One of the toughest decisions facing any business owner involves selecting the best health plan for his or her employees. A good medical benefits package can help recruit and retain key employees. But health insurance represents a sizable investment for any employer: The annual cost of health benefits (including medical, prescription drug, dental and vision coverage) for companies with 10 to 499 employees is $6,670, according to a 2005 survey done by Mercer Consulting. Choosing the wrong insurance plan can mean that your workers get fewer benefits and you pay higher premiums.
There are a number of important factors to consider when selecting a group health insurance plan. Coverage costs continue to rise — 6.1% last year — but the good news is that increases have slowed slightly, and there are more options than ever available to businesses. The strategies below will provide a good starting point for the decision-making process.
One thing to keep in mind is that each employee has a different set of needs and expectations regarding his or her employer sponsored group health plan. Be flexible, and consider offering employees more than one plan to allow each employee a choice. It’s also important to get the proper guidance when shopping for your group health plan. For small groups in New York, New Jersey and Connecticut there is no additional cost associated with utilizing an agent or broker who specializes in health insurance to help with your group health plan. The broker’s commission is built into the rates, and those rates are the same whether or not you work with an agent.
In addition to helping you find the right plan or set of plans for your group, your health insurance agent should be available to aid in the plan administration. He or she should be willing to work with you and your staff on day-to-day issues such as enrollments, terminations and changes as well as assisting in the administration of COBRA. The agent should also work to resolve any billing issues and claim problems that may arise.
An Overview of the Market Currently
Monthly premiums for health insurance coverage in the New York area run from $330 to $425 (or $3,960 to $5,100 per year) for an individual and $900 to $1,100 ($10,800 to $13,200 annually) for a family. That includes medical and prescription drug coverage. There are lower-cost alternatives, but these are very competitive rates for plans with well-established companies like Aetna, Oxford, Blue Cross and Blue Shield or Guardian Healthnet. (You can be pretty confident that if your monthly premium for coverage for an individual employee is more than $425, you are paying more than you should be.)
New York State requires insurance companies to offer community-rated, guaranteed issue medical policies for any business that employs between two and 50 full-time workers. This means that every business in one particular geographic area will pay the same premium for the same insurance plan regardless of employees’ age, gender or medical history. Under this system, small business owners pay the same premiums for men and women, regardless of age.
Employers with more than 50 full-time workers can solicit quotes based on demographic data and claims history from different insurance companies. Not surprisingly, younger, healthier groups will tend to be offered better rates for the same plan.
The market for small-group health insurance in New Jersey and Connecticut is different than that in New York. Insurers in New Jersey calculate the rate for each company using both the zip code of the home office and each individual employee’s gender and age. Upon initial enrollment, a composite rate is generated for the whole group of employees that is used for each new enrolled member until the policy anniversary. Connecticut insurance companies calculate the rate for each company using the zip code of the home office and the employees’ ages. Neither state considers a person’s health status or smoking status for small-group health insurance.
The First Step
Generally speaking, the first step in finding a plan that will fit your company’s needs is to compile a list of the doctors that matter most to your employees. (For many employees the biggest factor in whether they like their health care plan is whether their existing physicians are in the plan network.)
Your agent can help with this process; have him or her build you a spreadsheet listing the provider networks that include the physicians your employees prefer. By using in-network providers, employees will be required only to make a nominal co-payment at the doctor’s office, rather than paying the entire bill “out of pocket” and having to submit a claim for reimbursement should they choose an out-of-network provider. If there is an insurance company that has all of the doctors important to your staff within its provider network, then you can further reduce your costs by purchasing an HMO plan that uses that network.
Pricing Models: Premium Cost vs. Benefits