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Best health insurance deals
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January 25, 2002: 1:25 p.m. ET
Good, inexpensive coverage isn’t easy to find. Here are some tips to streamline your search.
By Miriam Ascarelli
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NEW YORK (Fortune Small Business) - If there's such a thing as the Holy Grail for small companies, it comes in the form of affordable health insurance. Great deals simply aren't easy to come by for tiny firms, which don't have the cash flow or the economies of scale of their larger brethren. The family policy costs a small company $6,900 per year, according to the Henry J. Kaiser Family Foundation.
"It is a huge, huge problem," says Todd McCracken, president of Small Business United in Washington, D.C. And with analysts predicting hefty increases in premiums, insurance should get even costlier.
What to do? Of course, you could pass the costs onto employees. But you don't have to. While it's unlikely you'll find something perfect, there are alternatives. Use these tips to find a suitable plan.
Contact your state Department of Insurance. The customer service people in these offices are a valuable resource. Well versed in the type of insurance products that are available in their state, they can steer you to companies and products that meet your particular needs. "You'll get the ball rolling," says Kelly Loussedes, a spokeswoman for the Council for Affordable Health Insurance, a Washington, D.C., research and advocacy association for insurance carriers in the individual and small-group markets.
Work with an agent or a broker. They know the products available, and it's a lot easier—and more cost-effective—for them to do the legwork. They can help you focus on what's most important—a low premium, say, or doctor choice—then evaluate your cash flow and propose realistic options. Using a broker is cost-effective for another reason, too: Commissions are built into the premiums. "So you may as well take advantage of someone's expertise," says Paul Kopelcheck, a retired insurance marketing executive who counsels small businesses about insurance as a member of the Service Corps of Retired Executives in South Carolina.
When looking for a broker, experience is important. Someone who's sold a particular line of products for a long time is likely to have valuable insights into the quirks of various carriers—which ones are more prone to sell insurance to someone who's had cancer, for example. So, find out how long they've been in business and how long they've represented the companies whose policies they sell.
Check out trade/professional organizations. They might offer a health plan to members. Since each state has its own insurance rules, the plan offered by the Chamber of Commerce in Tulsa, Okla., may not be the same as the one offered by the Chamber in Bozeman, Mont., however. Also don't assume that, just because a group to which you belong sponsors them, they're a good deal. Such plans are sometimes marketing arrangements, with commissions to the sponsoring associations, so the group may have a vested interest in pushing it, according to Rick Curtis, president of the Institute for Health Policy Solutions, a non-profit organization in Washington.
Investigate group-purchasing arrangements. In some states, there are joint-purchasing organizations that give small firms a choice of health plans. Because they have many members, these groups have more purchasing power than a lone small business would; as a result they're able to buy better plans and give options to members they might not otherwise be able to get, such as a vision or dental plan.
Among the better known are the Connecticut Business and Industry Association in Hartford, Conn., the Pacific Business Group on Health in San Francisco, Calif., and the Cooperative for Health Insurance Purchasing in Denver, Colo.
But be careful. Some are a lot more reliable than others. For more information about group purchasing, see the Institute for Health Policy Solutions' Website.
Consider establishing a Medical Savings Account. Established by Congress in 1997, this pilot program expires in 2002 and is only available to the self-employed and small businesses with two to 50 employees. (There are proposals in Congress to extend the deadline and expand the program to most Americans).
Creating an MSA involves taking out a high-deductible insurance policy ($1,600 to $2,400 for singles; $3,200 to $4,800 for families) and setting up a tax-free account (up to $1,560 for a single person per year; up to $3,600 for a family) to pay for day-to-day medical expenses until the deductible is reached and the policy kicks in.
If you don't spend all the money in your account, it can be used in subsequent years or to purchase long-term care insurance, premiums for COBRA continuation coverage or premiums for health-care coverage while an individual receives unemployment compensation. If it is withdrawn for non-medical reasons, you pay your current rate and a 15 percent penalty. (There is no penalty for those more than 65 years old). A list of companies offering Medical Savings Accounts is available on the Council for Affordable Health Insurance's Website.
Remember: Before signing on the dotted line, check out the company ratings issued by A.M. Best and Dun and Bradstreet for their financial stability and their claims-paying history. "You want a carrier that is A or A-plus rated. Says Kopelcheck, "There are enough of the good ones out there, you don't have to take second best." 
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