Maybe you’re just opening your small business (how exciting!), or maybe you have been at it for a few years now--whatever the case may be, it’s important to know and understand what health insurance is for your small business. We’ve shaved down the bulk of health insurance and left you with what is important to know.
Health Insurance in a Nutshell
We know that health insurance isn’t exactly a one-liner kind of topic. However, the simplest definition of health insurance goes something like this: A type of insurance coverage that pays for your medical and surgical expenses. That’s not too bad, is it?
Now, let’s relate it to something as an example. You can think of it like car insurance. You buy car insurance so that, in the case of an accident, your car can be fixed up without you having to pay a large amount. Health insurance works similarly to this only you’re insuring yourself, not a vehicle. You buy health insurance so that, in the case of an injury, you can be fixed up and not have to pay too much.
Terms You Need to Know
Before we go into the types of health insurance that you can offer your employees, there are five key terms that are important to know as you’re contemplating various health insurance plans. Here they are:
Health Insurance Premium: Your premium is what you pay monthly to be part of a health insurance plan.
Deductible: This is the amount you must pay for covered services before your health insurance will start to pay. They affect the price you pay for your insurance premium.
Co-Pay: It is a flat dollar amount you will pay your healthcare provider for covered service.
Co-Insurance: The percentage of allowed charges for covered services that you're required to pay.
Out-of-Pocket Premium: It is the maximum amount of money you will pay for covered services during a benefit period (for example, over the course of a year).
Types of Health Insurance
Now that you know what health insurance is, and you know some important key terms, let’s get into the two main types of health insurance.
Group Health Insurance: A group health insurance plan Is purchased by an individual (or family member) indirectly through the individual's (or family member's) employer. Group health insurance is dependent on an individual's (or family member's) employment and is typically:
Individual Health Insurance: Individual health insurance is a policy purchased directly by an individual for themselves and their family based upon personal needs and budget. Individual health insurance provides buyers with:
What’s Best to Offer Your Employees?
When compared side by side, group health insurance doesn’t allow employees to choose the plan that fits them best, and it’s expensive. In fact, because of group health insurance’s high costs, only 50% of small businesses offer it to their employees.
Individual health insurance is 20 to 60% less expensive than group health insurance. Plus, you and your employees will be able to choose the plan that fits you best that’s portable. Additionally, individual health insurance allows your employees to utilize premium tax credits (if eligible)--making their monthly health insurance premiums even more affordable.
Knowing what health insurance is will allow you to make educated decisions on what to offer your employees. Hopefully we’ve simplified health insurance enough to know what is best for you and your employees.
What questions do you have about what health insurance is? Comment below, we’d love to answer your questions.