more personal: “What do I want in a health plan?” Think about the type of coverage that you would like to have, including waiting periods, co-pay, prescription prices and maternity coverage. Chances are good that the things you want in a health plan will also be attractive to current and future employees. After thinking about your own family’s medical needs, ask your friends or other business owners about their plans. Having solidified your needs, it is time to start shopping around.
Insurance “Agent” vs. Insurance “Broker”
The Internet is a quick and easy source to look at a wide range of providers and plans, but it often lacks the human interaction an agent or broker can provide. Beyond being able to answer questions, an agent can also help set up a customized insurance plan for your business. It is important to note, however, that the words “agent” and “broker” are not necessary interchangeable. An agent works for a specific insurance company and will only be able to help you with products or plans provided by that company. A broker works for the policy holder. An independent agent is not tied to any one insurance provider and thus is able to look at a wide range of providers to find exactly what you are looking for.
Small Business Insurance Pitfalls
According to Nilay Patel, insurance director at Integrated Employer Solutions, the biggest mistake for a small business is “starting too big, too soon.” Often, companies with just a handful of employees, Patel says, want to purchase full package insurance—with low co-pays, low deductibles and maternity coverage—and get in over their heads. While an attractive health care plan is a great incentive to future employees, it is important to choose a plan that will be sustainable throughout a bad financial quarter.
Patel says it is important to look at how much coverage you really need. If the staff is only making a few trips to the doctor each year, it would be more cost effective to pay for those visits out of pocket, rather than pay high monthly premiums. Though this sounds like a raw deal for employees, it could actually save them money as well; employees generally have to cover 25-50 percent of their total monthly premium. Patel says that flexible spending accounts or “cafeteria plans,” where employees pay for their own insurance through salary reduction, are also a good alternative for companies starting to offer health coverage. “There is a plan out there for everyone,” Patel says, “You just need to know what your options are.”
Spencer Sutherland (my good friend) is a Salt Lake-based public relations specialist and freelance writer.
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