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the right insurance plan for your employees can be a challenge. Here are some
basics to get you off to a good start.
Health Insurance 101 for 2-50
this basic guide to small-business health insurance you'll find useful
information to help you select an insurance policy. Choosing the right
insurance for your employees is one of the most important decisions you can
make for your company. With a little planning, forethought, and effort, you
can make an informed decision about the right benefits for your employees, at
a reasonable cost.
your convenience, we have divided the topics into sections. We highly
recommend that you review these subjects with us to help you understand the
finer points of constructing and maintaining a group insurance program.
the Insurance Plan
guide is provided to you as a general overview of employee benefits. Every
employer's needs are different. Any advice in this article is general in
scope. We strongly encourage you to contact a licensed small-group insurance
broker about your specific needs. Please feel free to contact us for the
-- Health Maintenance Organization
primary care physician (PCP), who will be compensated by the insurance
company, must be selected from the network at the time of enrollment. This PCP
will manage all care provided to the insured person. In order to see a
contracted specialist or receive services from a hospital, a referral must
first be obtained from the PCP, except in cases of life-threatening
emergencies. No benefits are provided if the insured goes out of the network.
There are minimal to no co-payments, no annual deductibles, and no claim
-- Preferred Provider Organization
is similar to an indemnity plan, but with a network of physicians. The insured
is allowed to choose a doctor or hospital from a preferred-provider list.
Preferred providers are doctors, hospitals, and other non-network providers.
They have agreed to group pricing and will follow the procedures and policies
of the plan. Lower fees are arranged with the network of providers, giving
insureds a financial incentive to stay within the network. A higher cost or
co-pay is generally required for medical services obtained from outside
to an HMO, this healthcare delivery method requires selecting a primary-care
physician (PCP), who coordinates the insured's healthcare needs.
-- Exclusive Provider Organization
physician within the contracted network can be visited without prior approval
or referrals. Services received outside the network, however, generally are
referred to as fee-for-service, an indemnity plan allows absolute freedom in
selecting physicians or medical facilities, and permits self-referral to a
specialist. A yearly deductible must be met before the insurance company pays
coinsurance. Coinsurance is set at a predetermined rate in which the insurance
company pays that percentage of costs. This plan requires the use of patient
claim forms and reimbursement checks.
a basic-hospital plan, in-hospital (inpatient) care is the only service
covered; other services are not offered. Generally, benefits must be obtained
from a contracted, approved, or network facility. Services received outside of
this network may receive less coverage or no coverage at all.
plan type provides life insurance but does not include any other coverage.
plan type provides dental coverage but does not include any other coverage.
Rx / Stand-Alone Prescription
plan type provides prescription-drug coverage, which generally means the
insured person can obtain prescription drugs at a set price of a few dollars,
but does not include any other coverage.
-- Long-Term Disability
plans provide income for an individual who is no longer able to work due to an
illness, disease, or non-occupational injury. Compensation is either a flat
amount or one based on a percentage of regular income (often 50% to 60%). To
qualify, most plans require that the individual be a full-time employee for at
least one year before the disability and be under the age of 65. Short-term
disabilities are generally covered by other health plans.
-- The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires
companies with 20 or more employees to offer individuals who would otherwise
lose their insurance coverage as a result of termination the option to
continue their group healthcare coverage. Some states require that smaller
companies -- as few as two employees -- offer terminated employees the ability
to extend their coverage. Texas requires up to six months.
-- There are many differences between the thousands of insurance plans
available today, but every major health plan covers the following expenses:
of illness, disease, and accidents
surgical, and emergency care
(hospital room) and related services
visits and treatment
care (such as, X-rays)
vision, and hearing care due to accident or injury
medical equipment purchase or rental
care (such as, intensive-care unit)
other medical necessity
exclusions include the following:
injuries covered by worker's compensation
not recommended by a physician
deemed to be beyond customary and reasonable
addition, some states require that insurance companies provide coverage for
mental-health and/or substance abuse. Most insurance companies, of course,
allow additional coverage to be added to a policy with a related change in the
Dental care can either be part of a medical policy or it can be a separate
policy altogether. Basic dentistry services are covered, and orthodontics and
surgical procedures, although usually not included, can be added for an
additional charge. Routine examinations and cleanings are usually provided
free of charge. One important point to remember, however, is that most
dental-care plans have an annual maximum. Any costs exceeding this amount are
-- Disability benefits are periodic payments to an insured who can no longer
work due to illness, disease, or a non-work-related accident. There are three
types of disability: paid sick leave, short-term disability, and long-term
disability. Other programs, such as worker's compensation and state-run
temporary-disability programs, also cover disability. Social Security provides
a degree of benefits as well.
-- Preexisting conditions are defined as physical or mental conditions for
which medical advice, treatment, diagnosis, or care was recommended or
received within six months of the date of enrollment in the new plan.
normal circumstances, employees are covered immediately by their group
healthcare plan. According to federal law, however, preexisting conditions can
result in an exclusion of coverage for up to 12 months. This period can be
eliminated if the insured had prior coverage on a month-to-month basis. For
example, if someone was covered by a previous plan for 12 months and moved
into a new plan, there would be no exclusionary period. A break of more than
63 days, however, negates this provision. There may be additional state laws
affecting the exclusionary period. Check with your broker for more
preexisting conditions, treatments relating to that condition may not be
covered, but other illnesses or injuries are normally covered.
Insurance -- Some Issues
Who Should Be Covered
-- Before selecting a group health plan, you must decide who will be covered.
It is traditional to cover only full-time employees who have been with the
company for a certain amount of time. Coverage can be extended to include
spouses and other dependents, as well as part-time employees. Insurance
companies generally impose minimum requirements on the definition of
dependents, and, once these requirements are in place, you are obligated to
remain consistent with regard to who qualifies for coverage and who does not.
To alter this definition after it has been established or to give the
impression that the definition differs depending on the individual could be a
violation of state and federal discrimination laws.
for Benefit Premiums
-- In most cases, employees pay for a portion of their insurance coverage. The
employer often deducts these costs from their paychecks. Insurance carriers
generally provide companies with all the forms needed to handle this. In many
cases, these documents are completed at the time of enrollment. Always be sure
to get written permission from employees before deducting anything from their
paychecks. Deductions from Section 125 Plans are from gross rather than net
income (in other words, they are pre-tax).
Employees / Changing Coverage
-- After eligibility requirements have been determined,
it is important to provide employees with straightforward information on the
plans available and any deadlines that apply.
plans typically impose limitations on when you or your employees can make any
changes to the existing coverage. These are often events such as:
in the employment of an employee's spouse
in work hours
leave of absence.
-- To obtain group health insurance, certain information is required. This is
commonly known as the census. The census covers all pertinent information on
each employee who will be enrolled in the plan. The information most commonly
asked for includes the following:
name of each employee
or date of birth
on any dependents who will be covered
Out of Insurance
-- Some employees may want to forego the insurance coverage if they are
already covered under another plan, such as a spouse's group insurance, or if
they feel they can't afford the additional expense. You can a) allow them to
do so, or b) require that they obtain coverage regardless. If they do opt to
decline coverage, be sure to obtain this in writing for your records. This
confirms that the employee was given an opportunity to enroll and that he/she
understands any restrictions that may apply to future participation. Remember,
however, that if employees are expected to pay for part of their premiums,
they should not be forced to enroll.
and Comparing Proposals
-- When researching insurance plans, you will obtain many different proposals.
That is why BenefitMall.com offers simple comparisons of each plan's features.
You will want to discuss the details of each proposal with your broker. The
most important factors to check are the following:
schedule -- cost per employee per month
schedule -- general overview of the benefits provided
of doctors in the network
the Insurance Plan
as Employee Liaison
-- Employees generally expect their employer to assist them if they run into
any problems concerning their insurance policies. These difficulties typically
include things such as getting new insurance cards or getting claims paid in a
timely manner. Even if your company has a designated individual to deal with
insurance matters, employees will almost always speak to the employers first.
remember that your employees' concerns are valid and should be addressed. In
most cases, you simply need to have your employees contact member services at
the insurance company. When they do so, it is important that they have their
insurance cards, group and employee numbers, and claim numbers, as well as the
names and dates relevant to the claim. Be sure to have them document any
problems that arise.
this is not sufficient and you must become personally involved, contact your
insurance broker or the customer-service representative at the insurance
agency. They will usually get the problem resolved quickly.
Your Health Plan
-- Most administrative functions are handled by the insurance company through
which you have coverage. You are still responsible, however, for a fair amount
of work. The primary tasks include the following:
new employees and making status changes as needed
premiums from employee wages and remitting them to the insurance company
within the grace period allowed under the policy
as liaison between employees and the insurer
benefits and extending COBRA coverage
with reporting and disclosure requirements
-- If an employee leaves the company, you must terminate that individual's
coverage (this is done easily using forms provided by the insurance carrier)
and provide the employee with an offer to extend health benefits according to
COBRA and any state laws that may apply.
has been a brief overview of employee benefits. As with any subject that is
complicated in its details, you should always consult an expert in your
decision-making process. An insurance broker can answer any additional
questions you might have after reading this primer as well as guide you in
planning benefits for your company.