So you’ve finally finished medical school, completed your residency, and you’re ready to open your own practice. It’s an exciting time in life — you’re realizing one of your dreams.
But where do you start? Unfortunately, most medical schools don’t teach how to address the challenges of opening a practice — challenges such as securing loans, finding medical office space, purchasing computers and software, hiring staff, and deciding what insurance benefits you’ll offer your employees.
Providing group insurance for your employees is one of the biggest potential operating expenses for practice owners, and when it comes to providing group insurance, medical practices face tough, complex choices. In our current economic environment, offering insurance to employees while keeping costs down is a challenge. However, offering a comprehensive benefits package is crucial to attracting and keeping quality employees.
This guide will help you understand your options for insuring employees and offer tips on how to make group insurance coverage more affordable.
Health coverage for your employees
When you start a group practice, you’ll have to decide what types of insurance benefits you’re going to offer to your employees. Will you offer major medical insurance? Life insurance? Vision? Dental? There are many options—and as the owner of your business, you’ll have to decide how much you can afford to offer your employees, and what you need to provide to attract quality talent.
In Texas, groups with as few as two members may be eligible for group health insurance. Typically, the larger the group, the more options are available and the lower the premiums, because the risk is distributed across more members. In most group plans, the employer pays for a portion of the premium costs for the employee.
The law requires that a minimum percentage of eligible employees must participate in the plan, which prevents employers from only offering coverage to healthy employees in order to get better group rates.
Group insurance options
Based on what fits the budget of your medical practice, you may want to offer your employees a combination of the following:
Medical insurance — Medical insurance is designed to compensate for eligible medical expenses. Usually, medical insurance pays a high percentage of eligible expenses above a certain dollar amount. Up to that dollar amount, the patients pay the lion’s share of the costs incurred. As the employer, you can choose to cover some, or all, of your employees’ premiums for major medical health insurance.
Life insurance — Beneficiaries of a life insurance policy receive cash (a “death benefit”) to help pay for funeral costs and ongoing living expenses after the death of the policyholder. Most employer-sponsored life insurance plans offer up to $500,000 of coverage and are offered to the employee as a “term” policy, which means the employee is covered as long as he or she is employed by the company or medical practice offering the policy.
Long-term disability insurance — This coverage offers protection against the devastating financial implications of a disability that strips the policyholder of the ability to make a living. It also provides the policyholder with income for a long period of time, such as two years, five years, or until retirement.
Short-term disability insurance — Short-term disability protects a policyholder’s income for a short amount of time (up to two years) in the event of disabling injuries or illness. Short-term disability cannot replace income in the event of long-term, disabling injuries or illnesses.
Vision insurance — This insurance provides coverage for a portion of the expenses of eye treatments, discounts on eyewear, and services given by ophthalmologists.
Dental insurance — Dental coverage pays all or a portion of the costs incurred on dental care, such as fillings, crowns, root canals, and dental check-ups.
Long-term care insurance — Long-term care insurance offers protection for people who want to preserve their assets in the event they require in-home or nursing-home care over an extended period.
Insurance for your practice
Office overhead expense
With office overhead expense (OOE) insurance, you can help protect your practice and your employees in the event you suffer a disabling injury or illness.
OOE insurance pays your actual monthly overhead expenses, up to the benefit amount you select. And during the time you are disabled, your coverage may be continued at no cost to you. With some plans, you can receive benefits in the event you suffer even a partial disability, if that disability negatively affects your income.
Critical illness insurance
Critical illness insurance pays a lump sum benefit to the insured upon diagnosis of several defined critical illnesses. Among these are heart attack, stroke, life-threatening cancer, Alzheimer’s disease, and organ transplant. The lump sum is typically tax-free and is paid directly to the policy owner. The benefit can be used however the policyholder wishes—perhaps to pay deductibles, unpaid medical bills, or for assistance around the home.
Accident insurance pays a lump sum if you’re permanently disabled or if you die as a result of an accident. A portion of the total benefit is also available if you lose the use of your limbs or become blind due to the accident. Benefits may also include limited day care expenses, tuition expenses, and the expenses your spouse may incur (for school, training, etc.) to prepare to re-enter the workforce.
A life insurance policy can be structured to fund a "buy-sell" agreement. This would ensure that the remaining partners in the practice have the funds to buy the practice interests of a deceased owner at a previously agreed upon price. That way, the partners get the business and the beneficiaries of the deceased get money they may need.1
Long-term disability, accident insurance, and critical-illness policies also can be structured to have a buy-sell agreement in the unfortunate event that one of the physician-owners becomes too ill or injured to contribute to the company.
1. Life and Health Insurance Foundation for Education, Sept. 21, 2009 http://www.lifehappens.org/life-insurance/who-needs-it.