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Top 5 Health Insurance Options for Small Businesses

written by: W. A. Swan•edited by: Jean Scheid•updated: 6/26/2011

As a small business owner, health insurance is a costly proposition. When looking at the various small business health insurance options, owners find options either too costly or too rigid. Five possible options may help in minimizing cost while gaining the most coverage for your employees.

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    For the small business owner, both life insurance and health insurance can be a huge headache and expense. Finding the right small business health insurance options is always a task for any small business owner. There are, however, some health insurance options available. Many of these choices depend on the state where you do business. There are five main categories of health insurance options for small businesses.

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    1. Group Purchase Arrangements

    small business owners 

    Group purchase arrangements are one health insurance option for small businesses. This type of policy brings together multiple small groups under one policy. This creates a leverage which allows greater buying power and better coverage usually provided to large groups or organizations. There are eight states which have this type of coverage mandated by law; Arkansas, Kansas, Montana, New York, New Mexico, Ohio, Texas, and Wisconsin. While not every state allows this type of health insurance for small businesses, there are associations, both local and national, which have established their own type of group purchase arrangements. Search online in your industry or type of business and put "group purchase arrangement" after the business category to find possible alternatives for you.

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    2. Reinsurance

    Reinsurance is a type of policy used in purchasing pools for small businesses and low-income persons. Reinsurance health coverage can also be represented in state subsidies where policies are provided with lower cost deductibles or payments for those who qualify. States which offer this type of program include Arizona, Connecticut, Idaho, Massachusetts, New Hampshire, New Mexico, and New York.

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    3. High Risk Medical Pool

    This type of health insurance option for small businesses covers people who have pre-existing medical conditions and cannot obtain coverage through any other means. These insurance programs are state run and can be found in 38 states making this one of the more common types of small business health insurance options. The states that do not have this option are Arizona, Georgia, Massachusetts, Michigan, Nevada, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia. The District of Columbia also doesn't provide this coverage.

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    4. Health Savings Account

    Health Savings Accounts are the newest health insurance option available. This type of health insurance allows you to set aside income for medical expenses. This is a pre-tax deduction where enrollees make regular contributions. This type of account is combined with a policy and a high deductible. The benefit is the lower premium You can use the accounts to pay for the deductible or medical expenses.

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    5. HMO

    The most known option is the HMO. These plans allow participants access to a health network, usually run by the plan, where you are allowed low cost premiums in exchange for a limited list of doctors or specialists who work within the network. National HMO plans such as Blue Cross and Blue Shield have taken much of the concerns about limitations associated with these health insurance plans. The main benefit of an HMO is the absence of a deductible before insurance pays, but there is a co-pay for basic services.

    To find out which options are available in your area, contact your insurance broker.

    Image Credit: Wikimedia Commons.