Choosing a Group Health Plan

Where to start when choosing a group health plan

1. What is my budget?

Small businesses should look at a few factors when choosing a health plan such as strength of network, premium cost versus the underlying plan design (POS, EPO, PPO for example). It is always important to see what your budget is and then try to massage a carrier and product to fit your needs.

2. How do I structure Employer - Employee contributions?

Normally a business subsidizes the cost of group health insurance for its employees, and most carriers will require a 50% subsidy in order to underwrite group coverage. That national average normally falls around a 70% employer subsidy, thus leaving a 30% monthly contribution by employees. This is just the national average.

3. Can I offer more than one plan?

Many carriers will enable a small business to sponsor 2 plan designs. As such, an employer could then offer a core and buy-up option (higher cost, more flexible plan) for the employees. In addition, with this type of structure employees pay a larger monthly premium contribution for the more expensive product.

4. Are my rates fixed for a year?

Yes, all group health plans have a 12 month premium contract period. Therefore, you will only deal with a premium increase or decrease upon your annual renewal.

5. If we select a plan we want to change in 6 months can we?

Normally no. If you select a group plan, you normally can’t make any changes to the employer-sponsored product until your annual renewal. In addition the selection employees make are not to change until the annual open enrollment period (annual renewal period). There are exceptions for employees to make plan changes, per IRS code section 125 and life/event status changes such as adoption, marriage, divorce, death of a spouse, termination of employment, birth of a child.

6. Customer service of the insurance carrier and broker

In most states in the US, small group plans’ prices (2-49 employees) are regulated and fixed by the underlying state insurance department. So if you purchase from an insurance carrier or broker, you pay the same cost by law. So regarding customer service, you want 2 strong layers – a great small group broker (www.healthinsurancegeeks.com) and a health plan dedicated to a good customer experience (United Healthcare, Cigna, Aetna, Wellpoint, Health Net, Anthem are some examples).

7. Which plans are the best for the price?

In this market in 2009, either an HRA (health reimbursement arrangement) or an EPO plan design, give the most powerful product for the price. PPO and POS plans continue to be priced well above EPO and HRA products, and HMO plans are not priced well below as in the previous 10-20 years. H.S.A’s (health savings accounts) are also priced well in some markets with some carriers, but not across the board.

8. How much lead time do we need to start a plan

It is always recommended that a selection and all group paperwork be provided to the underwriting team at the insurance carrier at least 2 full weeks prior to the effective date of coverage. For example, for a September 1st effective date, all applications should received by the sponsoring insurance carrier no later than August 15th.