Once you've decided which health benefits you might want to offer to your employees, you will then begin the process of contacting benefit providers. Employers can obtain information informally by surveying other employers or may choose to work with a consultant. Beginning on October 1, 2013, small businesses (generally, those with 50 or fewer full-time employees) are able to purchase health care coverage for 2014 and later years through a government-run insurance marketplace established specifically for them—the Small Business Health Options Program (SHOP).
If you've decided that health care is a benefit you would like to provide for your employees, you'll want to obtain information from benefit providers. Where can you get a list of providers to contact? There are several methods you can use ranging from simply looking online or in the phone book, asking other employers for information, perusing the government-run insurance marketplace available for small businesses (SHOP), or perhaps even hiring a consultant.
To help level the playing field for small businesses regarding access to affordable health care insurance, the Patient Protection and Affordable Care Act (ACA) dictated the establishment of a group market health insurance marketplace for small businesses, SHOP. The SHOP marketplace, according to the government’s health care website, simplifies the process of buying health insurance for small businesses and gives them “choice and control over health costs.”
The way that the program works is that SHOP exchanges, like the individual health insurance exchanges, make insurance available through a state-created and -run marketplace or through the federally-run marketplace, or a combination of the two. The SHOP exchanges opened on October 1, 2013, for enrollment in health care plans for 2014.
Currently, 17 states and the District of Columbia are running their own SHOP marketplaces, with the majority of states having marketplaces run by the federal government.
Originally, SHOPs were required to provide employers with the possibility of offering employees a choice of health plans at a single level of coverage selected by the employer—bronze, silver, gold or platinum—for 2014. However, based on “serious concerns that issuers would not be operationally ready to offer qualified health plans through the SHOP” if employee choice was implemented for 2014, the Department of Health and Human Services (HHS) implemented a transitional policy effective July 1, 2013. For plan years beginning on or after January 1, 2014 and before January 1, 2015, a SHOP is not required to permit employers to offer their qualified employees a choice of health plans at a single level of coverage, but has the option of doing so. The transitional policy states that federally facilitated SHOPs will not exercise this option, but will instead allow employers to choose a single qualified health plan from the choices available in federally-facilitated SHOPs to offer their qualified employees.
States running their own SHOPs have the option of offering employees a choice of health plans for 2014. Therefore, if you operate your business in one of the states that administers its own marketplace, you may be able to offer your employees a choice of health plans for 2014:
| States With State-Run Marketplaces | ||
|---|---|---|
| California | Kentucky | New York |
| Colorado | Maryland | Oregon |
| Connecticut | Massachusetts | Rhode Island |
| District of Columbia | Michigan | Utah |
| Hawaii | Nevada | Vermont |
| Idaho | New Mexico | Washington |
As the reasoning behind the delay, the HHS declared that “this transitional policy is intended to provide additional time to prepare for an employee choice model and to increase the stability of the small group market while providing small groups with the benefits of SHOP in 2014 (such as a choice among competing qualified health plans and access for qualifying small employers to the small business health care tax credit).”
In addition, online enrollment for federally-facilitated SHOP marketplaces is unavailable for 2014 plan years. Small business owners must instead use a direct enrollment process by contacting an agent, broker, or an insurance company that offers a SHOP marketplace plan to apply, shop and enroll for 2014. For detailed information on the enrollment process for 2014, consult the Centers for Medicare and Medicaid Services (CMS) guidance.
If you qualify for the small business health care tax credit worth up to 50 percent of your premium costs, be aware that beginning in 2014, the credit is available only for plans purchased through SHOP.
Does your business qualify for SHOP? The SHOP alternative may be a good fit for your small business, particularly if you do business in a state with its own marketplace which offers an employee choice option beginning in 2014, and/or if you want to take advantage of the small business health care tax credit. There are a few requirements your business must meet to qualify for the SHOP marketplace:
One way to find the most prominent and popular benefits providers is to ask other employers. This is just as easy as it sounds. Some places to do your informal survey could be:
Be sure to ask if these companies and individuals actually like the coverage and service they get from their provider. Also, get phone numbers and names of contacts at the companies that sound interesting to you. People are usually anxious to share either very good or very bad experiences that they've had.
Once you have a couple of companies or agents that sound like possible leads, you can contact them and begin gathering information about coverage levels and premium costs.
If you want to get plenty of information and competitive offers from vendors but don't want to spend a lot of time doing the legwork and analysis, hiring a consultant may be an option for you.
Your consultant's involvement in the benefit research process can be as deep or limited as you want it to be. Here's a list of services that your consultant can provide for you:
Consultants can be expensive. To cut down on your consultant's billable hours do as much as you can up front to keep the consultant's costs down. Use their expertise when it's really needed, such as when you're trying to balance good coverage with good prices.
For example, one way to save on billable hours from your consultant is to collect and prepare your own summary of pertinent employee information. This will be a must for any health insurance agent or company to have, and it's easy to put together. Having your consultant do it with information you'll have to provide anyway is more than likely not the best use of your money.
Small businesses can have a particularly hard time finding good, reasonably-priced insurance coverage. Often, insurance companies are not eager to insure small businesses because the risk pool is small and they tend not to make big profits on them.
Assume that Premium Care Insurance Company insures a four-person business and takes in $10,000 in premiums over a year's time. If one of the four insured people has a heart attack, the medical claims that Premium Care will have to pay will easily surpass what they received in premiums, and the company will post a loss on the account.
When small businesses band together into larger groups, however, they enjoy more purchasing power and they have a larger risk pool, which makes them more attractive to insurance companies. You can usually get more competitive rates for insurance when the groups are larger in number.
Where can you find purchasing alliances? Some communities have health purchasing alliances. These are local, private non-profit groups that get small businesses together and offer them health care benefits at competitive prices.
To find out if your state has health purchasing alliances and how to contact them, check online or your phone directory in the state government listings or check with your chamber of commerce.
The enactment of the Patient Protection and Affordable Care Act and related legislation in 2010 heavily regulates the insurance industry, instituting benefit and coverage mandates. To assist small employers with the decisions they have to make regarding insurance choices, the U.S. Department of Health and Human Services offers a customized web tool to search for health care options.
Whatever method you use to obtain benefit provider contacts, you should prepare some information for the vendors so that they can give you an accurate quote for your group's premiums. That's where an employee census comes into play.
You can expedite the process of getting quotes from insurance agents by preparing what is known in the industry as a census. A census is a list of your employees and certain demographic information about them. Due to privacy law concerns, generally census information should be given only to licensed insurance agents with the understanding that it will be used for underwriting purposes only.
Once underwriters for the insurance companies get your census, they can analyze it against statistical information they have and come up with a price quote for you based on the levels of coverage you want. This is all handled by the insurance company representative. All you have to do is supply the information.
To create a census, put the following information in a table or spreadsheet:
Privacy requirements. Again, because this information is personal and important, it is imperative that you stress to the agents that you deal with, and get a signed agreement from them, that under no circumstances is this information to be used for any purpose other than underwriting, including soliciting or telemarketing other products and services that the insurance company may offer.
The next step will be to ask providers for information that can help you choose the best plan for your business.
In order to best evaluate the plans that you are considering offering to employees, ask the companies you are dealing with to provide you with the following information:
Consumer protection. Managed care plans must be filed with each state insurance department and must be approved by those departments before they can be offered. As a consequence, as a consumer, you at least have some assurance that a managed care plan has been examined by the state and has conformed to state rules.
You've gone through the process of making plan decisions about the health care plan you want for your business and you've contacted vendors for quotes and proposals. Now you're ready to compare and negotiate the policy with your vendors.
When an agent or an insurance company gives you a proposal, it's likely to contain lots of glossy materials designed to make having insurance with this company look like a life-enriching experience. There are a few critical pieces of information the proposal should contain that you should look at:
The premium schedule. Somewhere in the proposal, there should be a document that tells how much your insurance plan will cost per employee per month. Generally, the proposal will not break down any cost-sharing arrangement between you and the employee.
If the premium schedule says that the cost is $400 per month for each employee, that means that between you and your employee, you have to come up with $400 per month. You could pay $150 and each employee could pay $250, or vice versa, or any combination in between. Insurers generally let you do the math to figure out how much each party will pay.
The benefits schedule. You should also carefully read the benefits schedule, which should give you a general overview of the benefits the plan includes, with specifics such as inpatient care, outpatient care, and office visits, with specific information about how much copayment will be for each service and any limitations on the number of days of a covered treatment or procedure.
This form should be easy enough to understand that you can distribute it to employees as a reference.
Network doctors. It is imperative that you look at the list of network doctors if you are going with any managed care plan, such as an HMO or a PPO. Check to see how many of the doctors are in your area or in the service area of your employees. If there are only one or two doctors in your town, your employees may have to travel a long distance to get a doctor. Look closely at the list to see how many doctors are not taking new patients. That's a sign of an overburdened network that may make it difficult to get timely appointments.
Breakdown of costs. There should be a document in your proposals that shows how your insurance company and the agent arrived at the figures he or she has given you. This information is particularly important when you try to bargain on the price of the care.
Pay special attention to a figure called "retention." This is a code word for insurance company's profit, and it's a good place to start chipping away at their prices if you feel it's too high.
Beginning in 2011, under the Patient Protection and Affordable Care Act, insurance companies are required to spend 80 to 85 percent of premium dollars on medical care and health care quality improvement rather than administrative costs. If they don't, the insurance companies will be required to provide a rebate to their customers beginning in 2012. The intent of this provision is to make the insurance marketplace more transparent and make it easier for consumers to purchase plans that provide better value for their money. Detailed information on the requirements of the "medical loss ratio" provision is available on the government health care website.
The contract or policy. The proposal should include a copy of the actual contract that contains all the specific coverage levels and limitations. Make sure that this document reflects what you understand your policy to cover. Once it's signed, you won't be able to negotiate. Make sure it matches the benefits schedule referenced above, too.
Once you've selected a company or agent that you'd like to go with, you may want to see what you can do about reducing the price you've been quoted. Here are a few tactics that you can employ to get the price down:
If you obtain a great proposal from a company that offers coverage that's competitive with other plans you've looked at but the price is significantly below what others have quoted you for the same coverage, you may be getting "low-balled."
Low-balling is a tactic used by some insurance companies and agents to get your business. They will give you an artificially low price just to get your business. It may sound like a good deal, but when you go to renew the policy next year, the price will soar, possibly forcing you to go through the whole process of finding a vendor all over again. Or, in order to avoid that, you may end up paying a lot more than you would have, had you not taken the low bid in the first place.
Just like most things, buyer beware. If something sounds too good to be true, it probably is.
Cost-lowering tactics may be more effective for businesses with more than a few employees under the policy. If you only have two or three employees, you may not have much choice but to pay what is quoted.