get health insurance that doesn't hurt

Home Office / Jeff Wuorio

Your business insurance is in place. Company vehicles all are adequately covered. You've done the smart thing by augmenting your basic liability policy with the extra coverage of an umbrella plan.

Still, one last coverage issue remains: health insurance. And, since you're staring at a bewildering, $1.3 trillion industry, health coverage can prove the most intimidating insurance decision of all.

But it need not be an insurmountable problem. First, you need a rundown of some of the major insurance plans from which you can choose:

Health maintenance organization (HMO): This plan provides you and your employees with a list of physicians you can use. The good news: See a doctor on the list, and the visit usually only carries a $5 to $10 co-payment. On top of that, HMOs usually offer the lowest premiums to be had. On the downside, if you use a doctor not on the HMO provider list, you pay full freight.

Preferred provider organization (PPO): This provides a bit more leeway than an HMO. You can always use a doctor on the list and enjoy the modest co-pay. On the other hand, you also have the option of using a doctor outside the network — you pay the bill and then submit it for reimbursement. The added flexibility means PPOs generally have higher premiums than HMOs.

Point of service: Something of a cross between an HMO and a PPO. Stay within the network and, like an HMO, the plan picks up the tab. Go to someone else, and you'll likely end up paying most of the bill yourself. The difference: If your HMO doctor refers you to someone outside the network, the plan will cover the cost.

Fee for service: The old tried-and-true network. Here, you and your employees can go to anyone you wish. You'll first have to meet a deductible, after which the plan generally picks up about 80% of the expense. One wrinkle: Many plans establish what's known as "reasonable and customary" charges based on the going rate in your area. Exceed those cost parameters, and the expense comes out of your pocket.

To help you sort through your choices, you should hook up with a reputable insurance agent who can examine your business and make suitable coverage recommendations. However, Ken Linde, president and chief executive officer of Destiny Health, a provider of innovative insurance products, suggests that entrepreneurs do their own legwork when they're choosing specific plans.

"With health insurance, it's important to decide what you need and not just settle for a standard plan," he says. "If you really want to spend the time figuring this out on your own, you can. Check out the Internet, ask for brochures, contact your state health insurance department. As a small-business owner, you should always be on the lookout for what's creative and different and you should find a plan that you really believe in."

Here's a sampling of some of options that can optimize coverage for you and your employees:

Multiple choice. Rather than offer either an HMO or a PPO, give your employees the option of choosing which one meets their needs best. Not only does that give your staff the freedom to hook up with what works best, it also offers you a variety of payment options. For instance, one choice is to pay for the least-expensive health-care plan, leaving your employee the choice of adding the extra amount to buy up to the more comprehensive insurance.

Medical savings accounts. These can prove a real boon if you opt for a high-deductible health plan. Here, employees make tax-deductible contributions into an account that can be used to pay uncovered expenses. Some accounts let subscribers carry the money over from year to year, while others have a yearly use-it-or-lose-it provision.

"Group of one" plans. Many states allow self-employed people to buy health insurance under a "group of one" arrangement, meaning that subscribers pay group rates that are significantly less expensive than individual policies. Check with your state insurance office to see if that's the case where you live.

Cost is always a sensitive issue for cash-strapped small-business owners, but it should never compromise health-care planning. Here are suggestions that can help trim expenses and still provide good coverage:

Check into all sources of coverage. Trade and professional organizations often offer health insurance plans. Signing on with a group plan can significantly reduce the amount you pay as your share of your employees' health coverage.

Raise deductibles. The higher the deductible you have to pay before coverage kicks in, the lower the premiums for both you and your employees. If you opt for this choice, try to set aside adequate funds to meet the deductible.

Watch premium patterns. Many insurance carriers offer cheap coverage during the first year, only to push costs through the roof after that. So, ask to see what a company might charge over several years. "Don't just look at the first year, see what happens in the second and third as well," Linde says.

Negotiate with your doctor. This may seem an outlandish idea; not too long ago, doctors and other health-care providers were sacrosanct. Now, however, who would likely be more empathetic about the crippling costs of staying healthy? So, if your doctor gives you a prescription, ask if she has a sample or low-cost generic alternative. Make sure a test is absolutely necessary. Mention that you pay your insurance yourself and see if your doctor might reduce his fees.