A Small Business Owner’s Guide to Choosing a Company Health Insurance Plan
Choosing a health insurance plan for your small business is vital. Your employees expect that you will be presenting them with a well researched, well thought out health plan, and you owe it to them to provide just that. While there are many types of health insurance, the three most popular types of company health insurance plans offered to employees today are HMOs, PPOs, and point of service plans (POSs). Traditional indemnity health plans have almost vanished entirely, and new consumer-driven health plans are starting to take hold. Some businesses offer only one option, while others particularly those with a large, diverse group of employees offer two or more.
Which type of health insurance plan is best for your company? There is no easy answer. Premiums change every year, your employee base may change considerably, and state and federal rules can affect costs and coverage in unpredictable ways. Many companies make it a point to reevaluate their company health insurance options every year. Because it is one of the most important benefits to your employees and a huge expense for your business, it is worth taking the time to make sure you make the right choice, and this guide can help you to do so.
Choosing A Health Insurance Broker
When choosing a health insurance plan for your company, the first step is to find a health insurance broker. A broker is a salesperson who has a state license to sell and service contracts of multiple health plans or insurers, and state laws on brokers vary. Some states require you to purchase your company’s health insurance through a broker, while others allow you to go directly to insurers for your policy. The benefits of using a health insurance broker, however, usually make it worthwhile.
What To Look For In A Potential Health Insurance Broker
Flexibility – remember that the broker works for you: they should be able to help you get the best deal and the best plan for your employees.
Responsive Customer Service Ethic: even during the evaluation process, you should pay attention to how long it takes the broker to get back in touch with you.
Multifaceted Approach – by managing several benefits and handling employees’ questions, a good insurance broker should make themselves more available to you.
Questions To Ask A Potential Health Insurance Broker
What services do you offer that I will not be able to get from another broker?
What types of problems can you solve for my employees?
Tell me about some problems you have helped other clients’ employees resolve.
Can my employees call you for help 24/7? Do you have a web site or online chat for employees to get help?
Types Of Health Insurance
Once you’ve found an insurance broker, the next step is to decide which type of health insurance you are going to offer your employees. Here is some information on the most common types of health insurance to help you make your decision.
Traditional
The biggest advantage of traditional group medical insurance is the flexibility it provides employees. Also known as indemnity coverage, traditional group medical insurance allows individuals to visit any doctor or hospital they want and receive coverage for any treatment covered under the policy. Plan members can go to any specialist without a referral, and the insurance company has no say as to whether or not the visit is necessary. Unfortunately for people who prefer this flexibility, few employers offer traditional group medical insurance any more.
The reason that these types of plans are becoming so rare is cost. Because there are few oversight or cost-saving measures, premiums for traditional insurance tend to be higher than for other kinds of plans, which raises costs for both employers and employees. Traditional insurance also carries more out-of-pocket expenses, since most group medical insurance plans require costly deductibles (the amount the insured has to pay before the provider starts paying) and co-insurance (the provider pays the majority of the bill, but the insured is responsible for 5%, 10% or 20% of each charge).
HMO
Health maintenance organizations (HMOs) were the first alternatives to traditional insurance. By creating a network of doctors and hospitals and implementing cost-saving measures, HMOs are able to control costs better than other plans. Overall, HMO premiums are the lowest of any type of group medical insurance plan. However, HMOs are also the least flexible type of health care plan: they require members to choose a primary care physician who performs basic health checkups and approves visits to other physicians. These group medical insurance plans also generally only cover the expense of member visits to doctors and hospitals that are part of the network. Visits to nonparticipating doctors must be paid directly by the employee.
This system represents both the best and the worst of HMOs. While this structure helps minimize costs for employers, it can be unpopular with some employees who currently use doctors outside the HMO network, since they must switch physicians to receive coverage. Also, employees who want more control over their medical care can find it annoying to jump through the gatekeeper hoop to see specialists.
PPO
Preferred provider organizations, or PPOs, are now the most popular choice for employer-sponsored health care. A PPO is a collection of physicians and hospitals that agree to provide health care at a reduced cost to PPO members. With this setup, they can limit health care costs without the restrictions of an HMO.
Most PPOs are quite similar to traditional group medical insurance policies, with the exception that there are two different levels of coverage depending on which providers you use. For visits to doctors and hospitals that are affiliated with the PPO, patients pay a low deductible and little or no co-insurance. Visits to doctors and hospitals outside the network are not as fully covered, requiring higher payments from the patient.
This structure is designed to encourage PPO members to use specific doctors and hospitals that have been designated by the organization as preferred providers. These doctors and hospitals agree to provide health care to PPO members at lower rates, which allows the PPO to reduce overall health care costs.
POS
Also known as an open-ended HMOs, point of service (POS) plans combine elements of both HMOs and PPOs. As with an HMO, members choose a primary care physician who will provide referrals when needed. However, they are also free to visit out-of-network providers if they desire, with or without a referral – and the plan will still cover the expense, to some degree. However, members who use services outside the network must pay more than they would for in-network services. This increased cost typically involves deductibles and coinsurance, much like traditional fee-for-service plans.
POS plans are popular with some employees because they provide much of the cost savings of HMOs, but still include some coverage if the member wants to choose a specific doctor.
Factors to Consider When Evaluating Health Insurance Plans
Deciding on the type of insurance that you are going to offer your employees is not the final step in choosing a company health insurance plan for your small business. It is important to evaluate each individual plan before choosing one, since plans can vary widely. Here are some factors to keep in mind when evaluating potential employee health insurance plans.
Examine Features and Coverage: You’ll be hard pressed to find a plan that doesn’t cover hospital and emergency care, as well as outpatient care, which encompasses routine exams, lab work, and office visits, but these plans do exist, albeit in the minority. Group health insurance plans vary significantly when it comes to areas such as prenatal and postpartum maternity care, ambulance service, prescription drugs, and other services. Some plans do not cover these items, while others charge different copayment or insurance fees.
Evaluate The Plan’s Doctors: It can be difficult to access the quality of physicians participating in a plan network, but this assessment is also extremely important. Some questions to ask include: specifics of the screening process that is used to add new physicians to the health care plan. A good screening process should include not only background checks but also analysis of any previous malpractice or related matters.
You should also inquire as to whether any of the plan’s physicians have been certified by the American Board of Medical Specialties. In order to become ABMS Certified, a physician is required to demonstrate their competency, pass tests, and meet training requirements. An ideal plan should contain approximately 85% or more board certified physicians. Another important question to ask, is what percentage of plan doctors are actually accepting new patients, since some group health plans have been known to sign up doctors with a full patient load simply to boost their numbers.
Investigate Reimbursement Procedures: Many group health pans set unrealistically low limits on the maximum payment, so it is important to make sure that the plan you choose offers at least $1 million of coverage, because the cost of treatment for serious illnesses can add up quickly. You should also be wary of low reimbursement levels, because some policies pay a set maximum per procedure, which is actually less that what the physicians in your area actually a charge, leaving you to pay the difference if the claim payment falls short of the bill.
When evaluating PPOs or POS plans, be sure to avoid overpaying for the flexibility that they offer through high deductibles and co insurance, and be careful of policies that require patients to co insure more than 25% of the cost of treatment, or continue to charge co insurance in excess of $10,000.
Tips For Choosing an Employee Health Insurance Plan
Know Which Types of Policies To Avoid: Watch out for hospital indemnity policies and so called dread disease policies. Hospital indemnity policies pay for each day you are in the hospital. Unfortunately, most do not provide enough coverage to even cover the typical daily cost of a hospital stay. Dread disease policies cover particular illnesses but tend to be far more expensive than the likelihood of contracting one of these diseases would suggest.
Let employees choose
In 2004, only 16% of companies with fewer than 200 employees offered more than one health care option. However 59% of companies with 200 to 1000 employees offered multiple options, and 75% of companies with 1000 employees or more did so as well. Offering more than one plan gives your employees the freedom to choose the plan best suited for them. There is little additional cost to you, so it can improve employee satisfaction and make your small business seem a little bigger, without breaking the bank.
The key thing to remember when choosing an employee health insurance plan is that whichever plan or plans your choose, your employees will be the ones who are most effected by them. Take the time to research all aspects and steps of this process, weigh your options, and choose carefully.