Whether you are just preparing your start-up business plan or have been in operation for several years, group health care is something you should definitely plan for sooner rather than later.
According to a survey of small business owners conducted by Arthur Andersen on behalf of National Small Business United (NSBU), health and medical insurance is second only to paid vacation as the benefit most frequently offered to employees. And most business owners agree that a good benefit package can help attract and retain quality employees, as well as increase staff morale and productivity. Additionally, purchasing a group health plan may be more cost effective in terms of providing broader coverage for fewer dollars.
But is it possible for a small business to compete with big business benefit packages and purchase quality health care coverage without breaking the bank? The answer is yes - by doing some homework and understanding the available options.
Understand the Territory
Health care has undergone many changes in the last few years, while market demands have resulted in a perplexing array of options and a deluge of information. Knowing the terminology specific to health care coverage can help you make sense of all this information and accurately communicate your needs. Health plans operating in California are required by law to provide a definitions section in their disclosure form and evidence of coverage booklets - your state may have similar provisions. Request a copy, read through it and don't be afraid to ask questions. Another good resource is a book titled Managed Care Desk Reference by Marianne F. Fazen, Ph.D. (HCS Publications, Dallas, Texas).
Primary Considerations
Given the many options available, begin by identifying the issues of primary importance to your employees and your overall business plan. Quality- What percentage of the health plan's physicians are board certified (having completed training and passed examination for certified clinical residency in a medical specialty)?
- Is the health plan accredited by the National Committee for Quality Assurance (NCQA), the nation's HMO accrediting organization? (Health plan accreditation information may be obtained on NCQA's World Wide Web page at www.ncqa.org.)
- What other accreditation has the health plan received? From whom? For how long?
Accessibility/Flexibility- What is the geographic area of coverage for routine care?
- Are facilities full service and conveniently located?
- Is emergency care covered worldwide?
- Can employees select their own primary care physician?
- To which specialists can employees self-refer?
- Can employees choose providers from both inside the network (HMO) and outside the network (point-of-service)?
Features- Does the health plan offer a wide array of primary and specialty care services?
- Are prescriptions covered? How many days does the supply include?
- Are hospitalization, skilled nursing, home health and hospice covered?
- Does the health plan offer other services such as health education, mental health, and alcoholism and drug dependency care?
Affordability- How will pre-existing conditions or other health risks of your employees affect premiums?
- What are the copayments, deductibles and out-of-pocket maximums?
- Do you want employees to share a portion of the premium payment? If so, how much?
Profitable Prognosis
Historically, high cost and limited choices have precluded small companies from offering comprehensive health care benefits. However, in response to market demands, a variety of affordable, flexible plans specifically tailored for small business needs is now available. This makes it possible for small firms to compete with larger operations in the health care benefit arena and offer quality coverage to their employees. And, although the profit from an employee health care package is often not readily measured in dollars, improved productivity and employee morale can translate into increased sales and greater customer loyalty.
Comparing Apples to Oranges
When deciding among health plans, be sure you weigh the alternatives carefully and equally. Use the following list of common health plan features to compare the cost and coverage of various health plans you are considering:In the Medical Office:
- Doctor Office Visits
- Physical Exams
- Maternity Care
- Scheduled Well-Child Visits
- Immunizations
- Lab, Imaging, Other Tests
Hospital & Extended Care:
- Physicians' Services, Room & Board
- Skilled Nursing, Home Health, Hospice
Emergency Services
Prescriptions
Mental Health
Alcoholism/Drug Dependency Care
Durable Medical Equipment
Health Education
Deductible (calendar year):
- Individual
- Family
Out-of-Pocket Maximum (calendar year):
- Individual
- Family
Annual Premium:
- Based on your employee census and calculated by the health plan
Annual Employee Contribution toward Premium
The Name Game
Here are some basic terms that are important to understand when making decisions about group health care coverage:Broker - Individual or independent agency acting on behalf of an employer in purchasing employee health care coverage.
Capitation - Risk sharing reimbursement method in which the HMO pays a periodic, fixed, per person fee to a contracted provider.
Copayment - A specific amount of money an insured individual pays directly to a provider as part of sharing the cost of health care (the employer pays the premium share).
Deductible - Portion of health care expenses that an insured individual must pay out-of-pocket before any insurance coverage applies.
Employee Census - List of employees (including their date of birth, number and type of dependents, if any) used to determine premium rates.
Employee/Employer Contribution - Amount of money that the employee and/or employer contributes toward the premium cost of the employee's health plan.
Health Maintenance Organization (HMO) - Health plan that provides care through its own exclusive panel (network) of providers within a specific geographic area.
Indemnity or Fee-for-Service - Traditional health insurance where an insured individual is reimbursed for covered expenses without regard to choice of provider.
Limited Fee Schedule - List of specific medical services with corresponding maximum amounts that a health plan will reimburse to a contracted PPO provider.
Out-of-Pocket Maximum - Deductibles, coinsurance or copayments paid by an insured individual to the provider during a defined period, after which the health plan covers remaining services at 113 percent.
Point-of-Service (POS) - Health plan in which an insured individual can choose how to receive services (either through an HMO, PPO or indemnity arrangement) at the time the services are needed.
Preferred Provider Organization (PPO) - An independent group of providers (such as hospitals or physicians) that contracts with a health plan to provide services at discounted fees.
Provider - A hospital, physician or other health care professional who provides health care services.
Third Party Administrator (TPA) - Independent firm performing administrative services (such as premium collection, claims processing/payment or membership services) for employee health benefit plans.
Usual, Customary and Reasonable Fees (UCR) - Fee-for-service reimbursement method where a provider is paid for the full cost of services if the cost is consistent with fees commonly charged for identical or similar services within that specific geographic area.
Excerpted with permission from Small Business Success magazine, Volume X, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration and the Partners for Small Business Excellence.