Before you begin shopping for plans, you should make sure you understand your options regarding benefits levels, choice of providers and cost-sharing with employees. You won’t be making any final decisions at this point. Instead, you will start to identify directions to help guide your broker to plans that might work for you. Chances are you’ll have to tweak your wish list later on when you start getting quotes from insurers.
Below we discuss the main issues you should consider when making your preliminary coverage decisions.
Scope of Coverage
Early on, you should decide upon a general approach: whether you’ll be shopping for limited or broad coverage. Generally speaking, for plans at the more basic or “catastrophic” end of the spectrum, employees must pay potentially high costs at the time of service. Routine preventive care, such as an annual physical exam, may be covered, but ongoing care for a chronic health condition will be entirely paid for by the employee, up to the plan deductible amount. Because of the significant out-of-pocket costs, these plans are sometimes termed “high-deductible” or “high-cost-sharing” plans. For additional benefits or for less cost sharing, you may need to look at plans with broader coverage, sometimes called “comprehensive” plans.
Comprehensive plans cover a relatively wide range of services and benefits, such as preventive care, prescription drug coverage and mental health services. The most comprehensive plans also may cover alternative services such as acupuncture or chiropractic. The more comprehensive the plan, the more the premium tends to cost. On the other hand, employees may bear less cost-sharing responsibilities with more comprehensive plans. Finally, keep in mind that dental and vision benefits are almost always separate from the medical plan.
It’s a good idea to check in with your employees to find out what they most need or want in a medical plan. You may not be able to give them everything they want, but you may be surprised by their preferences.
Choice of Providers
When considering various plans, an important issue to consider is how important a choice of providers is to you and your employees. Employees who have established relationships with doctors may not want to be forced to choose a new one. This is particularly true for older people and families.
Health plans can vary a great deal in exactly which providers, hospitals, and medical groups are available to plan participants. Decide early on how important this issue is to you.
Keep in mind that purchasing alliances offer plans that allow employees to choose from multiple provider networks. In this way, a purchasing alliance may help a small group obtain coverage with access to the providers that most, if not all, participants want. (For more on purchasing alliances, see Step 4: Understand the Marketplace.)
How Costs Will Be Shared
The term “cost-sharing” refers to how health plan costs are shared between employers and employees. It’s important to understand that the cost-sharing structure can have a big impact on the ultimate cost to you, the employer. Generally, costs are shared in two main ways:
- Premium contributions. The employer pays a portion of the premium, and the remainder is deducted from employees’ paychecks. (Most insurers require employers to contribute at least half of the premium cost for covered employees.)
- Cost-sharing at the time of service. This may take the form of: copayments, a fixed amount paid by the employees at the time they obtain services; co-insurance, a percent of the charge for services that is typically billed after services are received; and deductibles, a flat amount that the employees must pay before they are eligible for any benefits.
The general rule is that the greater the cost-sharing at the time of service, the lower the premiums. With this in mind, the decisions you’ll have to make include:
- What amount or percentage of the employee-only premium will you require the employees to cover?
- What amount or percentage of the premium for dependents will you require the employees to cover?
- What level of out-of-pocket expenses (copayments, co-insurance, deductibles, and so on) will your employees and their dependents incur when they get care?
Coverage Rules vs. Options
Understanding the choices you have versus the rules you need to follow—such as who must be covered under an employer’s group policy, how much the employer must pay and other issues—can be tricky. The rules and options tend to get tangled together, making it hard to differentiate what is mandatory from what is optional.
See the “Summary of Coverage Rules vs. Options” for a table outlining which rules must be followed, and which areas give employers leeway to choose. Keep in mind this is just a summary; these issues are covered in depth in the Reference Guide.
One decision you will need to make is whether to offer coverage to unmarried domestic partners. If you offer coverage to unmarried domestic partners of employees, most insurers will require an affidavit of domestic partnership. The affidavit establishes that the domestic partners are living together in a committed relationship, and intend to stay that way indefinitely.