Structure Your Health Insurance Benefit Properly,
Health insurance is the second-most-coveted fringe benefit in
America today behind only paid vacation. Yet, only half of
employers with fewer than 10 employees offer it . . . often because
of the price tag.
However, a dealership’s ability to recruit and retain talented
kitchen and bath designers, salespeople, installers and other
valuable employees depends on the ability to provide desired
benefits such as health insurance.
Cost, of course, is a major consideration. But, think of it this
way: What would it cost you to lose a valuable employee? What would
it cost you to recruit and train a replacement? What would you lose
in productivity in the interim?
In today’s environment of managed care plans and increased
cost-sharing with employees, cost doesn’t have to be an overriding
issue for kitchen and bath design firms, according to benefits
experts. Structuring your benefits plan properly, with an eye on
the quality and cost of care, can help you develop a plan for your
qualified employees, those experts add.
Choosing between health plans is not as easy as it once was.
Although there is no one “best” plan, there are some plans that are
better than others.
First, business owners need to understand some of the basics and
basic terminology of health insurance.
With any health plan, you and your employees will pay a basic
premium, usually monthly, to buy the health insurance coverage. In
addition, there are often other payments employers or employees
must make. These payments will vary by plan, but essentially are
deductibles and co-payments.
A co-payment is a fixed dollar amount or percentage that is paid
for each doctor visit. By comparison, a deductible is the amount of
annual medical expenses that a health plan member must pay before
the plan will begin to cover expenses. For example, if your plan
has a $500 deductible, your employee will pay the first $500 of his
or her medical expenses before the health plan begins paying the
A provider is a hospital, health care facility, physician or
other medical professional that provides health-care
Health-insurance plans usually are described as either indemnity
(fee-for-service) or managed care. Indemnity and managed care plans
differ in their basic approach. The major differences concern
choice of providers, out-of-pocket costs for covered services, and
how bills are paid. Usually, indemnity plans offer a wider choice
of doctors (including specialists, such as cardiologists and
surgeons), hospitals, and other health-care providers than
Indemnity plans pay their share of the costs of a service only
after they receive a bill. Managed-care plans have agreements with
certain doctors, hospitals and health-care providers to give a
range of services to plan members at reduced cost. In general, you
and your employees will have less paperwork and lower out-of-pocket
costs if you select a managed care-type plan, and a broader choice
of health care providers if you select an indemnity-type plan.
Besides indemnity plans, there are three basic types of
managed-care plans: PPOs, HMOs and POS plans.
A PPO is a Preferred Provider Organization. As a member of a
PPO, you can use the doctors and hospitals within the PPO network
or go outside of the network for care. You do not need a referral
to see a specialist. If you or your employee obtains care from a
medical provider outside of the PPO network, you will pay more for
the service. For example, a PPO might pay 90% of the cost for a
visit with an in-network doctor, but only 70% of the cost for a
visit to a non-network doctor.
An HMO is a Health Maintenance Organization. As a member of an
HMO, you select a primary care physician from a list of doctors in
that HMO’s network. Your primary-care physician will be the first
medical provider to call or see for a medical condition. He or she
will make any needed referrals to a medical specialist. Typically,
these specialists will be part of the HMO network.
With some HMOs, you pay nothing when you visit in-network doctors.
With other HMOs there may be a small co-payment for the visit or
service. With most HMOs, there is no deductible.
A POS is a Point-of-Service type of managed care plan combining
features of health maintenance organizations (HMOs) and preferred
provider organizations (PPOs). Your employee can decide whether to
go to a network provider and pay a flat-dollar charge, or go to an
out-of-network provider and pay a deductible and/or a co-insurance
Many health-insurance companies have moved away from indemnity
plans and are instead offering managed care plans such as HMOs and
PPOs. You may have few or no indemnity plan choices in your
When considering your benefits plan, begin by determining the
needs of your employees. You may want to sit down with them to
discuss options, making it clear that you may not be able to afford
all of what they want and that some costs may have to be
Armed with this information, you should contact an independent
insurance agent or broker who:
- Can explain the different coverage options available;
- Present you with alternative plans and quotes, and,
- Sell and service your policy.
Consider the agent’s reputation and responsiveness, and how well
you deal with him personally.
You will probably get several different proposals and quotes from
insurance companies. Since each quote may provide for different
coverages, don’t just compare prices. Ask to see the entire
proposal from the insurer, including customer service and claims
In reviewing the proposals, ask the following questions:
- Is the insurance carrier reputable and financially strong?
- Will the policy be renewed every six months or annually?
- Is the plan easy to administer? Is there a toll-free 800 number
to call to make changes or have questions answered?
- Does the insurer process and pay claims quickly?
- Does the insurer provide educational or other communications
materials for employees?
- Are there any penalties employees should know about? Are there
any “hidden” deductibles, such as a separate inpatient hospital
- Will the insurer underwrite the policy as a group, an
individual or both?
- Does the managed care plan provide enough of a financial
incentive to encourage employees to select network providers?
Once you decide on a benefits plan, your insurance company
should provide follow-up information for employees that details
plan specifics, enrollment periods and claims procedures.
Providing employee health insurance coverage does not have to be
an all-or-nothing proposition or break your bank. Understanding
your employees’ needs, researching the options available, and
selecting a reputable insurer can give you an affordable package
that benefits both you and your