Salaries and fringe benefits represent the most expensive items in a small business budget.
(article continues below)
When multiplied by every employee in the organization, even moderate increases in health insurance premiums can have a big impact on your bottom line. In a competitive business environment, there is only one way to keep your head above water and that is to know the facts about your health insurance options.
For better or worse, there is one option that is not realistic in today's labor marketplace: not offering health insurance benefits at all.
Workers have grown accustomed to relying on their employers as a healthcare safety net. If your company doesn't offer healthcare benefits, it's unlikely that you will be able to attract and retain even average quality employees, let alone the best and the brightest. With that in mind, here are your choices.
HMO Health Insurance Plans
HMOs (Health Maintenance Organizations) are probably the most popular option when it comes to health insurance. An HMO plan is designed to provide a set of comprehensive health services within a specified geographic region. In addition to monthly premiums paid by the employee and their employer, the employee is responsible for minimal copays when services are provided.
The downside of HMOs is that employees are limited in their choice of healthcare service providers and facilities. The patient is free to select medical groups and specialists of their own choosing - as long as the medical groups and specialists they choose are part of the HMO plan. In most HMO plans, health services outside of the HMO's area are covered, but choices are usually more limited than they are at home.
PPO Health Insurance Plans
PPOs (Preferred Provider Organizations) work much the same way as HMOs in that medical groups, physicians, and hospitals contract with the insurance company to provide services to eligible persons for discounted fees they negotiate with the insurer.
The difference between a PPO and an HMO is that PPOs typically offer a wider range of options for patients when it comes to choosing healthcare providers and facilities. However, greater freedom at home comes at the cost of ever fewer choices outside of the PPO network.
POS Health Insurance Plans
POS (Point Of Service) plans are essentially HMOs that provide greater flexibility in the patient's choice of service providers and facilities. The patient receives the same coverage from the insurer whether they receive services inside or outside of the plan network. The cost of increased flexibility is passed on to the insured and their employers in the form of higher monthly premiums.
Fee for Service
Fee for Service plans are the traditional forms of insurance that existed before HMOs arrived on the scene. With this option, patients are completely free to select service providers and facilities of their own choosing. In return, they receive a fixed reimbursement, usually around 80% of "reasonable and customary" fees. The remaining 20% is paid by the patient as a deductible.
Not surprisingly, many employees are hesitant to become involved with a fee for service plan because in an age of increasing healthcare costs, the 20% they are responsible for can amount to thousands of dollars.