According to a recent University of Wisconsin study, more than 40 percent of dairy producers in the state lack health insurance coverage. While that number may seem shocking, it actually falls in line with national statistics that show somewhere between 40 to 45 million Americans lack health insurance coverage.
For individuals and for employers with less than 50 employees, finding quality health insurance coverage at a reasonable price does present a challenge — due to skyrocketing cost. That means you need to arm yourself with information.
Start by learning what types of plans exist. Next, ask your employees what type of coverage they really need or want. There’s no point in paying for coverage that none of your employees will use. Besides, it will allow you to tailor the plan you select and help hold down cost. Do your homework on any insurance you find to make sure you understand the policy. And always keep an eye out for changes in legislation that may offer new options for health coverage.
Use the following guide to learn what options exist for health insurance coverage.
Health Maintenance Organizations provide services for a set fee. You choose from a list of participating providers and pay a pre-set fee for doctors’ visits and other medical services. A primary care doctor in the HMO must make referrals for you to see a specialist in order to receive benefits. If you use a doctor not in the HMO, or an out-of-network physician or hospital, then you pay full price out of your own pocket. Some variations of HMO plans do allow for limited reimbursement if you go out of network. Be sure to ask.
Preferred Provider Organizations are managed plans where participating doctors, hospitals and other providers provide services for set fees. These plans are considered somewhere in between an HMO and an indemnity plan. PPOs also offer greater flexibility in choice. You can choose a doctor from their list of registered doctors and pay a small co-pay for their services. However, if you choose a doctor not on their list, also called out-of-network, then you pay the bill, file a claim and are reimbursed like with an indemnity plan.
These types of plans are what many people think of for basic coverage. However, indemnity plans are becoming less common. With an indemnity plan, you get to choose the doctors and hospitals you want to use. You typically pay everything out of pocket until you meet a deductible, then the insurance picks up usually 80 percent and you pay the other 20 percent. Under this program, you file insurance claims, and wait to get reimbursed.
Medical Savings Accounts
Medical Savings Accounts, or MSAs, combine high deductible health insurance with a savings plan where deposits grow tax-deferred — similar to an Individual Retirement Account. And when the money is used to pay covered medical expenses, you can withdraw it tax-free.
MSAs were implemented in the United States on a trial basis in 1996, and have limited enrollment. The IRS determines when enrollment levels have been met.
This trial program was set to expire at the end of 2002, but has been extended through the end of this year. Once you have established an MSA, you are “grandfathered” into the law and may continue the MSA even if Congress decides to eliminate this option. Work continues by various organizations to make MSAs a permanent health care option.
MSAs are available to the self-employed and employers with fewer than 50 employees who do not have health insurance, says Jessie Howe Brairton, with the National Federation of Independent Business in Washington, D.C. You basically purchase a high- deductible insurance plan for yourself and your employees, That deductible must be at least $1,650 for individuals and $3,300 for families. To cover those high deductibles, each person has a medical savings account that he can contribute to in order to cover out-of-pocket expenses. There are limits to the amount of the contribution, but those contributions are tax deductible. To find out more about the IRS’s rules on MSAs and eligible medical expenses, see IRS Publication 969.
Withdrawals from the MSA used to cover out-of-pocket medical expenses are tax-free, and money you do not use in a calendar year continues to grow on a tax-deferred basis, similar to an IRA. Using money from an MSA for purposes other than medical expenses requires the individual to pay a tax penalty. But, once you turn 65, you can withdraw that money for any reason without penalty. However, withdrawals are taxed as regular income at that point.
Not all of your employees will need the same benefits. Some may already have coverage under a spouse’s plan at another employer. In these instances, you may want to set up a cafeteria plan where employees can pick and choose the benefits they’re most likely to use. Don’t automatically exclude an employee from your health insurance plan if he or she has coverage from a spouse. For those employees, consider putting a dollar amount on that benefit and offer it to them in some other form, such as cash or a child-care reimbursement, says Sarah Fogleman, Kansas State University extension agricultural economist.
How to get started
Each state has different mandates on what coverage must be included in health insurance plans, says Brairton. Check with your state’s insurance department, commission or board to find out specifics on which companies hold licenses in that state to provide the mandated coverage.
Also, have a local, independent insurance agent or broker help you work through the options. However, don’t just go with one company, check out policies with several. You may be limited however, by the number of companies licensed to provide coverage in your state. When making comparisons, consider not only the premium amount, but also what benefits are included, such as prescription coverage and routine checkups. You also can contact major insurers directly to obtain quotes.
Talk to other business people you know to find out who provides their health insurance and their satisfaction with the coverage. In addition, use the Internet to research companies, coverage offered, and to get quotes.
You also can contact organizations that you belong to and see what benefits they may offer members. Some local and state groups may provide health insurance benefits for members. Generally, you can get group rates which makes this coverage less expensive.
Currently, efforts are ongoing to take this type of member benefit to national organizations. These Association Health Plans (AHPs) would allow small business owners to join forces through a trade association, like the U.S. Chamber of Commerce, American Farm Bureau Federation or National Federation of Independent Business, to access quality insurance at a more reasonable cost.
“With premiums on the rise and benefits declining, more farmers and their families are losing their health insurance coverage,” according to a statement by the American Farm Bureau. “A number of state Farm Bureaus have offered health insurance coverage but are limited to their respective state, resulting in higher premiums than could be offered by AHPs.”
Whatever health insurance options you evaluate, remember to take your time in order to make the best decision for yourself, your family and your employees.
As with any major purchase: buyer beware. According to Nina Bottchet with the Florida Department of Insurance, more than 30,000 Floridians are out money for a total of about $6 million worth of unpaid claims in the recent bust of various fraudulent health insurance operations.
She advises businesses to investigate the company before signing up for health-insurance coverage. In addition, she recommends that you identify the entity responsible for paying the claim and make sure that they too are licensed. “If they are not, there are no protections, such as a guaranteed fund, or a background check on the operator, or assurances that they have enough money to pay the claims."
Also, check lists of insurance providers from groups such as Consumer Reports and Forbes. These lists will give you the names of some of the top companies, as well as rate their financial soundness.