Our firm’s San Francisco insurance attorney knows that there are a lot of small business owners in our community, and that employee health insurance accounts for a significant amount of these local business’s costs. Often, health insurance is second only to payroll as a business’s greatest expense. Usually, small business owners have an insurance broker who sets up the company’s health insurance, and that broker earns a commission on the premiums on that account. This creates a disincentive for brokers to find ways to decrease expensive premiums for the business owners because that would decrease their commission.
The new federal healthcare legislation, the Affordable Care Act stipulates that insurance companies have to spend at least 85 percent of premiums on claims for employers with at least 50 employees, and for individuals and small business with less than 50 employees, at least 80 percent must be spent on benefits and improving quality for the customer, to avoid the medical loss ratio from things like broker commissions. The new law also requires that insurance companies publicly report how they spend premiums, so consumers can see how much of their money is spent on medical care and how much is used for administrative purposes.
A smart business owner will talk with their insurance broker and ask how the broker is working to decrease the business’s health insurance costs. The amount and type of insurance claims made by the employees determines the premiums, and therefore the cost to the company. By asking the insurance company for this data on medical claims, a business owner can see where costs need to be lowered and by knowing the problem, can more easily determine effective solutions.
Aside from the federal Affordable Care Act, San Francisco small business owners are no doubt aware that the City of San Francisco also has its own Health Care Security Ordinance that affects those who do business in the city. A business falls under this Ordinance if it engages in business in San Francisco, is required to obtain a business registration certification with the city, and employs 20 or more employees per week (which also includes employees working outside of San Francisco). Nonprofits with fewer than 50 employees and small businesses with less than 20 employees are exempt from the spending requirements under the Ordinance. A covered employee is one who has worked for the employer for at least 90 days and works at least eight hours a week in San Francisco. The Ordinance proscribes the amount of money a business must spend on each covered employee per hour, which will increase in January. In the coming year of 2012, businesses with more than 100 employees will have to expend $2.40 per covered employee per hour on health care. Businesses with between 20 and 99 employees will have to expend $1.46 per covered employee per hour on health care.
With health care insurance costs so significant to local businesses, San Francisco’s small business owners cannot afford to lose money from being cheated on their insurance. Small and medium size local business should contact an experienced San Francisco insurance attorney with any concerns about mishandling or bad faith in their insurance matters, or with any questions about compliance with the new federal and San Francisco insurance laws.
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