TOP DRAWER ARTICLE

Small Business Health Insurance Plans
by
HL Carpenter

Looking for a business health care plan that will fit your budget as well as fill the needs of your employees? If you are, you may be feeling overwhelmed by the jargon you’ve encountered.

Here’s an overview of five common types of plans:

Health Maintenance Organization. When you choose a managed care plan like an HMO, your employees will have to select a personal primary doctor from the providers who are under contract with the insurance company (the network). The primary doctor will handle all care, making referrals only if a specialist is needed. There’s generally a co-payment, but no deductible.

Preferred Provider Organization. A PPO is another type of managed group health insurance plan that uses a network of health care providers. The difference from an HMO? Your employees can choose “out-of-network” providers, such as a doctor with whom they already have an existing relationship. PPOs generally have a deductible and co-insurance features.

Point of Service. A POS is also a managed care plan. With a POS, your employees aren’t required to have a primary care doctor, though they’ll generally have to see only in-network doctors. POS plans can be more costly than HMOs, but may have lower co-pays than PPOs.

Health Reimbursement Accounts. HRAs are consumer-directed plans, owned and funded solely by your business that you use to reimburse your employees for medical expenses. Under Sections 105 and 106 of the Internal Revenue Code, properly established HRAs are tax free to your employees and tax deductible to your company. Your employees can carry over unused amounts in these accounts indefinitely, though the money belongs to your company, as the employer. You can combine an HRA with a high-deductible health insurance plan.

Health Savings Accounts. Created by the Medicare Prescription Drug Improvement and Modernization Act of 2003, HSAs are employee-owned, fully-portable accounts. HSAs consist of a high-deductible insurance policy and a savings account that covers medical expenses incurred before the policy kicks in. Both you and your employees can contribute to HSAs. The money in the account belongs to your employees.

Originally published September 2008.

Last update: January 8, 2011