How to: Pick the Right Health Insurance Plan

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Selecting health insurance for a solo practitioner, a new firm or a firm with an existing medical insurance plan evokes a range of emotions. It might evoke memories of Dustin Hoffman’s dental procedure in Marathon Man or even Steve Carell’s waxing in The 40 Year- Old Virgin (ouch!). The good news is that it doesn’t have to be that way. With the proper approach and planning, selecting health insurance can be an educational and beneficial experience. The key is to follow these steps and go with the flow, like Nemo in the East Australian Current.

1. Select a professional agent

First, select a professional agent specializing in group or individual health insurance. Two good places to start are www.cahu.org (California Association of Health Underwriters) and www.nahu.org (National Association of Health Underwriters). Both offer consumer information and a “Find an Agent” tool. If you have an agent, see if he or she is listed. These associations provide excellent information and training.

For maverick individuals, choosing to apply directly online, I have two words of advice: Be cautious. Those with health conditions or on medication could be denied or surprised by a hefty premium rating. That denial, now a permanent part of your history, could possibly have been avoided with proper management. An agent can submit an anonymous inquiry to nearly all of the insurance companies offering individual medical insurance. The health carriers respond with a “probable rating.” Be honest and thorough in providing the information – it will make the process easier and more accurate. All of the carriers use a disclaimer that final rates are determined after full underwriting, but you will gain a better idea of what to expect and won’t waste time applying to carriers that automatically decline due to certain health conditions or medications.

In the small group market – firms with less than 50 employees – there is no risk of being declined after meeting a few guidelines. California has had a small group “guarantee issue” since 1993. Insurance companies issue group coverage to groups with as few as two members, with only one person enrolling.

2. Develop a plan

The second step is to have a planning meeting focusing on plan design, specific needs for employees, physician and hospital networks and budget. The decision maker or makers need to decide if the employees will contribute to the premium; it helps the employer and the employee to arrange for premiums to be paid on a pre-tax basis.

Armed with the information from the planning meeting, the agent can begin research. The agent collects quotes, reviews and summarizes them. Expect to see high, medium and low premium plans or the current top selling plans in the region (giving insight into what other employers are offering). In my experience law firms prefer more than one option for employees – in the past it was a PPO and HMO combination. As HMO premiums continue
to climb, firms now often select one or two PPO options, including PPO plans called “HSA Compatible Plans.” The HSA (Health Savings Account) plans require a high deductible. The HSA has a tax advantage, by establishing a separate account, those costs be paid on a pretax basis (for California residents it is only a Federal deduction), without regard for adjusted gross income. A participant may establish a separate account to pay the deductible and allowable medical expenses. The employer, employee or both may fund it. Unlike Flexible Spending Accounts (FSAs) there is not a “use it or lose it” concern for the money in the account.

3. Analyze and Decide

The third step is to meet again with the agent, review the results of the research and make a decision. It is important to both analyze the benefits and the premiums. The least expensive plans are priced that way for a reason. Keep in mind that generally the key concerns of the employees are the office visit co-pay, the size of the network, the prescription drug coverage, as well as the annual maximum “out of pocket” costs. Many PPO plans now
have separate deductibles for brand name prescription drugs.

4. Implement

Once the plan selection has been made, the next step is implementation. The agent or a representative from the insurance company can conduct an employee educational meeting and handle the enrollment, which means the employer does not have to handle the questions!

5. Repeat Annually

This process is normally repeated annually: meet, review, educate and enroll. It is valuable to have an annual employee meeting whether or not there is a change in insurance companies. It is an opportunity to remind employees about the availability of routine preventive care services and to discuss any changes to the plan.

How long will this take? The timeline is hard to pinpoint. The process for an individual application can take two to four weeks. For a small group it is a good idea to start the process 90 days before desiring to implement a new plan. Employers whose plans were in place prior to March 23, 2010, when The Patient Protection and Affordable Care Act became law might have “grandfathered” status. Essentially, those plans are not required to adopt the provisions of the new law. However, in some cases the insurance company has modified the plan adding provisions (100% coverage for preventive care, unlimited lifetime maximums) without jeopardizing grandfathered status. Choosing to maintain “grandfathered” plans could become financially challenging or the carriers could eliminate the plan and transfer groups to the closest similar plan. The value of maintaining “grandfathered” status needs to be reviewed on an individual basis.

The next major portion of the PPACA takes effect in 2014. As it stands now there will be individual and employer mandates. The regulations are being drafted by the various regulatory bodies involved. Ultimately it means the analysis and selection process for medical benefits will change. In the meantime, try following this process and imagine swimming with Nemo.


- Colleen has over 20 years of experience in the insurance industry. Her practice, based in Lafayette, focuses on individuals and small to mid-sized businesses, providing insurance and employee benefits. She is a current member of the board for the local health underwriters (GGAHU) and a member of the local insurance and financial advisors association (NAIFA). ccallahan@callahaninsurance.com

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