We’re not trying to be too politically partisan here, exactly, but there’s a reason that large companies fight against health care reform. Right now, large companies have a financial advantage over smaller firms when it comes to providing health care coverage. The day health care insurance stops being a function of where people work, we think corporate employees may start deserting their posts en masse for the rewards of entrepreneurship and the culture of small businesses.

Don’t hold your breath.

According to the 2008 Employer Health Benefits Survey released in July by the Kaiser Family Foundation and the Health Research & Educational Trust, something like 99 percent of large companies offer health care coverage. But only 62 percent of smaller firms do so, and just under half (49 percent) of the smallest firms (three to nine workers) offer health benefits.  Among all small firms (three to 199 workers) not offering health benefits, nearly half (48 percent) cite high premiums as the most important reason for not doing so.

The survey finds that workers in small businesses offering health benefits on average pay more for family coverage than workers at larger firms do – $4,101 annually for workers in small firms (three to 199 workers), compared with $2,982 annually for workers in larger firms.  For single coverage, the opposite is true, with workers at small firms annually contributing less on average than workers at large firms ($624 vs. $769).

Meanwhile, workers at small businesses have faced more dramatic coverage cost increases than those in corporate America. About 35 percent of covered workers at small businesses (three to 199 workers) pay at least $1,000 out of pocket before their plan generally will start to pay a share of their health-care bills – rising from 21 percent last year. That compares to 18 percent of all workers at firms large and small, according to the study.

None of this should be shocking. Expect things to change rapidly over the next year or so. While the debate rages around us about what to do to improve the situation, you need to know how this works.

How insurance works for small businesses

You can generally deduct from your taxes all of your contributions to a group health insurance plan. Your employees get a tax break on the value of those contributions, which is why employers offer coverage at all. You are always going to be eligible for a group plan – federal law requires any insurer offering small group coverage to anyone to offer small group coverage to everyone. But the price may stink, depending on state regulations. Small business plans generally cap out at 50 employees.

State regulations vary. For example, five states – Massachusetts, New York, New Jersey, Maine, and Vermont – are "Guaranteed Issue" states. You cannot be denied medical coverage for a pre-existing health condition there.

Some extra protections and requirements are relatively common. Small businesses often must meet a minimum enrollment requirement – a set percentage or given number of your employees using the plan – to keep covered. In some states, the employer must contribute a pre-set amount toward employee premiums – 25 percent or 50 percent is common. Often, it is illegal for an insurance company to cancel a company’s coverage because someone gets sick.

Insurance companies can exclude some pre-existing conditions from medical coverage for a period of time. Under the Health Information Portability and Accountability Act – HIPAA – a plan is allowed to look back only six months for a condition that was present before the start of coverage in a group health plan. Specifically, the law says that a pre-existing condition exclusion can be imposed on a condition “only if medical advice, diagnosis, care, or treatment was recommended or received during the six months prior to your enrollment date in the plan.”

The Department of Labor gives an example. You may have had arthritis for many years before you came to your current job. If you did not have medical advice, diagnosis, care, or treatment – recommended or received – in the six months before you enrolled in the plan, then the prior condition cannot be subject to a pre-existing condition exclusion.

But if you did receive medical advice, diagnosis, care, or treatment within the past six months, then the plan may impose a preexisting condition exclusion for that condition for most people to 12 months (18 months if you enroll late), although some plans may have a shorter time period or none at all. Some people with a history of prior health coverage will be able to reduce the exclusion period even further using “creditable coverage.” You can’t be dinged for pregnancy, genetic disorders or certain problems with newborn children and adoptees.

If this sounds like there’s an insurance advantage to waiting to go to a doctor if your company is planning to switch providers in the next six months, then you’re right. Yes, that sucks. And yes, that’s one reason why we pay more for coverage in this country.

How to shop for insurance

You’re going to need to know how many employees you have to insure, and how many of their family members you plan to seek coverage for. If it’s just you, then you’re shopping for an individual coverage policy. If you have at least two employees, you’ll qualify for a group plan. You’ll need the names, ages and genders of everyone you plan to cover.

You have three options here. You can find a local broker who sells multiple insurers’ policies, a local agent who sells for a single insurer, or go online to the Internet clearinghouses. There are pros and cons to each approach. Local brokers and agents are within arm’s reach, more or less, if something terrible happens. You may have a relationship already with an insurance broker or agent when you took out business insurance. But you’re probably going to pay a bit more in either case. Brokers are usually paid on commission, by the size of the insurance contract. Agents tend to charge a somewhat lower premium because they work directly for the insurer, but you’re also less likely to get the full range of options.

Shopping online for insurance can be a mind-boggling task, because there are thousands of Web sites offering comparison shopping. Most of these sites will redirect you to a partner in the state of your choice, who will be able to sell you a policy locally and provide a local point of contact. You will certainly have the full range of options to choose from, depending on how diligently you search. And you may spend less, although you have to be careful to understand what you’re paying for.

We can make this process a bit easier for you. Check out our vendors for a little help.

Before dealing with an agent or broker, you need to do some diligence. You need to check an agent or broker's disciplinary record with your state's insurance commissioner's consumer hotline. You should also plug their name and local company into a search engine to see if there are any serious complaints.

You know how important trust is in a small business, and you probably have a good feel for behaviors that engender trust and those that don’t. Your instincts are important, but information is much, much more important when buying health insurance. Here are some red flags to fight fraud.

• If an insurance seller won’t give you a basic quote over the phone or online, run.

• If you can’t find the agent’s name on your state list of registered insurance agents, run.

• If an agent or broker starts in on a “hard sell,” expecting an immediate decision, run.

• If a seller won’t provide complete information about what is covered before you sign a contract, run.

• If a plan is substantially less expensive than other insurance offered by competing brokers or agents, be highly skeptical.

• If an agent or broker starts talking about “limited” or “low-cost” plans and not major “medical plans,” run.  The terms tend to mean that hospital stays and other costs are subject to a daily limit – the extra is on you.

• If the word “discount plan” appears anywhere on the document, run. See above.

• If an agent starts pushing an ERISA plan, which isn’t health insurance, run. See above.

• If the insurance document describes “contributions” or “dues” to a union or organization and not “premiums” for health coverage, run fast.

• If the plan offers "guaranteed" insurance coverage, without exclusions for pre-existing conditions and without waiting periods for coverage, run faster.

Do not be afraid to take your time and don’t let a sales person oversimplify this process. Buried in an otherwise-disturbing marketing blog post about how insurers should sell insurance are some interesting figures – consumers are easily scared away by the complexity of buying insurance. Beat that, and you’ll get a better deal.

Once you’re in front of someone selling insurance, you’ll need to run through some scenarios to see what your employees’ costs out of pocket would be in different situations. Try these:

• Typical doctor’s visit for a sore throat or back pain -- $300

• Plus two follow up visits with a specialist -- $1000

• Plus specialized tests -- $1000

• If someone got banged up – just a little – and ended up in an emergency room  -- $1000

• If someone got really banged up, and needed two weeks of intensive care -- $20,000

• plus physical therapy for six months -- $250 a weekly visit/25 visits.

• plus pain medication for six months -- $800

• If someone needed to take a moderately-priced acne medication for a few months -- $200

• If someone needed blood pressure medication for the foreseeable future -- $50/month

• Pregnancy and childbirth -- $5,000 to $15,000

• If someone suffered a heart attack -- $25,000

• If someone was diagnosed with complicated cancer and required chemotherapy and surgery -- $100,000

• If someone needs a bone marrow transplant or open heart surgery -- $350,000

• If someone gets crazy sick – a bullet in the head, three kinds of cancer and a bad cold -- $2,000,000

Health insurance is separate from dental and vision insurance under most plans. It’s relatively easy to fold both benefits into a health savings account plan. Other plans need to tack on the benefit. Vision plans are considered a wellness benefit, not a health benefit.

Vision insurance usually covers some part of the cost for annual eye examinations, eye glass frames and lenses, contact lenses and laser corrective surgery. Expect your employees to pay a small monthly fee and co-payments around $35 for services.

Like vision “plans,” there’s a difference between dental insurance and a dental plan. Dental plans ask participants to pay a fee to join and then pay a discounted rate at participating dentists. Dental insurance is a pool of shared risk. Plans might require a $25 monthly membership fee, while insurance might cost you a couple hundred dollars a month per employee.

Bottom line – you need to comparison shop, and you need to do insurance business with people you can trust, to do this right. The comparison shopping part? We can help. Trust? We’ll never tell you to trust someone blindly. But we can help you find more information.