Health Insurance for Small Businesses

Choices abound in an ever-complex marketplace.

By George N. Saliba, Managing Editor On Feb 17, 2017

Small business owners are so engrossed with managing their firm’s day-to-day operations that “purchasing health insurance” is a topic they often have neither the time nor inclination to thoroughly investigate, even though offering health benefits is a crucial means for promoting employees’ well-being, and for attracting and retaining top-tier talent. And while the health insurance marketplace is indeed complex and increasingly expensive, qualified insurance brokers can assist their small business clients with navigating its labyrinth-like nuances for high-quality coverage at the best possible price.

Gary V. Cupo, president and CEO of Fairfield-based Benefit Solutions, explains, “Especially in the last year or two, I am finding that [insurance] agents are increasingly realizing that [purchasing health insurance] has become pretty complicated, and that they should really refer [clients] to somebody who is focused and specialized. [These expert brokers] are the true specialists in this industry, since they are constantly keeping up with the laws and finding the right solutions for employers as well as individual consumers.”

Bridget Gielis, vice president of insurance services and sales, QualCare, Inc., echoes this general sentiment, saying, “The healthcare market is volatile and it is confusing, and small employers should really identify a broker who is going to be a strategic partner for them. … The brokers have such a good, core base of knowledge because they work with all the different carriers in the state. They are a great resource, and, again, it is finding the right one; not just the one who is going to ‘shop price.’ [You need the one] who is really going to be a partner as you would find in a CPA, or an attorney to help run your business.”

The Basics of Rising Health Insurance Premiums

The New Jersey Department of Banking and Insurance offers a guide for small businesses titled, “The New Jersey Small Employer Health Benefits Program BUYER’S GUIDE,” which – at the very least – will familiarize business owners with essential health-insurance-purchasing frameworks and associated industry terminology.

Some insurance brokers interviewed by New Jersey Business magazine stress that before contacting a broker, business owners may wish to determine that they in fact do want to purchase health insurance coverage for their employees, and, additionally, have a general estimate of how much money they may wish to spend.

The latter point is particularly painful for small businesses in recent years, since the cost of health coverage steadfastly continues to increase. Since many small business owners want to know why costs are increasing, a brief explanatory diversion is in order (even though the precise causes of healthcare premium cost increases are hotly debated).

The Affordable Care Act (ACA) has numerous mandates which some persons cite as one component related to premium cost increases, while others blame overall cost increases on various analyses of the insurance payer/hospital/pharmaceutical company paradigm. So-called defensive medical costs – meaning overly comprehensive tests and procedures ordered for patients to ensure medical providers won’t be sued – are yet another potential factor contributing to healthcare premium costs.

Offering one panoramic view of rising healthcare premium costs is Toby Stark, president of Stark Associates Insurance. He explains, “Cost of care is a big issue that drives up premiums. Even if somebody is just telephoning me and complaining about how expensive insurance premiums are [in the marketplace], I try to educate them: It is very difficult to stop the increased cost of care, and insurance has to follow those trends. If there is a new [medical] device, and it will cure you from cancer, what type of money amount do you want to put on it? How much is that worth to you? And nobody can answer that. Nobody is going to say, ‘Well, I think I am only going to pay $200 for that.’ It is kind of a Catch-22. As cost of care continues to increase, I also say, ‘Look, it is not health insurance; it’s the liabilities of the hospitals and the providers, and what they charge – and the insurance carriers have to pass that on to you.”

How Companies are Reacting to Increased Costs

NJBIA’s “2016 Health Benefits Survey” revealed interesting statistics regarding actions taken by employers to control healthcare costs. For example, when addressing the issue: 43 percent of employers increased their deductibles; 41 percent introduced high deductible plans; 28 percent increased employee contributions; 19 changed carriers; and 19 percent reduced benefits, for example. Another portion of NJBIA’s survey focused on how employers paid for the increased premiums: 33 percent lowered their profits; 29 percent froze or limited wages; 15 percent delayed investments; 16 percent were more productive; 7 percent cut employees; 6 percent reduced employee hours; and 46 percent didn’t take any action other than paying the premiums, for example.

Selecting a Small Group Health Insurance Plan

If premium costs are one inexorable component of healthcare coverage, when business owners meet with an insurance broker, they will want to ensure they receive the highest-quality plan for the monies they disburse. Regarding a plan’s quality, Stark says his clients, overall, are focused on: “‘Are my providers in the network?’ and, also, ‘How does [a particular] insurance plan actually work?’”

Gary Cupo adds, “Obviously, there is a direct correlation between cost and coverages: The lower the deductibles and co-pays, the higher the cost – and the more benefits you want covered, the higher the cost. The question becomes: ‘Are you getting the best value for your money?’”

As an example, Cupo explains, “I think employers don’t realize that they need to look at their maximum out-of-pocket costs. I see people buying these very expensive plans, and realizing that they are going to have high utilization. If they are going to max out anyway, then [they] should buy the least expensive plan … because that plan is going to pay the same maximum out-of-pocket; the only difference is that with [a less expensive plan, using a Health Savings Account] they could use pre-tax dollars to reimburse themselves on a pre-tax basis, rather than pay for a deductible and co-insurance with after-tax dollars.”

Additionally, Cupo states that uninformed companies may be paying a much higher share of premiums compared to what is prevalent in the marketplace. He says, “I just had a company [where the owner] wanted the richest plan for his employees. And I said: ‘Is that really the best way to spend your money?’ He was paying 100 percent of the employee premium, and – what is unheard of for this size group – he is paying 100 percent of the dependent as well. If you look at the dollars they are spending, [he should] have a more well-rounded benefit package that employees would appreciate. Employees want dental, vision and long-term and short-term disability coverage. They also want a 401(k) plan, with a company match. Again, I see companies that might pay more money than they should for [health coverage].”

Various Health Insurance Offerings

In broad terms, Paul Marden, CEO of UnitedHealthcare, explains that benefit designs are one factor employers examine, and, again, in broad terms, the richer the benefits, the lower the out-of-pocket costs are for the member (and the higher the premium).

Marden adds, “Generally, I liked what happened with the Affordable Care Act (ACA), with the ‘metal levels,’ and the nomenclature that they used, because you are associating platinum, or gold, with richer benefits, and then bronze – or catastrophic – with the lowest level of benefit. [This all] makes it a little easier for owners to understand.”

A Move Toward Quality

While there are various iterations of doing so, some health insurance companies are attempting to lower the cost of care by, in part, monitoring the outcomes of healthcare providers’ various patients, and rewarding those with good results.

As Michael J. Considine, vice president of individual, small employer and mid-size markets at Horizon Blue Cross Blue Shield of New Jersey, says, “[The term we use] is population health management. We believe is it going to cut or slow down the cost curve. Using the scenario of a diabetic: If [he or she] were in a high-deductible plan, as an example, [he or she] may say, ‘You know what? I am not even going to get into benefits until I hit $2,500 in this deductible plan. I am not going to go for my [diabetic] medications; I am not even going to bother going to the doctor.’

“However, with [Horizon Blue Cross Blue Shield of New Jersey’s] OMNIA program, the whole concept is that Horizon and the doctors work collaboratively to make sure that a diabetic is taking [his or her] medicine. With diabetics, typically there are vision issues, [for example]. So, the doctors will make sure that somebody is going for their eye exams – there are many types of these metrics.”

Considine concludes, “Then, how we [with OMNIA] reimburse is based upon the providers – the doctors and hospitals – adhering to those quality metrics.”

Conclusion

Small businesses have numerous health insurance options available to them, and a quality health insurance broker, combined with a basic understanding of the marketplace, can pave the way for intelligent decisions that may help keep a company competitive in the labor market.

Finally, the health insurance marketplace is in a state constant flux, and although it may be shaped by some of the dynamics outlined in this article, President Donald Trump is adding a new level of intrigue to the broader equation. Will the Trump Administration remove healthcare mandates? Might the Affordable Care Act (ACA) be repealed, or substantially altered?

Offering a view that is shared by others, UnitedHealthcare’s Marden concludes, “We are not going to speculate on what could happen with the new Trump Administration. But, [overall], what we are really advocating with legislators on a state and federal level is just to continue to move toward a modern, high performing and more simple healthcare system.”

 

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