Group Insurance

Our staff is able to design, install and service employee benefit programs for your business. Some of the programs we have extensive experience in include:

• Medical (PPO, POS, HMO, Indemnity)
• Dental (PPO, Indemnity, DMO) 
• Rx 
• Vision
• Disability (Short and Long-Term)
• Life
• Sec. 125 Cafeteria Plans
• Voluntary Benefits 

Basic Health Insurance Primer:

As a small business owner, you have the task of deciding whether or not to provide a group health insurance program for your employees. Most business owners have the need for health insurance themselves; therefore, it is usually in their best interest to be on a group plan rather than an individual plan. Group plans often have richer benefits and lower overall premiums because of the “shared cost” effect. Once the decision is made to acquire a group plan, you should be aware of the types of health plans available and the many features and benefits they provide. There are many types of group insurance programs. However, it shall be the focus of this article to only include plans that are designed to be comprehensive medical plans and not plans that will cover specific medical treatments. Most health insurance plans can be broken down into four major categories:

Comprehensive Major Medical Plan

This type of group policy will provide benefits for expenses incurred by an employee for most medical treatments. This includes benefits for treatments in a hospital, for physician services in or out of a hospital, for treatments needed for the care of accidental injuries, for treatments incurred during pregnancy, and most other medical costs incurred from a "medically necessary treatment.

Riders that can typically be attached to this type of plan include:

•  Prescription Drug Card - allows for small co-payment by employee when purchasing prescription drugs.
• Supplemental Accident Benefits - provides first dollar coverage with no deductible for treatment of accidental injuries.
• Dental/Vision Benefits - provides insurance for the specific cost of dental and optical treatments.
• Skilled Nursing Care/Home Health Care - provides coverage for the cost of ongoing care in a skilled nursing facility or in the home.

This type of coverage is chosen by most small business owners. However, due to the enriched benefits provided by major medical plans, this can be the more costly choice.

Health Maintenance Organizations (HMOs)

A Health Maintenance Organization (HMO) is a form of managed health care. 

There are built-in cost containment features that help to reduce the risk of loss to the underwriting insurance company, thus reducing the cost to the business owner. For example, many Blue Cross/Blue Shield plans have HMO options that provide benefit plans for employees who choose physicians from a participating list of medical providers. Most HMOs are organized similarly. The difference comes in the way the physician "panel is structured. Prepaid group practice HMOs include practitioners that are located together at an office and are hired by the plan and paid a salary. Individual practice association HMOs include participating physicians who practice individually and are contracted by the HMO. In both cases, the HMO is receiving a prepaid premium from the plan participant.

Preferred Provider Organizations (PPOs)

Preferred Provider Organizations are very similar to HMOs in concept. PPOs are groups of physicians and hospitals that contract with employers, insurance companies, or third party administrators to provide health care services at reduced fees. Like HMOs, they may be structured as group or individual practices.

The primary differences between HMOs and PPOs are:

• PPOs do not provide benefits on a prepaid basis but on a fee-for-service basis as services are rendered.
• Fees are usually subject to a schedule used by all PPO participants.
• Plan participants do not have to use the PPO physicians or facilities. They can make a choice each time health care is necessary. However, PPOs usually have lower deductibles and lower co-payments.

Self-Funded Plan

The Self-Funded Plan involves an arrangement whereby the employer assumes all the responsibilities and liabilities that an insurance company would normally assume. Basically, the employer is responsible for payment of all claims. However, problems arise when substantial claims are incurred by the employees. Therefore, most self-funded plans will be less economically feasible for small groups and will work very effectively for large groups due to the reduced risk.

There are various partially self-funded plans that are more feasible for small groups. This type of plan would be underwritten by an insurance company. The employer would be responsible for the co-insurance portion of the major medical plan, while the employee is responsible for the appropriate deductible. Traditionally, the co-insurance portion of a major medical plan is 80% of the $5,000 of medical costs that exceed the deductible. The insurance company is then responsible for all amounts exceeding the deductible and co-insurance.

The total annual aggregate out-of-pocket expenses for the employer work out to be what the average annual cost of a full-blown major medical plan would be for the same group. Therefore, if a company has a fairly good health history, it may save some money with a partially self-funded plan.

Two or more of the above health insurance plans can be used simultaneously with tax saving strategies.

Cafeteria Plans

Cafeteria Plans are available to business owners and their employees for the purpose of funding employee benefits with pre-tax dollars.

The essence of a cafeteria plan, as described in IRC Section 125, is that it allows each participating employee to choose among two or more benefits. In particular, the employee may "purchase nontaxable benefits by foregoing taxable cash compensation. Benefits under a cafeteria plan are limited to cash and certain statutory benefits, including medical, disability and other accidental or health plan coverages, group term life insurance, dependent care, group legal services, and 401(k) plans.

There are many different methods of initializing cafeteria plans for small businesses. Each company is different, and cafeteria plans should be approached with that idea in mind.

Conclusion

The choice of what type of health insurance will best fit your need is not an easy one. However, having a basic knowledge of what is available can make the decision a little easier. The bottom line comes down to a more important question. "Do you want a plan with quality features and benefits?" or "Do you want to save money?" In most cases, you will find it difficult to have both.