Choosing a healthcare plan for your business can be a difficult and laborious task. The dramatic rise in health insurance costs, coupled with new and more stringent governmental regulation, is cause for small business owners to take a hard look at the plans they offer their employees.
While there are several issues you must consider when evaluating healthcare plans, two of the most important are plan benefits and plan pricing. First, you must determine if you can afford a traditional HMO or PPO plan that offers more benefits at higher costs, or if you should consider lower-cost options. What’s more, if you have out-of-state employees and/or you wish to offer coverage to retirees, your insurance options will be reduced.
Next, you’ll need to decide which insurance carrier to choose—most major carriers offer similar plan design and benefits. Insurers will consider the average employee age, family size, geographic location and type of business when determining rates. In larger companies, claims experience and loss ratios are added into rate calculations.
When choosing a carrier, it’s important to consider the network of providers. Are your employees’ doctors in the network? Is the local hospital in the network? Employee discontent may rise if their doctors or local hospitals are not available to them.
Insurance carriers are responding to the needs of small businesses by taking a more creative approach in plan design. One example of this is the establishment of high deductible HMO and PPO plans that are compatible with consumer-driven plans, such as Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs). An HRA is an employer-sponsored plan in which the employer contributes a predetermined amount to an employee’s account to be used to pay for medical expenses incurred under the plan deductible. An HSA is an account that belongs to the employee— to which both the employee and employer may contribute—to be used to pay for medical expenses under the plan deductible. All of these plans have restrictions, and employers should seek the advice of a health care consultant to determine which is best for their company.
Both HRAs and HSAs offer tax advantages to the employee by enabling them to use pre-tax dollars to pay for health care. The use of these plans—coupled with high deductible health insurance plans—has shifted more of the risk to the consumer. The desired result of this shift is more involved consumers making better decisions when it comes to their health. For example, a member suffering from a sore throat will visit his local pharmacy to seek help before going to a hospital emergency room.
The introduction of new health plans, pre-tax accounts and the shifting of risk can put a tremendous amount of pressure on the small business owner. Several costly mistakes can result from making the wrong choice. In today’s environment, it’s critical to seek the advice of qualified insurance brokers or consultants. The path to achieving the correct balance of coverage and cost will be far easier to navigate with the advice offered by these professionals.
Carriers continue to seek ways to lower the cost of health insurance. Nationally, providers are creating limited network plans that control costs by requiring that treatment be given by network-owned providers. Additionally, the introduction of hospital tier plans was designed to encourage the use of lower cost hospitals for treatment.
The effects of the recently enacted Patient Protection and Affordable Care Act are not yet known. Experts claim this law may result in even higher health care and insurance costs. But by being an informed business owner, you can make decisions that will result in a comprehensive health care plan for your employees and a healthy financial future for your company.