How small businesses, employees can survive health insurance cuts

Faced with decreasing revenues from the global recession and higher health care premiums, many small businesses are opting to completely drop health coverage for their employees.

From 1993, the number of small businesses offering health insurance has dropped more than 20% to the current level of 38%.

With health coverage currently at the top of the political agenda, many Americans are faced with a rude awakening. Many people simply cannot afford family private plans that can exceed $20,000 per year.

But don't despair: Here are some useful tips for small businesses and employees when faced with this situation:

Small Businesses

• Offer some type of credit or bonus if you decide to drop health coverage. This extra cash can help your employee transition to a new health plan.
• Have employees take on some costs with the cost sharing approach. Do not pay 100% of the health care, treat your small business like a family and have everyone pay their fair share.

• Increase co payments and deductibles to reduce health coverage costs on your part.

• Switch to a more affordable insurer.

• Start a wellness campaign. Post signs in the bathroom that encourages employees to wash hands and even install hand sanitizers. This can reduce the chances of employees getting sick, which can cause a major burden on the overall health coverage. A business full of healthy employees saves money.

Employees: What do I do now?

• Opt for a short-term individual plan. These offer low monthly premiums, but have high deductibles.

• Short-term insurance through spousal coverage.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

o Families continue group coverage for up to 36 months
o Only available to employees of firms with more than 20 workers
o Required to pay entire premium for overage (up to 102% of cost)
o Only for voluntary/involuntary job loss, transition and other life circumstances. Not if an employer decides to drop coverage, shut down, or file for bankruptcy.

The COBRA option strikes me as the most interesting because you can get around it. Your employer will most likely notify everyone if they are going to drop health coverage. In this case, decide if you want to leave, thus making you eligible for COBRA to continue coverage (if you have a family under your plan).

Also, always have an emergency fund that can help pay for the entire premium for coverage under COBRA. This emergency fund is crucial and it will act as your own personal insurance to help protect yourself in these situations; especially if you are seeking individual insurance.

  • If you fall near the poverty line, you may be eligible for Medicaid. Check with your local government welfare office.
  • If you reside in Arkansas, Florida, Kansas, Mississippi, Ohio or Pennsylvania, consult with The Benefit Bank – an organization that can connect you to a variety of government resources.
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