Small Business Owner Health Insurance
Small Business Owners have a choice of insurance plans to provide to their employees. They can choose a PPO, an HMO or POS, an HSA or HDHP, or an HRA.
A PPO is a Preferred Provider Organization. Medical providers contract with preferred provider organizations as opposed to having contracts with various insurers and third party administrators. The providers agree to a fee schedule or reasonably discounted amount for their services in exchange for prompt payment, convenience and less administrative expenses by the insurance company. A PPO usually has a deductible and co-insurance and no co-pay. The deductible is the amount required for you to pay before the insurance starts paying for services. Once the deductible is met, the insurance then pays a portion (for example 80%) of services and you pay the remaining which is the co-insurance. The co-insurance is then limited and when the limit is met the insurance carrier then pays 100% for the remainder of the plan year.
An HMO is a Health Maintenance Organization. In an HMO, the insured has a primary care physician. The primary care physician then must give a referral for the insured to see a specialist or receive non-emergency hospital admissions. Any service that is not provided by the primary care physician and has not been approved by the primary care physician is not covered by the insurance. Only emergency situations as defined by the HMO are covered regardless of the participation of the provider or whether the primary care physician referred the service.
A POS or Point Of Service plan uses parts of the PPO and HMO plans. The patient does not need to have a primary care physician to refer them to a specialist, however without the referral they may pay more out of pocket than they would if they got the referral.
An HSA is a Health Savings Account available to taxpayers in the U.S. who are enrolled in an HDHP (High Deductible Health Plan.) Money deposited to this account is not taxed and may be used for qualified medical expenses without being taxed. Non-medical expenses funded by this account are subject to taxes and penalties if taken prior to retirement age. These funds can be used for deductibles, coinsurance and any other out of pocket medical care not covered by the insurance plan. There are many ways to retrieve funds from an HSA, such as debit cards, checks or a reimbursement process.
A High Deductible Health Plan (or HDHP) has lower premiums in exchange for higher deductibles. High Deductible Health Plans have a minimum deductible of $1,100 for single coverage and $2,200 for family coverage. The maximum deductibles are $5,500 for singles and $11,000 for families. A Health Savings Account can help with the expenses for this type of health plan.
An HRA is a Health Reimbursement Account funded by an employer to reimburse its employees for medical expenses not covered by the health insurance plan. The employers contributions to this fund are tax deductible to the employer and the funds received are tax free for the employee. Health Reimbursement Accounts are owned by the employer.