Healthcare Hassles: Cost, Coverage and Claims
With rising insurance costs, providing employee health insurance poses a challenge for small businesses. In fact, many small business lack enough workers to qualify for the best rates, so they forego providing coverage altogether. However by joining groups, targeting plans designed for small businesses and selecting exactly the right coverage, the business owner can find the right coverage at the right price.
Why Offer Healthcare?
Research shows that employees with health insurance are healthier and happier than their counterparts without. Because insured employees they have access to ongoing healthcare and better providers, absenteeism and worker's compensation claims are reduced. In turn, productivity is enhanced, saving time and money.
For employers, major incentives do exist. Health insurance-related expenses, when incurred by an employer, are often tax-deductible. Additionally, including healthcare coverage in employee benefits packages can attract and retain quality workers.
Options for Everyone
A multitude of healthcare plans now exist, and the array can overwhelm employers and individuals alike. From a business owner's perspective, a key element to consider is the importance of healthcare provider choices to individuals. Plans can vary greatly regarding doctors, hospitals and medical groups serving those covered. Some people, particularly families and older individuals, who've developed histories with particular physicians, may be unhappy if they must change. Here are just a few of the many plans currently available:
Small-Group Major Medical
Traditional, or indemnity, health insurance is known for the flexibility it affords. Plan members can access any doctor or hospital, plus any treatment included in the policy. Additionally, the insured can visit specialists without referrals, regardless of whether the insurance company deems the visit vital.
Despite its advantages, high costs make traditional plans less favorable for employers. Members also feel the effects of traditional insurance's higher costs. Traditional insurance tends to carry higher deductibles and co-pays, meaning greater out-of-pocket expenses for employees.
HMO. The oldest form of managed healthcare and the first alternative to indemnity insurance the HMO (health maintenance organization) is the least flexible plan. It is, however, the most cost-effective. Since they utilize a network of doctors, laboratories and hospitals, "contained" HMOs can most efficiently control and reduce healthcare costs, compared to other plans.
With HMOs, plan members must (generally) use in-network doctors and hospitals for coverage to apply. Otherwise, the insured must pay for out-of-network doctor appointments. Also, visits to specialists require primary-care physician referrals.
PPO. For employers, the PPO (preferred provider organization) has become the health insurance plan of choice. Less rigid than an HMO, PPOs employ cost-saving measures while affording plan members greater choice. In these networks of physicians and hospitals, members receive their healthcare at reduced, fixed costs. What's more, they have the option to visit non-network providers, receiving some degree of coverage. Nonetheless, out-of-network deductibles are higher, so sticking with network providers means lower out-of-pocket expenses.
POS. APOS (point of service plan), or open-ended HMO, functions as an HMO and PPO hybrid. In these programs, a primary-care physician gives referrals to other network providers, but plan members are free to go outside the network. In the latter case, a physician referral isn't necessary and some plan coverage still applies. Again, out-of-network costs will be greater regarding co-pays and deductibles. Even so, if the primary physician refers the patient out of network, (versus patient self-referral), the plan covers more of the bill.
Consumer-Driven Health Care
CDHC (consumer-driven healthcare) lets people take a more active role in their healthcare decisions. The idea is that greater involvement leads to more astute decisions in using healthcare services. As costs continue to escalate, CDHC is gaining more awareness, especially among employers. While the CDHC trend is more evident in larger companies, smaller companies are catching on, too.
An umbrella term for a broad range of plans, the most notable CDHC plan combines health savings accounts (HSAs) with high-deductible (often $5000 plus) insurance plans. In a nutshell, the savings-account component pays for routine medical care; the high-deductible insurance component covers more costly emergencies and medical procedures. The HSA grows through pre-tax contributions made by employees or individuals, plus any employer contributions. Any leftover savings roll over year-to-year. More on HSAs later.
Pundits liken one CDHC variation to an ala carte menu of medical-care choices. In employer group plans, business owners contribute a fixed amount to each employee. The money then is applied to the costs of health services as accessed by the employee. As for which services are eligible for coverage, employees choose from a list of options during the enrollment period.
Small Group Limited Medical
Short-term health insurance is designed to protect beneficiaries in the event of major medical or surgical procedures. Most short-term coverage lets patients choose any doctor or hospital, paying for all covered expenses once the deductible and co-insurance are met. Typical deductibles range from $500 to $5, 000, with plans paying from 50 percent to 80 percent or more, depending on the medical service provided.
The purpose of this type of plan is to pay for major hospital, medical and surgical expenses deemed medically necessary for eligible illnesses or injuries. For example, coverage may include hospital room and board, miscellaneous hospital services, surgical procedures, anesthesia services and out-patient care. If stated in the policy, coverage limitations may exist.
Short-term plans are a convenient choice for those needing temporary coverage. Thus, this type of program may be appropriate for new hires waiting for their group plan to begin temporary employees or those looking for lower-cost alternatives to COBRA.
Limited medical plans vary in what they cover, but most pay a large portion of medical costs once an annual, in-network deductible is met. Such limited coverage typically doesn't include prescriptions, vision or mental health benefits, private-duty nursing or accidental death coverage.
Some companies are looking to cut health-care costs with mini-plans, which pay only for standard medical care, such as visits to the doctor. Some also offer partial prescription coverage. However, payouts are often minute when compared to major medical costs like those associated with hospital visits, surgery or mental health services.
So, while the plans may pay for a limited number of annual doctor visits and a capped amount of prescription expenses, emergency room coverage may only amount to $300 a year. In most ER's, this amount won't go very far. And with strict coverage caps, members foot the rest of their medical bills, no matter how high.
Even so, these plans are gaining popularity, at least with business owners. Fewer benefits mean dramatically reduced costs to employers.
Dental Insurance: Something to Smile about?
Like their healthcare cousins, dental insurance programs cover a wide range of benefits and service. Leading plans include:
- Indemnity. The most common type of dental insurance, in indemnity plans, the business owner or consumer pays annual or monthly premiums in exchange for dental services. Coverage is often capped, with the plan paying up to a set amount for dental work. On the plus side, most indemnity programs let patients choose any dentist.
- DHMO. Dental health maintenance organizations pay policyholders' annual premiums to visit dentists a set number of times a year. In turn, the dentists receive a flat rate for providing care. Plan members do not choose their dentist.
- PPO. In preferred provider organizations, policyholders choose their dentists from a predetermined network of providers. Policyholders pay for discounted dental services and may incur surcharges.
- DDP. Growing in popularity, discount dental plans have no service caps. Dentists in DDPs simply agree to provide discounted care to group members. Members can pick their dentist from the group of participating providers.
Vision Plans: a Clear Picture
Vision benefits supplement health insurance policies, offsetting the high costs of regular eye exams, prescription eyewear and the like. Vision insurance can be obtained by individuals (purchasing their own plans); through groups, including an employee's company; or through government programs, such as Medicaid. But more often than not, vision insurance is a wellness benefit coupled with HMOs, PPOs and indemnity (traditional) health insurance, which is contracted with networks providing eye-care services. Available plans typically include:
Vision benefits package. For a yearly
deductible, membership fee and/or co-pay, members with
a vision benefits package are provided with
eye care services. Plans vary, from basic coverage to
enhanced products. Basic packages generally cover
preventive eye exams, eyeglasses or contact lenses. Some
provide allowances for more costly designer frames,
specialty lenses and LASIK surgery.
Before services can be accessed, however, a paid deductible may be required. After that, participants make fixed co-pays to a network provider each time they use eye care services. Also, vision benefits packages don't tend to offer unlimited access, with eye-care services typically available a fixed number of times annually.
- Discount vision plan. Discount vision plans are just that: discounted eye-care services provided upon payment of an annual fee or membership dues. Premiums vary according to coverage and the number of family members enrolled. Participants either show a vision plan I.D. card and pay the provider directly, or make advance discount payments to the plan provider. In the latter, the member uses a coupon or debit card. Usually, eye-care services can be accessed as often as needed. If non-network providers are consulted, participants pay in full when services are rendered. They may later request reimbursement for any covered amount.
Short and Long-Term disability: When Work is Impossible
If an injury prevents an individual from working, the disability plans listed here replace a portion of his or her wages:
- Workers compensation. State law sets the amount of income that individuals injured on the job receive. Employees typically recover a percentage of their gross earnings or take-home pay, up to a certain limit.
- State mandatory disability plans. New York, New Jersey, Rhode Island, California, Hawaii and Puerto Rico have state-sanctioned short-term disability plans. For up to 26 weeks, employees who suffer non-work related injuries or ailments are entitled to income benefits. Maximum benefits vary by state.
- Employer-based short-term disability. When employees can't perform their duties due to illness or injury, they are considered disabled. Depending upon employment length, a portion of pre-disability income is replaced for up to 26 weeks.
Employer-based long-term disability. Once
short-term disability coverage expires, long-term
coverage begins if an employee remains disabled. The
definition of permanent disability varies by company and
by plan, as does the amount paid to the employee.
Typically, 40 percent to 60 percent of income is
replaced. Most plans pay benefits until age 65, provided
the definition of disability is still met. Even so,
benefit periods vary by plan.
Some employers offer enhanced long-term disability coverage (for purchase) to give employees additional peace of mind. A number of plans also offer physical rehabilitation services.
Social Security disability. SSD
(Social Security disability) pays
benefits to individuals who become disabled before
reaching retirement. This federal program applies to
those who can't work because they "have a medical
condition that is expected to last at least one year or
result in death." Federal law requires this strict
definition of disability. Social Security disability
doesn't cover those with short-term or partial
disability, though other programs do.
For benefits to kick in, individuals must have worked long to be covered under Social Security. Payment amounts likewise are subject to age conditions at the time of disability. On average, disability applications take three to five months to process. Therefore, it's wise to apply as soon as a disability occurs. Monthly benefits are based on a person's average lifetime earnings.
Medical discount cards. While not the same as
insurance, medical discount cards can offer
more affordable healthcare to the 43 million Americans
who are uninsured. With cards, participants pay
out-of-pocket for their medical care, usually at lower
prices than most healthcare providers' normal rates.
It is important to note that many states don't
regulate the companies offering these discount cards.
As for the amount of savings and scope of medical services covered, these vary by card. Participants pay monthly or annual fees to qualify for the medical discounts. Specialists can often be seen without referrals, and some cards don't cap the amount of program usage.
Life Insurance: Passing a Little on
The following descriptions detail just what's out there for business owners who want to add a special dimension to their employees' benefits packages:
- Whole life insurance. Whole life insurance offers the insured's beneficiaries benefits based on the policyholder's entire life. Upon the insured's death, a lump-sum payment (benefit) is made. The benefit amount is calculated when the policy is taken out, and premiums are based upon this amount. This type of coverage doesn't account for increased wealth and expenses for example, higher mortgage payments if a larger home is later purchased over a person's life. Premiums are fixed over the policy's term.
Term life insurance. Term life
insurance considers the fluctuating risk factors
over a person's lifetime. Such policies change in
accordance with changes in the insured's life. Therefore,
the premiums are variable.
For both whole life and term life insurance, cost factors include age, health, family history and driving record. A physical checkup is required for either policy type to assess risk factors.
- Universal life insurance. Universal life insurance has several unique features not found in whole life policies. Specifically, the policy owner is allowed to vary the timing and amount of premiums, as well as the benefit amount. These run in accordance with the policyholder's changing needs. So essentially, with universal life insurance policies, the protection, the expense and the cash value components are itemized. Separating these elements is what lends flexibility to universal life insurance plans.
- Survivorship or "2nd to die" insurance. Survivorship insurance covers the lives of two insured people, usually a husband and a wife. This type of life insurance is available as universal life or whole life and pays a death benefit when the last of the two insured persons dies. Because these policies allow the insurance company to delay the payment of the death benefit until the second insured's death, liquidity is available for paying estate taxes when needed. Since it's generally cheaper than individual coverage on either spouse, this type of plan is quite popular.
Variable life insurance. Variable life
insurance combines life insurance protection with
a flexible investment plan. The policy owner may choose
to invest premiums and cash values among various,
selected products. Additionally, the policy owner assumes
all investment risk linked with the policy.
The two types of variable life insurance are variable whole life and variable universal life. In the first, the death benefit depends on investment performance, increasing or decreasing accordingly. The death benefit, however, won't fall below a set minimum amount, as long as premiums are paid. In the latter, the insured may vary the timing and amount of premiums and the face amount of coverage.
Group life insurance. Group life insurance covers
a specific group of lives for instance, company
employees, labor union members or members of an
association. The policy owners in these instances would
be the employer, the union and the association,
respectively. With group life insurance, the insured can
name his/her beneficiaries.
For employees of companies, group life insurance may be part of a benefits package. In other situations, individuals may contribute to a policy's cost or pay for it themselves.
Rx Discount Cards Mean Pennywise Prescriptions
Discount Prescription Programs. Many uninsured
Americans can't afford to buy their prescriptions. As a
result, some companies have designed programs, or
prescription cards, allowing qualified patients to obtain
medications at discounted rates.
For example, one leading drug manufacturer offers�a discount card for 11 products to anyone without government or private prescription coverage.�Even applicants eligible for, but who decline, Medicare Part D can enroll. However, applicants must live in the United States and be under the care of a licensed U.S. doctor. Applications�are available by phone or on-line. Savings can range from 15 percent to 40 percent, with annual re-enrollment required.�
Another leading discount card�offers 275 medications, manufactured by 12 participating drug companies. In this case, though, those who decline Medicare Part D aren't eligible to apply. Additionally, applicants without prescription insurance must meet income guidelines. The average savings run from 25 percent to 40 percent, and a good number of the nation's leading drug companies participate. Applications for this discount card likewise are available by phone or online.
- Government programs. Most states, the District
of Columbia, Guam and Puerto Rico operate programs to help
low-income people with their healthcare expenses. These
initiatives, which vary from state to state, can include
prescription insurance discounts. Details on each state's
program are available online or via local health
- Patient assistance programs. Other discount prescription medication programs are designed by physicians to help their patients.�These cards, similar to a box store's system for enabling consumers to save cash, may be used for any prescription at most pharmacies.
Health Savings Accounts Preparing to Get Sick
Health savings accounts (HSAs) offer money saving advantages for individual health care. Created by the Medicare Modernization Act, HSAs help employers lower the cost of providing healthcare, while allowing individuals more control over their care decisions, specifically, over how they apply their benefits.
HSAs also offer tax incentives to business owners. While a HSA isn't a "health insurance plan," there are no costs to offering an HSA, other than those associated with managing it.
Here's how these plans work: Health savings accounts allow taxpayers to save pre-tax money to pay for future medical costs. To qualify, enrollment in a High Deductible Health Plan (HDHP) is required. Individuals or employers then make the pretax contributions to the accounts. Withdrawals from HSAs are tax-free, provided the funds are used for qualified health expenses, including deductibles and costs not covered under the medical plan portion.
Advance notice of withdrawals isn't required, but the method of getting hold of the cash check, debit card or other means varies by HSA. For non-medical withdrawals, a 10-percent penalty applies, except for those over age 65 or disabled.
Since individuals own their HSAs, the savings move with them as jobs change, even into retirement. Better yet, the accounts can be transferred to a beneficiary in the event of death. And when the beneficiary is a spouse, the transfer is tax-free.
Broker Versus Provider
Healthcare brokers can prove useful in providing affordable health insurance, at the same time helping individuals optimize their healthcare benefits.
Besides bringing a myriad of options to light, including lesser-known choices, such as health savings accounts, brokers can assist with legal and compliance issues. Among these are the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Employee Retirement Income Security Act (ERISA), and other regulations pertinent to specific areas. They also can help employees and the self-insured process claims and resolve related problems.
Choosing a Broker
Experts advise starting the broker selection process by talking with friends, relatives and colleagues. Contacting the local chamber of commerce, searching the Yellow Pages or checking the state insurance commissioner's Web site are good strategies, too.
The latter typically provides key details, such as the broker's licensing information and any records of consumer complaints. Another starting point, the National Association of Health Underwriters' Web site represents various brokers and their offerings.
Industry insiders recommend choosing well-qualified brokers with five to 10 years of experience under their belts. They also suggest that the best brokers usually write at least 50 policies a year. Interviewing several candidates, asking questions and obtaining references are the most effective measures for making a sound choice.
Are Brokers Worth the Bother?
Essentially, brokers are benefits experts. The right one can match an individual's insurance needs with the best services, coverage and prices. Most group health insurance is written (or sold) by brokers, who act as liaisons between those covered and the insurance companies. Since they build relationships with the providers, brokers can act more efficiently on their clients' behalf, according to industry insiders.
A Word about Providers
While brokers offer products from a range of companies, some consumers prefer to buy plans directly from provider firms. Not all insurance corporations sell directly; but persons well-versed in the health insurance field and who know exactly what they're after may find this a viable option, if available.
When working with an insurance company agent, keep in mind that the services they provide are limited. The business owner who purchases the plan is responsible for handling billing and claim disputes, initial enrollments and annual enrollment periods, among other responsibilities.
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