Legal and Insurance

Cutting Heath Insurance Costs

SBOCTeam — Tue, 02 Dec 2008 15:16:00 GMT

By Christopher Freeburn

Escalating premiums are forcing many smaller businesses that offer group coverage to scramble for ways to cut costs. These usually involve tactics that may be necessary to keep your business's bottom line healthy, but will likely prove unpopular with your workers. Start by cutting back on specific benefits, by eliminating dental or vision care coverage, for example. Alternately, you can consider increasing the co-payments employees must pay when visiting physicians and purchasing prescription drugs. Both measures will lower your plan's overall premiums.

Comparing plans

Of course, the single most effective way a small business can reduce costs is by shopping around for the lowest cost plan in the first place. "There are many health insurance providers out there," advises Todd McCracken, president of the National Small Business Association (NSBA). "Small business owners should consider a range of offers from as many companies as possible." Working with an insurance broker can bring you a much greater range of possible providers than trying to solicit offers on your own.

Small businesses are increasingly a market courted by the major insurance providers, which have designed group health plans-HMOs, PPOs and POS plans-specifically to address the financial concerns of small businesses.

Additionally, you can reduce the percentage of the insurance premium you pay per employee. While most states have no legal minimum for employer premium contributions, some-California, for instance-require the employer to make some level of health insurance premium contribution. However, no state demands that a business pay more than 50 percent of the premium for each employee. In general, small businesses pay about 30 percent of an employee's individual premium, but there is no hard and fast rule about it.

Choosing the right plan

The first step in selecting the health insurance plan that best fits your company is to sit down and discuss the matter with your employees, says Mindy Ross, an independent insurance agent in Nassau, New Hampshire. "Ask your employees what sort of coverage they need-and how much of the premiums they will be willing to pay." Let them see exactly how much the insurance will cost both them and your business, Ross advises. "That way they will understand why you are choosing a particular plan, even if it might not be the one they'd like," she says. Ross explains that letting your employees know the high cost involved in setting up and maintaining their insurance can help soften the blow if you need to cut back on the plan or lower employer premium contributions later. "Most of the time, employees have no idea just how much their insurance is costing the company."

Stepping Outside a plan

Even after trimming coverage and reducing premium contributions, some businesses find the available array of health plans too expensive. But even if you opt not to obtain a group plan for your employees, you can still provide some form of health coverage. According to Section 105 of the IRS tax code, employers can reimburse employees for health care expenses. Under this option, a company decides, on an annual basis, to set aside a certain amount of money, which the employees use to purchase individual health insurance policies-or pay actual medical costs-on their own. The money allocated for this purpose is tax-free for the employee and tax deductible for the employer.

HSAs and HRAs

The dramatic escalation of health insurance costs has caused much pontification as well as some real action in Washington. In 2003, Congress created Health Savings Accounts (HSAs)-which went into effect in 2004-as an alternative to traditional medical insurance. HSAs are offered only in conjunction with a High Deductible Health Plan (HDHP). Sometimes called "catastrophic health plans," HDHPs generally cost a great deal less than traditional health insurance plans, but feature minimum deductibles for 2008 of $1,100 for individuals and $2,200 for families, with maximum out-of-pocket expenses of $5,600 for individuals and $11,200 for families. Though HSAs and HDHPs can be set up by individual consumers, they can also be offered through employers. If you offer an HDHP plan, all full-time employees must be treated equally under the plan. Deposits into employee HSA accounts are made on a pre-tax basis, with the maximum annual deposit being $2,900 for individuals and $5,800 for families. Funds deposited into HSAs are the property of the employee making the contributions and any unused funds are carried over from year to year and continue to earn tax-free interest on behalf of the employee. Funds in an HSA can be withdrawn without advance approval to cover any qualified medical expense, including deductibles for HDHP coverage and expenses not covered under the insurance plan, such as dental, vision, chiropractic services, and over-the-counter medications. Some HSAs offer a debit card to pay for such expenses, others offer checks or reimbursements; most offer a variety of ways to access the funds in the HSA. HSAs are fully portable, meaning the funds remain the property of the employee even if he or she leaves the firm or changes health plans.

Similar to HSAs are Health Reimbursement Arrangements (HRAs), which can be used in conjunction with HDHPs or other traditional insurance plans. An HRA is an employer-funded account that reimburses employees for medical expenses as they are incurred. The advantage to the employer is that such funds are expended only if they are needed, meaning that the healthy employee, who requires little or no care beyond an annual physical, will save the company money, making the HRAs of employees in genuine need that much more affordable. Unused funds remain the property of the employer. Major insurance providers have incorporated HSAs and HRAs into their coverage offerings, making it easier for small businesses to add them to their coverage options.

Disaster Recovery

SBOCTeam — Fri, 09 May 2008 12:24:00 GMT

Don't be catch unprepared for the worst case scenario

By Chris Freeburn

A small business's survival can mean more than weathering the economy's ups and downs, or attracting consumer interest. Sometimes it means recovering from disaster. That disaster can come in the form of a fire that rips through your office, or the building housing it, a flood that soaks the business district in which your company is located, or a tornado or hurricane that batters your city. Such calamities can leave your business miraculously unscathed, moderately damaged but still functional, or reduced to ashes and debris. While such disasters are, thankfully, infrequent, planning for their possibility is something that every small business owners should do - before the unexpected happens.

Insuring your company's survival
Choosing the right insurance to protect your business from potential disasters should rank alongside choosing a location or buying office equipment as critically important tasks. Unfortunately, too many small business owners are so intimidated by the prospect of having to wade through complicated insurance offers, coverage options, and the specter of high premiums that they put insurance decisions off, or simply follow the recommendation of their insurance broker - often without understanding the details of the coverage they end up receiving.

Many small business owners, on the advice of their insurance agents, purchase a general business-owners plan (BOP), which is a set of combined insurance policies designed to address the needs of similar type businesses that face the same kinds of risks. Generally, BOPs include coverage for property, business interruption, and liability. While these plans offer a general range of coverage mostly adequate for small businesses, it is important to make sure that they address your company's specific needs.

Property insurance will generally cover any buildings or equipment owned (or leased?) [MKT1] by your business. But it is a good idea to review your coverage from time to time to make certain new equipment has been added to the policy. "One of the biggest mistakes small business owners make in regard to their insurance coverage is obtaining a general policy without ever reading through the details of the coverage," says Dave Bowman, chairman of TTG Consultants. "They assume that if they have property insurance, that means the insurance company will pay for any damage - no matter what caused it. That's a huge mistake." Make certain that your property insurance will cover any potential natural disasters that might strike. Many policies will not cover flood damage, or only do so under very specific circumstances. Does the area in which your business operates experience earthquakes? Brush fires? Hurricanes? Does the insurance policy cover damage from those specific events? What about damage resulting accidents or vandalism or other criminal activity?

Business interruption insurance can be a life preserver for any business. Many business owners understand the value of insuring their offices and equipment, but neglect to consider what will happen to the company's finances in the event the offices or equipment become unusable. If your business's location is destroyed, or rendered unusable by some disaster, will your insurance provide you with temporary income while you are getting back on your feet? Does it cover expenses related to operating from a temporary location or even relocation costs? If not, you might end up watching your business founder financially even if your property insurance completely covers the loss of your building or equipment. "Most creditors won't care that your business is shut down for a few days or weeks to recover from a fire, flood or other accident," Bowman says. "They expect to be paid on time because they have to pay their bills on time." Business interruption insurance will compensate you for the income lost while your business cannot make use of its property. This form of insurance covers the operating expenses and profits you would have generated during the period in question, based upon your existing business records. When reviewing your business interruption policy, make sure the coverage's time limit is reasonable enough to permit you to relocate and restart operations after the loss of your property.

While BOPs offered a good range of general protection, they do not provide coverage for other specific types of insurance, including health, workers' compensation, disability, automobile, and professional liability, all of which must be covered under other policies.

Extra expense insurance is another type of business insurance you may wish to consider. Related to business interruption insurance, extra expense insurance pays you a reasonable amount of money in excess of normal operation costs in order to speed your company's recovery.

Protecting your company's data assets
Having the right insurance will give you the financial boost needed to reassemble your office, repair or replace equipment, and give you enough funds to keep things going until your normal revenues pick up again, but insurance can't protect the one vital thing your business absolutely needs to get back on track - your company's critical data. Today, virtually no business, no matter how big or small can survive without the information stored on its computers. Consider for a moment just what information is stored on your company's hard drives: customer information (including purchase records, outstanding invoices, and account numbers) company tax records, employee records, your business plan, and all the daily records of financial transactions. Imagine trying to get your business up and running again if this information was irretrievably lost.

Traditional methods of backing up data
"The first line of defense against data loss is an automatic backup to a physical drive," says Boston-based data security expert Jim Mott. "There are many products that will perform automatic backups every few minutes or every hour, with absolutely no user intervention needed after setup," he adds. "But a surprising number of small businesses just don't take advantage of them."

Many small businesses choose to use an external hard drive as their primary data backup device because they are inexpensive and easy to set up (usually requiring nothing more difficult than plugging in a USB cable). External hard drives can be attached to individual machines, or to company networks, and most come with automatic data backup software. External hard drives offer protection if a network server or individual PC hard drive fails. Any disaster that heavily damages or destroys your office, like a flood or fire, on the other hand will likely destroy the external hard drive as well. Removable disk drives can guard against this possibility by backing up your company's data to high capacity data disks that can be removed from the drive and carried outside the business in emergencies, or even nightly. "Removable drives have come a long way," says Mott. The storage capacity of affordably priced removable disks now ranges from 50GB to 100GB, more than enough to preserve the data of most small businesses. As with external hard drives, most removable disks can be configured to automatically back up data on a periodic basis. "Of course, removable drives are reliable as a means of protecting data only to the extent that someone actually removes the disk from the drive before leaving the office," Mott cautions.

Online data storage
Once upon a time, only big companies with huge IT budgets could afford the luxury of transmitting their data for backup and storage in secure, remote locations. But the Internet has made this an option for even very small businesses. Online data storage is a rapidly growing field with both established names and newcomers all vying to store your company's data.

There are a number of benefits of storing and backing up your data offsite. Physical security is the best. If your offices are damaged or destroyed by fire, terrorism, or natural disaster, your critical business information will still be secure, miles away, whereas any on-site data storage device may not survive. Online storage also permits easier access to data, especially for companies with traveling representatives or multiple offices, without clogging up email systems or company servers with large files. Better still, online storage is far more easily expandable. No need to buy new equipment for the office and endure the disruption of installation if more storage capacity is required - simply purchase more storage space from the provider. Online storage also eliminates the need to maintain the storage devices or deal with technical issues on your own. Many online storage providers also offer software the automatically backs up all your company's data at set intervals, eliminating the chance of data loss due to forgetfulness. All your business needs is a high-speed Internet connection.

A number of other companies offer online data storage with similar services, including Verio (verio.com), Iomega (iomega.com), HyperOffice (hyperoffice.com), eVault (evault.com), C I Host (cihost.com) and iDrive (idrive.com). These companies offer a variety of data access, storage, and backup features at widely varying pricing structures. All offer secure, encrypted data storage and transmission and technical support.

Small business owners interested in storing their data online should make sure that the storage provider under consideration offers secure data backup facilities, preferably with their own security guards, fire protection, hard disk redundancy, and independent power supply in case of power failures.

Chris Freeburn is an associate editor/writer for Priority magazine