Why Health Insurance for Small Businesses Can Be So Expensive Posted By : Jonathon James
08.11.2006 11:15 Insurance Articles
Health insurance for small businesses is an issue that many small business owners struggle with. Finding group health insurance that is both affordable and valuable can be difficult. However, as many entrepreneurs soon learn, there are actions that can be taken to increase the odds of a satisfactory outcome for both the small business owner and his or her employees.
First, the question may be asked as to why coverage for small groups is less affordable? The question can be found in one word: Risk.
With small group health insurance, it is much more difficult for underwriters to predict the average cost of medical care. That is, small businesses have fewer employees to spread the risk of a major medical claim. Indeed, if a member of a small group incurs a major injury or illness, it impacts the overall costs of medical care for the whole group much more so than for larger groups. Accordingly, in an effort to protect themselves from this higher level of risk, insurance companies charge more for health insurance for small businesses.
Small large companies will opt to self-insure their employees. However, unlike their larger counterparts, small businesses typically cannot afford to serve as their own health insurer. That is, they cannot directly fund health insurance for their employees because the financial risk is simply too great. Given this environment, what can small businesses looking for health insurance do?
One option for small businesses is to join a trade or professional organization that offers group health insurance for its members. If this is not an option, small business owners should contact a health insurance broker and request several small business health insurance quotes. By doing this, the small business owner can at least get a sense of what his or her options are for a known budget.
Obtaining health insurance for small businesses may take some determination on the part of the small business owner. Joining a trade or professional organization may be the answer for some, while others may simply opt to pay the necessary costs for their small business health insurance. Either way, it pays to do your homework so that the choices made will be informed and not simply the “lesser of two bad” choices.
First, the question may be asked as to why coverage for small groups is less affordable? The question can be found in one word: Risk.
With small group health insurance, it is much more difficult for underwriters to predict the average cost of medical care. That is, small businesses have fewer employees to spread the risk of a major medical claim. Indeed, if a member of a small group incurs a major injury or illness, it impacts the overall costs of medical care for the whole group much more so than for larger groups. Accordingly, in an effort to protect themselves from this higher level of risk, insurance companies charge more for health insurance for small businesses.
Small large companies will opt to self-insure their employees. However, unlike their larger counterparts, small businesses typically cannot afford to serve as their own health insurer. That is, they cannot directly fund health insurance for their employees because the financial risk is simply too great. Given this environment, what can small businesses looking for health insurance do?
One option for small businesses is to join a trade or professional organization that offers group health insurance for its members. If this is not an option, small business owners should contact a health insurance broker and request several small business health insurance quotes. By doing this, the small business owner can at least get a sense of what his or her options are for a known budget.
Obtaining health insurance for small businesses may take some determination on the part of the small business owner. Joining a trade or professional organization may be the answer for some, while others may simply opt to pay the necessary costs for their small business health insurance. Either way, it pays to do your homework so that the choices made will be informed and not simply the “lesser of two bad” choices.
By: Jonathon James