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Selecting Group Healthcare Plans

Selecting Group Healthcare Plans

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Selecting Group Healthcare Plans

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  1. Selecting Group Healthcare Plans Presented by (Name, CPA) Member, The Ohio Society of CPAs

  2. Healthcare Trends Employer-sponsored health insurance premiums have increased 119% in past 10 years (source: The Henry J. Kaiser Family Foundation.  Employee Health Benefits: 2008 Annual Survey.  September 2008)

  3. Healthcare Trends Without health care reform, small businesses will pay nearly $2.4 trillion dollars over the next 10 years in health care costs for workers (The Economic Impact of Healthcare Reform on Small Business, Small Business Majority, June 2009)

  4. Benefits of offering health insurance Helps recruit and retain the best available talent Employee morale: health insurance considered a valuable benefit If you can’t contribute to the cost, employees may get lower rates through a group-sponsored plan than they could purchase on their own

  5. Benefits of offering health insurance Tax incentives for both employers and employees Wellness programs in some plans may help employees live healthier and reduce time off

  6. Types of Group Plans Small businesses can choose from different insurance plan types. Weigh the pros/cons of each against the needs of your group Traditional fee-for-service or indemnity plans Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs) Major Medical Policies FSAs/MSAs/HSAs

  7. Fee for Service Plans Participants can choose their own providers Pay out of pocket for service until annual deductibles are met; remaining cost shared by plan and participant (ex. 70% plan/30% plan member)

  8. Fee for Service Plans Least popular and most expensive plan type Few cost-containment or managed care measures built into the plan Favored by employees with serious or chronic illnesses

  9. Health Maintenance Organizations Advantages: lower cost, broad coverage, but less freedom in choice of providers Plan members must see a primary care physician for all but emergency needs Office co-pays average $10; no deductibles

  10. Health Maintenance Organizations Referrals required to see specialists Preferred by those with large families who need to keep costs down or by younger employees desiring the lower premium

  11. Preferred Provider Organizations PPOs: blend of fee-for-service and HMOs Gives employees more control over their healthcare than with HMOs Choice of providers; referrals not needed for specialists

  12. Preferred Provider Organizations Insurer negotiates cost efficient rates with in-network providers Participants can access out-of-network providers but at a higher cost Preferred by employees who typically exceed their deductibles and want flexibility in choosing providers

  13. Major Medical Plans Special fee-for-service plans Insurance against risk of long-term chronic illness or catastrophic injury Limited covered services: private nursing care, home, office or hospital care; x-ray, lab tests, prescriptions Two types: comprehensive and supplemental

  14. Major Medical Plans High deductibles and co-payments, but could provide first-dollar coverage with no deductible for some services Helps employees contain healthcare costs Preferred by healthy, low-wage employees

  15. Flexible, Health and Medical Savings and Spending Accounts All carry tax incentives for employees FSA’s—also known as known as Cafeteria or 125 benefit plans Employees can put aside pre-tax money to pay for out-of-pocket expenses not covered by primary insurance plan

  16. Flexible, Health and Medical Savings and Spending Accounts Reduces taxable income Drawback-use it or lose it within one year MSAs: open only to self-employed or businesses with <50 employees

  17. Flexible, Health and Medical Savings and Spending Accounts Used with a high-deductible health insurance plan (min. $2,000 individual; $4,000 family) Employees and/or employers make tax-free contributions up to 65% of annual deductible for individuals (75% for families)

  18. MSAs Withdrawals pay for out-of-pocket expenses Account can accumulate from year to year Employer contributions must be reported on the employee's W-2. Earnings of the fund are not included in taxable income for the current year

  19. Health Savings Accounts Tax advantaged accounts created to pay for qualified medical expenses in conjunction with high deductable health plans Help consumers prepare for future health events including long-term care premiums, because their health savings can be rolled over from year to year

  20. Health Savings Accounts Are portable from job to job as well as retirement The money belongs to the individual and can be invested, with earnings growing on a tax-free basis

  21. Health Savings Accounts How do they work? HSA plans include two major components: • Portable savings accounts • High deductable medical coverage that typically includes 100% payment for covered preventative care

  22. Health Savings Accounts How do they work? They encourage members to become involved in their own healthcare decisions They help consumers be better prepared for medical expenses later in life

  23. Health Savings Accounts Consider contributing a portion of the deductible into each employee’s HSA account (50% or more) to help with high deductible Another option is to give each employee a monthly fixed allowance for insurance premiums and HSAs (defined contribution)

  24. Supplemental insurance options Dental care insurance Vision care plans • Big profit center for insurers • Often not worth the price of premiums • Limited provider networks • Better option may be using flexible spending account to pay for services

  25. Factors to consider for your plan What services will you cover? Some states have laws and regulations for group plans and small businesses Which employees will the plan cover? • Full or part timers • Spouses and dependents • Unmarried domestic partners

  26. Factors to consider for your plan Will there be a waiting period and eligibility requirements for new employees? How will health plan portability requirements affect your company?

  27. Researching a Plan Sources include: Talk to other small business owners about their plans and experience with insurance providers Research providers online Consult an independent insurance agent

  28. Researching a Plan Sources include: Hire a consultant or independent insurance brokerage specializing in healthcare plans Explore group purchasing options available through many professional associations or purchasing alliances in some communities

  29. Helpful Information for Research Gather information on eligible employees and their dependents before approaching an insurer or broker for quotes. This will determine your risk pool and plan rates.

  30. Helpful Information for Research • Full names of employees and dependents • Ages, dates of birth, gender • Social security numbers • Home addresses or zip codes • Marital status • Obtain written confirmation that information is used only for underwriting purposes, and employees will not be solicited in any way

  31. Choosing a Plan  Evaluate plan types Solicit, review and compare proposals Negotiate terms and price of the policy

  32. Comparing Proposals Proposals should include the following critical components for comparison: • Premium schedule showing the cost per employer per month • Benefits schedule—what the plan will cover • List of providers in the managed care network

  33. Comparing Proposals critical components (continued) • Itemized cost structure—the formula for how the insurer arrived at the cost quote for your group • Copy of the policy—the contract listing the coverage levels and limitations

  34. Rates Insurers calculate rates based on the specific demographics of your group Rates are often regulated by states Your rates may be affected by the overall health of your group. Insurers may charge higher rates for groups with a higher claims liability

  35. Negotiating Rates • Review cost of coverage for specific services (e.g. raising co-payments could lower premiums) • Consider extending the term of the contract. Insurers may give you a price break to keep your business for more than one year • Extend waiting periods for new employees from 30 to 60 days • Eliminate obscure services

  36. Administration Employers typically handle the following components plan administration functions: • Enrolling new participants and managing changes throughout the year (terminations, COBRA participants, etc.) • Deducting premiums from employees’ pay • Liaison between employees and insurer

  37. Administration Employers typically handle (continued) : • Reporting and disclosure under the Employee Retirement Income Security Act • More companies are outsourcing components that are not part of their core business

  38. Questions? Comments?

  39. Thank You If you have any questions or would like to discuss group healthcare plans or other financial matters, please contact me: • Name, CPA • Company • Address • E-mail • Phone