Once a new business starts getting up to speed and hiring employees, one of the first organizational decisions it encounters is what to do about business health insurance. Group health insurance is generally cheaper than having employees obtain coverage individually, but often new entrepreneurs dont have experience with the issues involved in selecting a business health insurance policy. Its well worth having someone in the organization come up to speed on the relevant issues.
After all, business health insurance is a significant cost factor, especially as the organization grows, and the quality of the group health plan can affect the recruitment and retention of employees. Along with all that, choosing and evaluating group health insurance is not an issue that is going to go away; it is a decision that will be revisited year after year, so the organization might as well get good at it.
Starting out, there are two major types of decisions to be made: what kind of plan structure the organization wants, and how to approach the buying process. The following are some of the structural issues.
Some of the fundamental structural issues to consider include:
- Insurance or Savings Plan: Naturally, employees prefer to have their medical costs insured, but an organization that cant afford that can at least set up health savings accounts (HSAs), which allow employees to set aside pre-tax dollars for medical expenses. Ultimately, some combination of insurance and HSAs may be the most effective approach.
- Deductible and Co-pays: These represent the distribution of the cost burden between employer and employees. The higher the deductible and co-pays are set, the lower the plans premiums should be. Using HSAs can be one way to mitigate the employee burden of high deductibles.
- Premium Share: This is another way to distribute costs between employer and employees. Remember, even when employees have to shoulder a considerable portion of the premium, it is still likely to be cheaper than if they sought coverage as individuals.
- Add-on Coverages: It may sound great to include as many services as possible, such as dental and vision coverage, but every add-on will increase the overall premiums.
- Geographic Footprint: For any employer with employees in multiple locations--especially those in different states--an important consideration is finding coverage that includes as many of these employees as possible. In some cases, multiple plans may be necessary, but this can really increase costs since the size of a covered employee base can help bring down the average premium.
- Physician Choice: This is the issue of whether employees can choose their own doctors, or have to pick from an approved list. Limiting the choice can help bring down premiums, but depending on how narrow that choice becomes, it might not meet the needs of the employee base.
For a brand-new employee health plan, often the best an organization can do about structural decisions is to make educated guesses. As time goes on, though, reviewing cost and usage data along with getting feedback from employees helps the company refine its decision making. After a while, this can lead to a group health plan that is tailored to the needs of the organization and its employees.
Source
National Association for the Self-Employed
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