Small Business Insurance

New insurance plans offer opportunity to small business

By SALLY DUROS

Small business could find an opportunity to hire in these difficult times – if they offer health insurance.
For small businesses trying to attract top talent let go by major corporations, health insurance is a necessity, said Raman Chadha, President of Explorit Entrepreneurial Services, a consultant to small businesses on Chicago’s north side.

“Employees don’t want to have to shop for it,” he said. “They would rather their employer offer them options, even if they have to pay an added fee to get their ideal coverage.“

Fortunately, timing is right with the unveiling of some new health insurance tools targeted at Illinois small business - defined contribution health insurance and medical savings plans.

These plans follow a trend since the mid-1980s of shaving costs for business, while putting choice and control into the hands of employees.

An example of a defined contribution plan geared toward small business (2-50 employees) is FlexScape.

Introduced in Illinois in September by Thousand Oaks, Calif-based insurance giant Wellpoint, FlexScape allows an employer to lock in coverage at rates of $80, $100, $120 per employee per month. Through a feature called EmployeeElect, the employee can choose among five plans and pay for them with pre-tax dollars. The employee can choose to lower the deductible, and select among an array of options including number of visits, prescription co-pays, patient co-pays as well as other services.

Jim Pautz, co-owner of E.C. Schultz & Company, a small specialty tool and die company signed on with FlexScape in August. The 106-year old company has 16 employees. Its average cost of insurance has increased 15% to 20% per year.

To insure a married man, aged 41, his wife and three children, the company would spend about $380 per month ($500 deductible). The employee could lower the deductible, vary numbers of visits, and adjust prescription drug co-pays for say, $180 per month.

Illinois has 350,000 business with 100 or fewer employees. The fastest growing companies, those creating the most jobs, have 25-75 employees.

”Illinois is not a good environment for health-care coverage for small businesses,” said Mollie Cole, Managing Director of the Small and Emerging Business Division of the Chicagoland Chamber of Commerce. “Small businesses have to grab any incentive available.”

Last week, the Chamber mailed a letter to its 2,600 members suggesting they consider a personal medical account offered by Destiny Health Care. The Elk Grove-based company provides insurance to companies with as few as two employees.

The personal medical account is an answer to the “use it or lose it policy,” inherent in more traditional insurance plans, says Destiny Vice President Bill Drasnik.

Under Destiny, an employee is insured for core benefits including hospitalization, surgery, chronic medication and high cumulative benefits. The employee then elects to fund an account that pays for day-to-day healthcare services like a doctor’s office visit, non-chronic prescription drugs and dental and vision expenses. If that account has money left at the end of the year, it rolls over into the next benefit year.

“I am in the second year of the plan,’ Drasnik said,” I had a good deal of personal medical fund that I did not use last year and I rolled it over this year.”

“In a typical plan,” he said,” the only value you get is if you are sick and you need to use the plan. You get no value if you are healthy.”

Sally Duros is a business writer who can be reached at www.sduros.com, sally@sduros.com.