Choosing a Company Health Plan: What to Know Before You Start

Choosing a health plan for your company is a complicated process. Make it easier on yourself by walking through the steps below before you begin reviewing plans.

Determine Eligibility

Before you even start, make sure that your company is eligible to offer group health insurance. Although requirements will differ slightly between insurance carriers, there are certain criteria that your company must meet to qualify for group insurance rates:

• Your company must either be incorporated or have a business license.
• There must be a minimum of 2 full-time (W-2) employees.
• The company must be willing to fund a minimum of 50 percent of the insurance premiums for the primary insured.
• You must have 75 percent participation among your eligible employees, after "waivers."

The last bullet warrants some explanation. An employee who already has health insurance can "waive" participation in your plan. This is different from "declining" coverage. An employee who chooses not to participate in your plan, but does not have other coverage is called a "decline." If you have ten employees, seven would need to participate in your plan to reach the necessary 75 percent participation level. But if three of your employees "waived" participation because they have coverage through their spouse's health plan, you would only need four employees to participate in your plan. Three of your employees could "decline" coverage and you would still meet the eligibility requirements to qualify for group coverage.

Choose Your Plan Type

The type of plan you choose will affect your cost more than any other factor. In some cases you can offer dual plan types which allow your employees to choose their plan based on family needs or doctor availability. There is usually no extra charge to the company for making dual plans available. The three basic plan types are:

• HMO: Health Maintenance Organizations are the most cost effective plan you can offer. HMOs require policy holders to choose a primary care physician who will coordinate the policy holder's care including authorizing referrals to specialists. Most HMO plans require exclusive use of doctors that are in-network.

• POS: Point of Service plans also use primary care physicians, but there is more flexibility and a larger network of doctors to choose from. The primary care physician can make referrals out-of-network and the plan will usually cover a percentage of the out-of-network fee. Patients can sometimes refer themselves to out-of-network doctors and receive partial coverage as well. POS is the mid-level cost alternative.

• PPO: Preferred Provider Organizations are the most expensive plan type. Remaining in-network is still a requirement for full coverage, however the size of the network will be substantially larger than with an HMO or POS. Policy holders do not have to choose a primary care physician, nor do they need referrals to see specialists. Policy holders can choose to see doctors that are out-of-network, and will receive partial reimbursements. PPOs are sometimes the only choice for companies with employees in multiple states.

If you don't want to make changes to your existing doctors, you can start your search by finding out what types of plans your doctors work with and what physicians' networks they belong to.

Deductibles and Co-Pay

Once you have chosen your plan type, you will need to determine the benefit structure of your plan. The most important benefits to consider are the deductible and co-pay. These two numbers will most directly affect your employees' out-of-pocket expenses. Obviously, the higher the deductible, the lower the premium will be. But higher deductibles mean more financial risk for your employees. A co-pay is charged with each doctor visit, so this number will also be a factor in your employees' annual expenses.

Develop a Census

To begin running quotes you will need an accurate census of your employees. (A census template can be found in the OfficeArrow toolbox). The census should include the following information for each employee:

• Age
• Gender
• Home zip code
• Type of coverage (individual, spouse, children)
• Number of children

Your census document should also include the company's physical address and a description of the business. (Example: manufacturing, consulting, retail)

Work With a Broker

It is a common misconception that working with a health broker will add costs to your premium. Insurance agents are compensated by the insurance companies. Unlike other commission based industries like real estate, where the agent's commission affects the seller's profit, insurance agents are not paid by their clients. An insurance agent will be able to give you quotes from all carriers, offer suggestions on the various plans, guide you through the application process and be available to answer your employees' questions.