About Health Insurance for Small Business Owners

Health insurance in America is a difficult topic. Many people go through life uninsured and unable to seek out adequate health-coverage. Because of this, being able to provide health insurance in the form of a group plan is a powerful piece of leverage for employers. However, this can be complicated for smaller firms to provide.

Group health insurance works on a principle similar to individual health insurance, but often comes at a lower cost due to the distributed risk involved. Group health insurance is purchased by the employing firm, such that a premium is paid by the firm in exchange for coverage for their employees. Often, the premiums paid will be cheaper per person than that of an individually purchased plan because the insurance corporation is gaining the membership of a 'group' of people at once which are generally speaking lower-risk to the insurance corporation. Most plans are set up such that the cost of the premium is split between the employee and the employer, but this means that the employee is still getting coverage at a lower price than they would ordinarily be able to.

While this can be very useful in attracting and retaining good employees, something that small firms might find difficult, it can also be much more difficult for small firms to acquire. Insurance corporations study the customer firm, and will consider a rate based not only on employee demographics, but size. Even though individual medical history isn't provided to the insurance company, it is still prone to treat smaller groups as higher-risk and will tend to charge more than when dealing with larger groups.

Small businesses can handle this in a number of ways. One way could be to promote a lower-risk demographic in the workplace. Focusing on employee health by offering flu shots, gym membership, and other benefits can reduce a firm's 'risk' index and achieve lower premiums without having to discriminate to achieve the 'right' demographic. They could also attempt to set up tax-deductible 'health savings' accounts for their employees, or simply opt for more selective health coverage.

While the obstacle of price remains a large burden for small businesses, it's not unrealistic for them to acquire at least a limited plan in order to attract stronger employees and continue to grow.