|
|
Avoid the 6 Deadly Sins of Group Health Insurance
|
1. Evaluate Other Group Health Plan Programs
Several small business owners make the mistake of believing that there are only 1 or 2 types of group health plans available. This is a big mistake - there are several options available to small business owner’s; Health Reimbursement Arrangement (HRA), Partial Self-Fund, Professional Employer Organizations (PEO), Medical Savings Accounts (MSA). Here’s a brief explanation of each, consult your current employee benefits broker for more information.
Health Reimbursement Arrangement (HRA)
This type of plan has the employee become more involved in the usage of the health care decision. The general the plan works like this, the employer purchases a high deductible health plan (i.e., $1,000, $2,000, $3,000 or higher). The employer “self insures” this high deductible amount. The employer could ask the employee to pick up a share of this deductible. Each year, the employer sets aside a specified amount of money in a Health Reimbursement Account (HRA). The employee can draw on the HRA account to pay for health expenses that would be subject to the deductible. HRA funds not used may role over into the HRA fund for the following year. All funds contributed to the HRA are fully deductible. HRA funds used by employees for medical related expenses are not taxable.
By purchasing a high deductible plan the employer will save 20-50% compared to a traditional no deductible plan. The monthly premiums that would go to the no deductible health plan are now split up. A premium amount is paid for the high deductible plan and the difference that would be typically go to the no deductible plan is now contributed to the HRA for future claims. Actuarial studies show that 92% -94% of people would not reach their deductible maximum during the year. If you have a relatively healthy employee population, this type of health plan could save the company thousands in health care premiums and still offer a quality health plan.
Partial Self Fund
This type of Health Plan offers lower premium cost than traditional “fully insured” Health Plans. The employer/business owner assumes part of the medical expense risk of future claims when they happen. This expenses risk dollar amount has a “stop loss” or cap per incident and can vary from $1,000 to $20,000. The larger the medical risk the company assumes the lower the premium. This type of plan is suggested for companies with relatively healthy employee population. This could offer a significant savings over a traditional “fully insured” Health Plan.
Professional Employer Organizations (PEO)
When most people think of PEO’s it’s in relation to health insurance. PEO’s offer small business’ access to the same kind of employee benefits available to Fortune 500 companies. To have access to these employee benefits you must follow the guidelines and requirements associated with the PEO. First, the PEO becomes a co-employer of your company’s employees, including the owner(s). The ownership of the company does not change but the employees are “leased” back to the company. Other possible requirements are; all payroll and federal/state tax reporting is administered by the PEO, Worker’s Compensation and unemployment insurance is administered by the PEO. If you’re thinking of signing on with a PEO, ask lots of questions to determine whether the arrangement would fit your business goals.
Medical Savings Accounts (MSA)
MSA’s offer lower health care cost and the tax advantages of a medical savings account. The plan consists of a high deductible medical plan and a medical savings account of pay for medical expenses as they occur. Employer and Employees are rewarded with quality health care options and savings for future medical expenses. Employees play a more active role in how health care dollars are spent because any money contributed toward their MSA, if unspent, is theirs to keep. MSA funds can be used to pay for any deductible or coinsurance amounts due for medical services covered under the Health Plan. MSA funds can also be used to purchase a wide variety of qualified medical services that are not traditionally covered under a traditional Health Plan. Those include; eyeglasses, lasik, vision care expenses, dental services not covered under a dental plan (i.e. orthodontia or braces), hearing aids, chiropractic care, weight loss programs, etc… Cost for these services are paid for on a pre-tax basis and offer big savings to employees. MSA funds have a big advantage over a Section 125 Cafeteria plan, in that the MSA funds roll over to the next year and do not have to be used by year-end. Also your MSA funds account earns interest.
2. Perform a “Background Check” on your Health Plan Provider
How can you evaluate the “Health Performance” of your current Health Insurance Company? Does your company pay claims quickly and is your company financially strong and will they be there when you need them. There are several ways for you to research the strength and quality of your company or the company your considering. Your state’s Department of Insurance regulates insurance companies for the members of the state. The Department of Insurance has a “Complaint Index” that it maintains for all Insurance Companies that operate in the state. This can be accessed online at www.insurance.state.mo.us/reports/complaints/compindx.htm. You can also call the Missouri Department of Insurance direct for a copy of the report, (573) 751-4126.
There also are insurance rating services:
These services evaluate Insurance Companies for the public.
3. Offer a Section 125 Cafeteria Plan and Allow Employees to Pre-Tax Benefit Premium Cost and Medical Expenses
Section 125 Cafeteria Plan allows employees to select benefits normally paid on an after-tax basis and, through payroll deduction, to pay for these benefits on a pre-tax basis. Paying for these benefits on a pre-tax basis allows your employees to increase their take home pay without costing you more money (see exhibit 1). Section 125 Plans, also known as “Cafeteria Plans” or “Flexible Spending Accounts,” can be structured to include a variety of benefits. The most common include:
Premium Conversion Plans – This enables employees to pay their share of health insurance premiums with pre-tax dollars.
Medical Flexible Spending Accounts – Employees can use salary reduction to reimburse certain medical expenses on a pre-tax basis through individual accounts.
Term Life (up to $50,000) and Disability Insurance premiums - Policies covering the employee only may also be reimbursed on a pre-tax basis.
Employers realize the following benefit of offering a Section 125 Plan:
Reducing Payroll Costs – Social Security contributions are reduced for each dollar of employee participation.
Controlling Costs – An employer can control the company’s share of medical costs without limiting employee choices.
Recruiting and Retaining Quality Employees – The employer is viewed in a positive light by employees because a benefit package is being provided with the employee’s interests in mind.
4. Offer Supplemental Health Benefits on a Voluntary Basis
Employers are challenged today to find balance between offering a quality benefit package to retain and attract good employees and not breaking the budget on benefit costs. Many small business’ today contribute only to the cost of the Health Plan benefit. Other employee benefits are offered on a “voluntary basis”. These benefits include Dental, Life, Disability, Critical Illness, Cancer, Long Term Care, etc… Voluntary basis is defined as the benefit is offered to the employee and if the employee sees the value then he/she can pay for it through payroll deduction. This method of offering benefits allows employees to attain benefits that they may not pave purchased on an individual basis.
5. Evaluate Multiple Health Plan Options and Share Premium Cost
Offer Multiple Health Plan Options for your Employees
Most Health Insurance Companies will allow a small business employer offer more than one Health Insurance Plan option. This allows employers to offer a “benefit rich” health plan – possibly used by families and a “value” health plan – possibly used by young healthy employees. This can mean BIG Savings for Employers. Employers would only be responsible to contribute to the price of the “value” plan for the employee. If the employee wants the “benefit rich” health plan, that employee has the choice to “buy-up” at an additional fee. This additional fee would be the employee’s responsibility and would have this additional fee taken out of their paycheck.
Share Monthly Premium Cost with Employees
Most Small Business’ today are asking employees to participate in the monthly premium cost for them and their families. The days of companies offering 100% of the cost for health insurance are gone. The cost is too high for the small business owner to absorb 100% of the cost. Health Insurance Companies require the small business owner to contribute only 50-75% of the monthly cost of the employee’s cost only. The employer/business owner is not required to contribute to the dependents premium cost. It is at the discretion of the owner to contribute beyond what is required. In today’s small business marketplace we are seeing the most of companies contributing 50-75% of the cost for the employee only. The remaining cost is payroll deducted from the employee’s paycheck. If a Section 125 Cafeteria plan is offered the employee are able to pre-tax their out-of-pocket cost for health care.
6. Purchasing the wrong Group Health Plan
Get a group plan according to how your employees expect to use it. For many companies after payroll, employee benefits are the second largest expense item in the budget. Get input from your employees, ask them how they use their present plan, what features of the plan do they use the most? Send a confidential survey to all of your employees and ask for their input. Ask them what they like and don’t like about the present plan and what other benefits they would like to see offered. You may be surprised with the responses you get. You can save a lot of money if you purchase a Group Health Plan without the “Fat”. Don’t pay for Health Plan coverage’s not used.
|
|
Health