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

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Selecting Group Healthcare Plans

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Selecting Group Healthcare Plans

Presented by

(Name, CPA)

Member, The Ohio Society of CPAs


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)


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)


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


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


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


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)


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


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


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


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


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


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


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


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


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


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)


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


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


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


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


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


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)


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


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


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?


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


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


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.


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


Choosing a Plan

 Evaluate plan types

Solicit, review and compare proposals

Negotiate terms and price of the policy


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


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


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


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


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


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


Questions? Comments?


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


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