Health insurance is one of the biggest issues facing small businesses. Insurance premiums have increased dramatically over the last seven years, according to a 2003 survey by The Henry J. Kaiser Family Foundation. From 2000 to 2003, annual premium increases were in the double digits nationwide. Last year's increase reached a whopping 13.9 percent across the country, exceeding the rate of inflation by more than 10 percentage points.

The numbers are even worse for Florida small business owners. According to the Florida Department of Financial Services, premiums for small employer health insurance rose on average by 16 percent in 2000, 24 percent in 2001 and by almost 30 percent in 2002.

So how can small businesses-defined by the Small Business Administration as companies with fewer than 200 employees-provide health insurance coverage to their employees without destroying the bottom line? According to Eric Tyson, national finance expert and co-author of the best seller Small Business For Dummies, small businesses, especially those with 100 employees or less, need to find a balance between meeting employee expectations and reducing health insurance costs. The smallest companies, those with just a handful of workers, may have to forgo offering health insurance altogether.

"According to the Employee Benefit Research Institute, six in 10 American workers view their health insurance as their most prized employee benefit," Tyson says. "Only about 23 percent of employees consider retirement benefits the most desirable. It's clear that offering some form of health insurance is a big plus in recruitment and retention, but for smaller companies the options may be limited."

Tyson advises small business owners to spend some time learning about their options and accepting that there must be trade offs if they are going to keep costs down. In this age of skyrocketing health care costs and out-of-orbit insurance premiums, both employers and employees need to rethink how they view health insurance benefits, Tyson says. "Insurance has to be viewed as for the big stuff, not the little stuff. People have to be willing to accept that if they go to the doctor, it might cost them $200 or $300. The important thing today is to know that you have catastrophic coverage should you need it."

Do your homework, Tyson advises, and explore all your options before signing up with an insurer. He offers the following guidance for small businesses seeking to reduce health insurance costs while offering the best coverage for their employees:

o Make sure your health insurance provider is in the business for the long haul.

Look for a provider that has been in the field for decades and specializes in health insurance. While there are no guarantees that any insurer will stay in business, it is best to choose among the biggest plans in your area. If your insurer pulls the plug, employees with pre-existing conditions may be unable to secure new coverage. Besides the increased likelihood of staying in the health insurance business, larger players can negotiate better rates from providers.

o Choose a health insurance plan that offers guaranteed renewability.

Check the renewability terms of the plan carefully. Some plans require you and your employees to prove continued good health by undergoing yearly physical examinations. You don't want to shop around for new coverage each year because one or more of the individuals covered under your plan experienced health problems.

o Learn the ABCs of health care coverage.

More and more health insurance plans keep costs down by contracting with specific health care providers. Be sure to check the availability of network providers in your area before signing on to a particular plan. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) are the main types of plans that restrict your choices. The major difference between HMOs and PPOs is that PPOs pay the majority of your expenses if you use a provider outside their approved list while and HMO typically will not cover out-of-network provider costs at all.

o Look for a plan that has no maximum level of benefits.

Health insurance plans specify a "lifetime maximum benefit" they will pay over the course of your coverage period. With the high cost of hospitalization, physician services and ancillary charges such as tests and lab work, employees suffering from major medical problems can eat away at benefits in no time. For example, if you have an employee who is diagnosed with cancer and coverage is capped at a few hundred thousand dollars, that employee's benefits will be terminated after the cap amount is reached. This can be financially devastating for individuals. Choose a plan that has no maximum or that has a maximum level of benefits of at least several million dollars.

o Select higher deductible and copayments.

To keep costs down, employers are opting to shift a greater portion of the burden of health care to their employees. As with other insurance policies, the more each individual is willing to share in the payment of claims, the less you will have to pay in premiums. To keep premiums down, choose a plan with the highest deductible and copayment that you and your employees can comfortably afford. Most policies have annual deductible options ranging from $250 to $1,000. And many offer copayment options that require the employee to pay 20 percent of out-of-pocket up to a certain amount, typically $1,000 to $2,000. HMO plans usually offer copayment options ranging from $5 to $20 a visit. The higher per-visit charge you are willing to accept, the lower your health insurance premiums will be.

o Reimburse your employees for a share of their individual premiums.

Smaller businesses with only a handful of employees often forego company-wide health insurance coverage altogether. Instead, they offer to reimburse their employees for a portion of their individually obtained health insurance costs. Typically, employers pay half the cost of the health insurance premiums with the employees picking up half the cost. This type of cost sharing allows your staff to obtain better coverage while reducing the burden on both the business and the individual employee.

Life Saver

Small businesses find affordable insurance through Sarasota Memorial's Charter Plan.

Carol Cassata and Penny Thompson, co-owners of The Cleaning Connection-a Sarasota-based home cleaning company that contracts with developers such as US Homes to keep new houses under construction looking neat and tidy for visitors-were dead-set on finding affordable health care coverage for their staff. They knew that the majority of the 15 women who work for the company, many of whom are single mothers, could not afford health insurance on their own. But as they searched the private sector for affordable group coverage, Cassata and Thompson, small business owners with a passion for doing the right thing for "their girls," were flabbergasted at the high monthly premiums.

Then they heard about Sarasota Memorial Health Care System's Charter Plan, established last spring to provide affordable health care insurance to small businesses with four or more employees in Sarasota County. More than 45,000 members of working families in the county do not have health insurance. "The uninsured's health is worse than it should be and the economic cost to the system is greater than it should be," says Sarasota Memorial's CEO Dr. G. Duncan Finlay.

Under the Charter Plan, which is administered by the Sarasota Memorial Health Care System and the Sarasota Memorial Physician-Hospital Organization and is not taxpayer subsidized, Cassata and Thompson are able to provide coverage for all eligible employees at about half the monthly cost of other health plans.

"We are able to get our girls coverage for a monthly premium per employee that ranges between $200 and $380 a month. Other insurance plans we looked at were at least double. And we split the premium with each girl. So we take an average of $25 out of each employee's weekly paycheck. It's just so important for them to have coverage," Cassata says.

There are restrictions on eligibility, including a cap on participants' income levels and a mandate that employers pay at least 50 percent of the premium costs. In addition, each employee must meet a deductible ($500 a year in network) and make $20 co-payment for each of the first four doctor visits each year. After deductibles are met, the plan covers 80 percent of most health care related charges. So far there are 109 members out of a 3,500 cap signed up. But the biggest benefit so far to The Cleaning Connection has been the plan's emphasis on preventative medicine.

"Each of us had to have a physical exam within 90 days of joining the plan. I found out, much to my surprise, that I had dangerously high cholesterol. Now that is being managed. But Penny found out that she had breast cancer. She had a mastectomy and is now doing great. That 90-day requirement saved her life."

Small businesses interested in more information about the Charter Plan can contact Terry O'Brien at First Benefits Group, Inc., (941) 361-3057. -Nancy Wollin