Is There a Doctor In the House?

How to choose the best health insurance plan for your small business

Health insurance is one of the most expensive lines in the budget for small businesses. Business owners’ premiums have increased between 15% and 20% on average, year-over-year for at least the last 10 years,  says Amanda Austin, director of federal public policy for the National Federation of Independent Business.“The more benefits you offer, the higher the cost,” she adds. In spite of this news, there are ways to find an economical, yet adequate health plan for your business.

What can you afford?
On average, business owners annually spend from $600 to $2,000 per employee on a policy, says Austin, depending on the coverage selected.

When you’re evaluating a plan’s costs, look at the deductible, coinsurance costs, and doctor visits and prescription drug co-payments, otherwise known as out-of-pocket expenses, advises Marcos Figueroa III, an Atlanta-based financial services associate with Prudential Financial. “You need to ask yourself whether the company can pay for it, and if not, how much the employees will have to contribute.” Your business’s annual out-of-pocket maximum is a major factor in determining how much your plan can end up costing.

Although health insurance provided by insurers is regulated by the states, Austin recommends visiting www.ehealthinsurance.com to get a general idea of how much your business can afford to spend. Alternatively, you can contact a local agent or broker.

There is power in numbers.
Joining a trade association or partnering with other small businesses or even individuals to purchase small business group health insurance can help business owners spread financial risk among members. The result could mean lower premiums and more extensive coverage. Employers should check with their state insurance department, since each state has its own laws regarding group insurance.

Understand the tax benefits.
Small businesses offering health insurance may be eligible to receive tax credits under the Small Business Health Care Tax Credit. To qualify, employers must cover at least 50% of their full-time workers’ healthcare costs. Qualifying small businesses must pay an average annual wage of less than $50,000. Effective immediately the credit is worth up to 35% of the small business’ premium costs; in 2014 it jumps to 50%. The credit gradually phases out for firms that pay average wages of between $25,000 and $50,000. For more information, visit www.irs.gov.

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