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Group Insurance for Business Owners

As a business owner you are not required by federal or state law to provide health, dental or other benefits to your employees. However by offering a competitive benefits package of group health and dental insurance, as well as life, disability and even long term care insurance, you can make your company attractive to potential recruits and retain valued employees.

In a typical group insurance program the employee pays part of the premium and you pay the rest. Through this cost-splitting you are able to pay higher premiums and gain better coverage than your employees could on their own through individual insurance plans. The larger your company the better the rates and more comprehensive the coverage you are likely to be offered by insurance companies. Large employers may offer their employees a choice of different insurance plans and insurers. Some employers provide a set dollar amount of coverage and employees customize their insurance from a menu of choices, paying the difference if they want extra coverage. If you have a small company it is likely that you will only be able to afford one plan.

There are different types of health and dental insurance plans, with different advantages and disadvantages. Managed care, including: Health Maintenance Organization (HMO), Preferred Provider Organization (PPO) or Point-Of-Service (POS) plans, tend to offer lower costs to your employees with small co-payments and little paperwork, but they are usually limited to a network of health and dental care providers. Traditional indemnity (fee-for service) plans offer more flexibility of coverage and care provider choice, but usually with higher up-front costs, higher deductibles and more paperwork to submit claims for reimbursement.

The cost of health and dental insurance continues to increase. Self funded insurance plans offer an alternative. Instead of paying monthly premiums to an insurance company, you pay your employees’ health care costs directly to the health care providers. Self-insurance offer tax benefits and more flexibility to customize coverage to suit your employees and your pocketbook. However you need to do a risk analysis of the claims history and demographics of your employees and their dependants and a cash flow analysis to make sure that your company could handle unexpectedly large health care claims. You may want to take out stop-loss coverage to mitigate your risk and pay for the services of a third party administrator to process and pay your employees’ claims.

If you are a small business you can increase your insurance buying power, lowering your premiums and increasing coverage, by joining a small business purchasing alliance or by belonging to a Professional Employer Organization (PEO). Joining a PEO gives you access to cheaper and more comprehensive benefits (as well as human resources and administrative services) but at a cost to your autonomy as a business owner.

When selecting a benefits package for your employees, consider the needs of your workforce, the rates and the range of coverage offered. Analyse your insurance options for managed care or traditional indemnity plans, and alternatives such as joining a purchasing alliance, a PEO or operating a self funded plan.