Insurance Insights

Time to Take Another Look at Small Group Insurance

Current small business health insurance offerings hold some pleasant surprises for employers looking for affordable medical insurance coverage in 2010.

That’s because the California insurance industry is competing for customers in an economy that is expected to be flat to down in 2010.

Insurers are lowering premiums by introducing new high-deductible health plans (HDHPs) which can be paired with tax-advantaged Health Savings Accounts (HSAs).  Employers generally contribute a portion of the premium savings to the HSA, which can be further supplemented by the individual employee.

In the battle for market share, insurers – including Kaiser -- are all offering these plans at prices that are simply not sustainable. It might be a bit harsh to call it bait and switch, but it’s definitely a buyer-beware situation.

“Too-Good-To-Be-True” Benefits Pricing

As we’ve been advising you since 2006, the “too-good-to-be-true” prices had to go up.  And they have, by an average of 20% per year, and now in the case of one of our clients, a stunning 40% for 2010. 

That said, we think that the competition for business can work to your advantage. It is definitely not a one size fits all solution, but for employers with a substantial number of employees over age fifty it is definitely worth a second look.

Remember our client with the huge increase?  He was facing a 40% increase on his high deductible plan, as compared to a 7% increase on his PPO plan. Not surprisingly, he was ready to move everyone back to the standard PPO plan. On the surface it looked like an easy decision... Just to be certain, we ran the numbers.

The Employees Are The Real Winners

What we found is that when we combined the premium for the high-deductible plan with an employer contribution for the entire deductible into the HSA plan, the total employer outlay still turned out to be less than the premium for the standard PPO plan.

Once the deductible has been paid, this HDHP covers 100% of medical claims with no coinsurance.

Our Four Step Process

As we have said, this isn’t a one size fits all solution. The market is constantly changing, and new opportunities appear and disappear regularly.

At Shargel & Company, finding the right insurance solution for your company involves much more then identifying the low bidder. Group health insurance is a complex product, and precisely tailoring an employee benefits package to your needs is a complex process.

1) We work to understand your business preferences. We know that offering the best health insurance to your employees, is an important part of your strategy to attract and retain the talent that you need to be competitive.

2) We investigate the culture of the company. It is paramount that your employees value the benefits that you provide.

3) We look at what is available in the market place. As independent health insurance agents, we are carrier ‘agnostic’; our only concern is to find the best package for you.

4) Finally we look at cost, and make detailed cost comparisons between the programs we recommend.

In this difficult economic period, it will make sense for some of you to consider a HDHP/HSA plan. If you are interested, we are here to help.

For more information about high-deductible health plans/HSAs, please visit our website.

For a small group benefits consultation, please contact Susan directly.

If you are interested in the progress of health care reform legislation in Washington D.C., please visit Susan's Health Care Reform Blog.

Please join the discussion. How are you managing rising employee benefits costs?

What You Don't Have to Worry About!

Our client who was treated for breast cancer is the owner of a small business and buys health insurance for herself and her staff  through that business. With her treatment complete, she is looking forward to growing her business. However, she came to me with two big worries.  

Her first concern was “What’s going to happen to my premiums now that I’ve had breast cancer?” Fortunately, her business is in California, a state which passed some of the strongest protections in the country for small businesses way back in 1992. California has limited the amount insurance premiums can increase due to medical claims. These regulations stipulate that my client’s premiums can be set no higher than 10% above the standard rate. This is a very important protection; it ensures that no business is destroyed by radical increases in the cost of insurance due to an employee’s illness. My client can rest easy knowing that her coverage is protected and won’t become a burden to the business.

Businesses in other states are not so lucky; the average amount premiums are permitted to vary above standard is 25%--in states that have had small business reform.  In Pennsylvania and Virginia, there are no regulations on rating structures at all. That’s why you read horrifying newspaper articles about companies whose premiums have increased 50% or more due to a major health claim.

My client’s second question was “Am I locked into this plan forever?” Now that she has a preexisting condition, she wanted to know whether she will be able to change plans or insurance companies.  Again, California’s laws require that all businesses which meet certain basic requirements be guaranteed acceptance, regardless of the health issues of the employees.  And again, the new pricing can be no higher than 10% above standard rates. 

So the next question on your mind as the reader of this blog must be: “I’ve gotten rate increases that are more than 10% for more years than I can count.  And we didn’t have major claims!”  What reform in California has accomplished is limiting the variation in premiums between businesses--not the steep rise in premiums overall.  And this, of course, is the issue for all of us. The continued upward cost spiral must be addressed in national health reform.