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Health Insurance for the New Business Owner
You've decided to start your own business and you're raring to go. But, if you're like many entrepreneurial wannabes, there's probably one big question mark hanging over your head: what to do about health insurance. The good news, says Gene Fairbrother, small business consultant for the National Association for the Self-Employed, is that "many more insurance companies have plans for small businesses than ever before." Unfortunately, finding the right one can be costly-and confusing.
What to do? These five tips can help you cope.
1. Understand the basics. The world of health insurance is an alphabet soup of jargon. Make sure you learn your ABCs, especially the types of plans you can choose from. Old-fashioned fee for service plans (FFS) allow you to see any provider you want. They also generally require that you pay more in out-of-pocket expenses and higher premiums. Then, there are various types of managed care plans: preferred provider organizations (PPO), point of service plans (POS), and health maintenance organizations (HMO). Generally, with these plans, you can use only the providers in their network. Or, you may be allowed to seek the services of other providers, but at a higher cost.
2. Make an outline of your requirements. Before you start approaching insurers for their rates and plans, determine exactly what it is you need. "The worst thing somebody can do is just pick up the phone and call a couple insurance companies," says Fairbrother. "There's going to be mass confusion." If you have employees, ask yourself such questions as whether or not you'd like a low deductible, or how much you want them to contribute to premiums. If you're self-employed, consider everything from whether or not you have children who need coverage to whether you require dental coverage. Then, pinpoint your budget and the maximum you can spend.
3. Consider a group plan. You'll be able to lower your premiums if you enroll in a group health plan, rather than an individual one. Many small businesses, in fact, have banded together to create joint plans. Some states allow self-employed people with as few as two employees, including the business owner, to form a group. You can find out whether there are any in your area by contacting your state's Department of Insurance. You can also get in touch with a local small business development center. One caveat: small group plans tend to be pricier than those for bigger entities. In California, for example, they're about 20% more costly on average, according to John Arensmeyer, CEO of Small Business Majority, a national small-business advocacy organization.
4. Contact associations. Industry trade groups often offer members access to health insurance plans. Or, local chambers of commerce may also be able to provide coverage.
5. Prepare yourself for a pre-existing condition clause. If you're buying health insurance, you're likely to encounter these clauses, which stipulate that the insurer will not cover certain conditions you had before joining the plan. Or, they may ask for higher premiums. Some states have a mandate requiring that all insurers provide everyone a policy-but the companies may raise your rates if you have a pre-existing condition.
For more information about health insurance, you can also try the National Federation of Independent Business.
About the Author: Anne Field is an award-winning small-business writer based in Pelham, NY
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