Did somebody mention costs?
How can you make sure the quality of health care service is high while keeping the costs down? Take a look at the following cost containment strategies to see how they might work for your small business.
Look into managed care options
Managed care is far cheaper than traditional Fee-for-Service, and in many cases it offers a more comprehensive package of services, including preventive care, annual exams and wellness programs. With managed care, your employees receive the most cost-efficient quality care available
Offer your employees Dual Choice
Typically, this is a choice of an HMO and PPO or HMO and POS. Instead of an employer choosing one plan for all employees, dual choice lets employees choose the type of plan that best meets their needs and budgets. Employers generally pay a portion of the premium and the employees pay the balance. How does it work? Here are the ways:
- The employer pays for the lower cost plan and employees buy up to the costlier plan.
- The employer pays a set amount per month or percentage of the premium for every employee.
- The employer charges all employees the same amount and pays the balance, regardless of the plan each employee selects. Employers are generally required to make a minimum percentage contribution based on the cost of the lower cost plan.
Need help deciding which combination of plans best suits your needs and budget? When you obtain your free quote, HealthInsurance.com provides a Cost Calculator to help you determine the contribution formula that works best for you.
Raise your employees' deductibles, copay and contribution percentages
Employees should have a strong financial motive to be economical when choosing providers or using medical services. This doesn't mean an employee should hesitate if he or she is sick. It just means that an employee should not needlessly use plan services. We all know that if something costs a little more, we are more conscious of how we use it.
Concentrate on preventive care!
Make your workplace a healthy zone. Encourage company exercise programs or intramural sporting leagues. Develop prevention and wellness activities. Make casual Friday into yoga or aerobic Friday. By keeping your workers fit, healthy and relaxed, you will help avoid unnecessary health care costs. (Not only that, you will probably notice increased productivity, too.) You can further improve your environment by offering healthy vending machine snacks, adopting a no-smoking policy (with financial incentives to quit) and providing passes and discounts to fitness centers.
Combining a qualified High Deductible Health Plan (HDHP) to cover catastrophic illness and injury with a Health Savings Account (HSA) to cover routine expenses may be your answer to lower premiums for health insurance. Health Savings Accounts (HSAs) are becoming increasingly popular because of their flexibility and immediate tax savings.
Who is eligible?
- To be eligible to establish a health savings account an individual must
- Be covered under a high deductible health plan
- May not be covered under any health plan that is not a high deductible health plan
- Not be entitled to benefits under Medicare
- Not be claimed as a dependent on another person’s tax return
Who can contribute and how much is deductible?
Contributions are 100% tax deductible up to the size of the HDHP deductible within certain limits. This means a tax-deductible contribution of individuals ranging between $1,000 and $2,600 and between $2,000 and $5,150 for families. HSA’s allow for catch up contributions for individuals age 55-64.
- Contributions to the account are tax deductible
- Amounts in an HSA belong to the individual and are fully portable
- Amounts in an HSA earn tax-free interest
- Unused amounts in the account at year-end remain available for future years
- Distributions are not taxed if used for qualifying medical expenses
HSA funds not withdrawn accumulate tax-free interest until age 65. At age 65 you have the option to withdraw them for any purpose and pay ordinary income taxes.
Other forms of insurance?
In addition to traditional forms of health coverage, you might consider several other insurance products ...
Disability income insurance:
Coverage That's Healthy for Your Business
Making the best choices ...
Playing the numbers game
When it comes to buying group health insurance, there is strength in numbers. And, big numbers have traditionally gotten the best deals. According to The Wall Street Journal, in 1999, 70% of Americans obtained coverage through their employers. Many of those employers are large companies with strong-arm power at the insurance bargaining table. As a small-business owner, however, there is no reason to feel leftout. HealthInsurance.com has all the tools you need to find the highest quality coverage at the best possible price.
Cornering the small-group market
Small-group refers to the number of employees in a given company. It can be as many as 100, but is most often two to 50. In this market, health insurance prices have traditionally been based on two factors:
- Projected cost of medical services in a given geographic area
- Projected utilization of services
Cost projections are fairly stable across the country. But insurance companies estimate utilization of services probability on factors ranging from the medical history of your employees and their dependents to age and gender. These details affect plan premiums to you and your employees. If a member of your staff is considered a greater risk the group will usually pay a higher premium for insurance coverage.
The importance of underwriting
The majority of small-group health insurance companies use a process called underwriting. An underwriter analyzes risk factors (including the medical history of each individual) to estimate potential claims and determine a group's insurability. The insurer's goal? To offer coverage at a fair price and to ensure adequate income to pay future claims and expenses.
Small-business coverage options:
Regardless of whether you are a small company or a Fortune 500 giant, you want to make sure you are getting your money's worth out of a health plan. It's important to weigh the pros and cons of each choice when selecting a plan. While premiums vary among different carriers, recognize that there can be substantial differences in the benefits provided and in the amount your employees must pay out-of-pocket for services.
Don't get rocked when you enroll ...
When you purchase insurance, you are buying the insurer's promise to make the payments specified in the policy if you incur covered medical expenses. To fulfill this promise, the company must be willing and able to pay the claim. How can you be sure your chosen insurer is solvent? The best way to investigate a company's ability to pay claims is to check out its financial stability.
What about choosing a carrier?
HealthInsurance.com has strict criteria for choosing carriers. Once potential carriers are identified, HealthInsurance.com reviews their products, their ratings, their reputation and their competitiveness in the market. In addition to independent studies and resources, HealthInsurance.com utilizes the following tools for carrier review:
- NCQA (National Committee for Quality Assurance)
This committee uses clinical audits and customer feedback to report on the quality of Health Maintenance Organizations and Point-of-Service plans.
- AM Best
Insurance carriers are alpha-rated based on overall financial strength and ability to meet claims commitments. HealthInsurance.com only includes carriers with a B+ or higher rating. B+ is a secure, very good rating.
- Standard and Poor's
Similar to AM Best, this group rates financial security of carriers by checking the carriers' ability to pay claims in accordance to terms of issued policies. HealthInsurance.com only represents carriers with BBB or higher ratings. An insurer rated BBB has good financial security characteristics.
Types of coverage
"Managed care" - an umbrella term used to describe several types of cost containment models -- is a common choice for small groups. Of the Americans who obtain health care through their employers, 70% are enrolled in a managed care plan. Whether PPO, HMO or POS, managed care plans share some of the same basic characteristics:
Comprehensive health care services offered through arrangements with selected doctors, hospitals and providers
Financial incentives for recruiting members and convincing them to stay within the network
Formal programs for quality assurance and utilization review
Health Maintenance Organizations (HMOs) offer health care in certain geographic areas. Members of the plan agree on a set number of comprehensive services for an affordable monthly premium. Generally, these plans have no deductibles and minimal copay. HMO participants must use the plan facilities and health care providers in order to be covered by the HMO. However, out-of-network emergency care is usually covered.
There are several types of HMOs. In the Staff Model, doctors and other providers are usually directly employed by the HMO. Members must visit these providers at designated facilities, medical centers or offices. The Independent Practice Association (IPA) Model allows contracts with physicians in private practice or with associations of independent physicians. In the IPA model, plan members may use the offices of medical groups or private physicians as long as they are part of the HMO plan.
Think of it this way: An HMO is an organization that may be housed under one roof or many local offices. All participating providers are bound by the HMO guidelines, and all plan members must stay within the listed providers if they want their non-emergency health care to be covered by the plan. In addition, HMO members must choose a primary care physician. This plan doctor is in charge of all health care decisions and recommendations for the patient.
A Preferred Provider Organization (or PPO) usually contains groups of hospitals and providers that contract with employers, insurers, third-party administrators and others to provide health care services to covered persons and to accept negotiated fees as payment for those services. In plain English: A PPO usually has a broader base than an HMO, and feels more like old-fashioned Fee-for-Service plans to participating plan members. The cost is typically much lower than Fee-for-Service, however, because plan providers accept discounted fees. Unlike HMOs, PPOs allow plan participants to go outside the network and still receive coverage, although the benefits will be more limited out-of-network.
A POS is an HMO with indemnity-like out-of-network benefits. The patient chooses to seek treatment in-network or out-of-network at the time they need the service. POS plans generally cost more in monthly premiums than straight HMOs, but they allow the flexibility to go directly to a doctor other than the primary care physician and to consult specialists without referrals.
Fee-for-Service is the conventional form of health insurance that enables employees to choose their own physicians, specialists and hospitals. Most plans require that members meet a set deductible as well as a coinsurance payment. Insurers pay a percentage (usually 80%) of covered "reasonable and customary" service charges. (These rates are based on comparisons of other local providers in the same area.) Employees pay the remaining percentage for covered care, as well as charges over the "reasonable and customary" level. Different plans vary, with all Fee-for-Service plans give employees complete freedom to select any medical care provider.
Teaching an old dog new tricks? Maybe not ...
For many years, Fee-for-Service coverage commanded star billing in employee benefits packages. One reason was that in the past, Fee-for-Service coverage usually did not include any cost containment provisions. The major advantages? Freedom for the consumer to choose providers and few caps on expenditures. Today, however, many Fee-for-Service plans also offer a variety of cost containment features. These features can hold down costs for the insurance company and the business owner, but the consumer may end up feeling restricted when he or she uses the plan services.
What other types of insurance might benefit you and your employees?
Minding the rules ...
A sweeping federal law called "The Health Insurance Portability and Accountability Act" was passed in August of 1996. As a small business owner, it is a good idea to familiarize yourself with this law's key provisions, outlined below. They may affect you, your business and your employees.
Important news about insurance availability, eligibility and continuity Insurers that offer small-group coverage will have to accept -- with very few exceptions -- any employer group of two to 50 employees that applies, and enroll all eligible employees. At the option of the employer, insurers must (with some exceptions) renew all group coverage contracts.
As a rule, pre-existing condition exclusions cannot exceed 12 months. Insurers and employers sponsoring self-funded plans must credit prior coverage toward such exclusions when an employee (current or new) changes health plans. Thus an employee who maintains continuous coverage will not have to serve an exclusion period for a pre-existing condition more than once.
The effect on long-term care insurance:
Long-term care insurance will receive the same tax treatment as accident and health insurance. Employers can deduct, as a business expense, the cost of setting up a long-term care insurance plan for their employees as well as any contributions they make toward the premiums. Employer contributions are excluded from employees' taxable income.