Health insurance is the second most coveted fringe benefit in America today, (behind paid vacation time) yet only half of employers with fewer than 10 employees offer health insurance. Cost, of course, is a major consideration, but in today's environment of managed care plans and increasing cost-sharing with employees, it doesn't have to be an overriding issue. Structuring your benefits plan properly by striking a balance between the cost of care and quality of coverage can help you attract and retain qualified employees, especially important in today's tight labor market.
Where To Start
When considering your first benefits plan, begin by determining the needs of your employees. You may want to sit down with them to discuss options, making it clear that you may not be able to afford all of what they want and that some of the costs may have to be shared. Armed with this information, you will want to explore these three basic avenues when shopping for health insurance.
1. Work Directly with a Health Insurance Company. Contact individual insurance companies for quotes to determine who can offer the most attractive package of benefits for the money. You could also contact a health insurance agent who represents several companies. Either way, because there is an ongoing relationship with the company that services your plan, you will want to consider not only rates, but also the agency's reputation, personal dynamics, and responsiveness. The Kansas Insurance Department publishes a resource guide for consumers shopping for health insurance in Kansas. The publication provides basic information on types of insurance available, has lists of insurance providers, and even gives information on the number of complaints filed against specific Kansas insurance companies. Call 1-800-432-2484 for a free copy of "Health Insurance in Kansas."
- 2. Join an Existing Group. One of the easiest ways to get started with a health insurance program for your business is to do some research into already existing plans that you can become affiliated with. Many groups (i.e., trade associations, chambers, etc.) that you belong to, or that you could join, may have their own group health plan for members. By joining an existing plan, you can save money on start-up costs since the existing plan will have already absorbed these costs. Costs are also lower because of the reduced risk when expenses are spread over a larger group. Check with professional groups, associations, chambers of commerce, economic development agencies, or other cooperatives about joining their group health plan.
- Note: If you're a sole proprietor or self-employed, consider joining a group for cost-effective coverage for you and your family.
3. Work With Consultants or Brokers. Another way to go about finding health insurance for your employees is to hire a consulting firm that specializes in employee benefits and human resources outsourcing. If you are a manager with little free time to visit with dozens of companies about many different combinations of plans, you can contact an expert. These consultants will be able to find you the most cost-effective mix of benefits for your number of employees.
Some companies will act as agents or brokers for several companies in order to offer a range of employee benefits in addition to health insurance coverage. These companies can often provide better rates to businesses that contract for additional employee benefits, such as 401 K, pension, cafeteria and flexible spending plans.
Health Plan Types
There are 3 general categories of health insurance plans:
This is a traditional pay-as-you go health insurance plan. The employee pays a set deductible, then a coinsurance percentage (usually 20%) of covered expenses. After he or she has paid a certain amount out of pocket, the plan pays 100 percent of the expenses. The employee can use any doctor or hospital, and simply files claims for reimbursement.
Managed care plans encourage employees to avail themselves of quality, cost-effective care by offering them financial incentives to use certain doctors and hospitals. The providers in a managed care network agree to limit their fees in return for a guaranteed number of patients.
One type of managed care network is a Health Maintenance Organization (HMO), which generally provides 100 percent reimbursement for most services, but provides little or very limited benefits if the employee chooses to see doctors outside of the network for care. In a Preferred Provider Organization (PPO), the employee receives higher reimbursement (often 90 percent) when using a network provider, but benefits are lower (sometimes 70 percent) when the employee receives care from a physician outside the network. However, many plans reimburse emergency care at the 90 percent level, regardless of whether the service is provided by a physician within or out side of the network. HMO's and PPO's can also have coinsurance percentages and deductibles, but they are generally much lower than traditional indemnity coverage.
Some employers fund their own plans, but contract with an insurance company for claims administration. This option is generally for larger businesses with more sophisticated insurance administration capabilities, and financial resources to absorb the higher risk involved.
Selecting and Implementing a Plan
During the process of shopping for insurance, you will receive several different proposals and quotes. Since each quote may provide for different coverage, don't just compare prices. Ask to see the entire proposal from the insurer and evaluate it based on everything from customer service to claims paying capabilities.
Another decision you will have to make is the extent of coverage you, as an employer, are willing to provide. You may want to select the plan, contribute a flat rate and ask the employee to share some of the premium cost. Or, you may decide to provide full coverage for the employee, but not for the employee's spouse or children. In today's benefits environment, providing employee health insurance coverage does not have to be an all-or-nothing proposition. Understanding your employees' needs, researching options available and selecting a reputable insurer can give you a competitive advantage in recruiting and retaining a skilled workforce.