In today’s market of employee benefits, there are still multiple vehicles in which you can provide employer sponsored health insurance. The group health insurance industry both here in Indiana and the rest of the country have been impacted by the Affordable Care Act. There has been some positives impacts and some negative. For now, we still have a variety of options for any company to look at.
The first option and still the most common option, is a fully insured group health plan. Under this arrangement, there is a total premium and that is all the company & employees are responsible for. Under the ACA, there is no more underwriting for companies that have less than 50 employees here in Indiana. The rates are determined by the age of employees, geographical location of the company, type of plan design, and which carrier you use. Your company can be extremely healthy and will pay the same as a group that is unhealthy. There is still some competition in the small group fully insured market. The amount of companies offering small group products for Indiana, is less than 5.
If your company has over 50 employees, even if the majority of them are part time, you are eligible for underwriting. A group then must answer medical questions on their employee applications or pull claims data. Then the insurance carrier will underwrite the risk of your employees. Once risk is assessed, then a risk factor will be determined and that will impact your premiums. This can be a good thing for groups that have low risk, but a negative thing for groups with high risk. The other issue is it can take time for employees to complete applications when they are answering medical questions.
Partial Self Funded plans/ Level funded plans
When the ACA was passed, the insurance industry was concerned about guaranteed issues impacts on the small group market. The low risk groups will have a significant premium increase under an ACA plan. The industries answer has been partial self funded products that look and feel like a fully insured plan. Also called level funded. These plans are self funded so they do not have to comply with all the rules of the ACA. This opens the door to underwriting a small group, which can lead to a lower costing plan. The other potential benefit is a potential claims refund. On a self funded plan, underwriters will project what your expected claims are going to be. Then on the level plan, a portion of the monthly cost will go towards funding those claims. If your claims for the year are less than expected, then you may get a claims refund back. This approach can be very successful with groups that that have large dependent participation. The premiums dollars for family coverage can add up quick, which will add to your claims fund, which creates the potential for refunds. A company that has a culture of health and wellness should also entertain this arrangement.
One important aspect of the claims funds is what is called specific stop loss insurance. It means exactly what it sounds like, STOP THE LOSSES. On the level funded plan, you may have options on specific stop losses for each member of your plan. An example, the 1st $15K in claims comes out of the claims fund, then after that, the reinsurance pays the rest. If you have $100K in your claims fund, now you have $85K. The specific stop loss, is one of the most important aspects of the level funded insurance contract.
Claims fund refund
Every carrier treats the refund a bit different. Some carriers will give 100% of the refund back, others up to 2/3rds and some even less. These are the details that have to be address when entertaining this insurance plan.
Indiana has more carrier competition in the level funded market, than in the fully insured market. The reason for this is because of underwriting. The carriers are able to assess risk and decline to accept the risk. The approach is sophisticated so you should have a broker that you can trust.
Preferred Employer Organizations (PEO) is the another option for the group health insurance. This is a co arrangement with your company and a company that will take over all aspects of HR and accounting. Under this arrangement, your company agrees to list your employees under a larger group and lease them back to your company. By joining the larger group, this can create insurance premium reductions, Shifting HR responsibility, limiting risk for compliance along with having access to a larger benefit offering.
The PEO is not a new concept by any means, but the health insurance companies started to embrace that model after the ACA was put in place. Again this option creates the ability to underwriting the group health insurance, which can create savings. Another positive aspect of the PEO is shifting all reporting and compliance to the PEO company. This has been a popular idea as we fully understand the scope of the ACA reporting requirements.
For Indiana, we have a handful of PEO plans variable. Some of the PEO companies have even embraced the broker community for distribution channels. Not all PEO’s are the same. We have national PEO’s and then we have local PEO’s. There are benefits to both of them. One thing is certain you want to make sure the PEO you are looking at is taking on all the liability of the ACA reporting. So far we have only found one PEO that will do that.
Companies that may benefit from PEO arrangement:
The reality is a PEO can have significant admin fees. These costs can be anywhere from $600-$1,500 per employee. The companies that could benefit are the ones that do not have an HR infrastructure. A company that has multiple locations, but has no time to put in the right HR services. These type of situations can lead to the PEO being the best option. It’s not the lowest costing option, but the one that takes the least amount of ownerships time. There has been a need for all the services the PEO is offering to make the admin fee worth it. There are very few companies that will negotiate the admin fee, we have found one.
Another move by the health insurance industry, was to create association plans. These are not the type of association plans of the past, these association plans allowed for the insurance company to underwrite the health insurance. For Indiana, we have the national association of manufacturing. If you qualified to join the association, then you could take your group health insurance to underwriting. At first companies had great interest in the association plans in an attempt to lower their health insurance costs. What was realized very quickly, some of these associations had high risk which led to even higher rates than ACA group plans. The association plans should not be completely dismissed as some companies could benefit from the health savings along with being a part of the association.
HMO Come back
HMO’s are now making a comeback on all forms of health insurance. At one time, a HMO was viewed as a very negative health insurance arrangement. That is starting to change because of the cost savings they can bring to a company. In Indiana, we have hospital groups form their own HMO insurance products for large group, and now they are offering these plans to small groups. The HMO can create savings because of their narrow network and the way they reimburse medical providers.
The narrow networks are made up of doctors that are willing to except less in reimbursement with the change growing their practice with more patients. Today’s HMO are putting a large emphasize on care coordinators. This is where a member may have a serious condition and a coordinator reaches out to coordinate all the members care. This should lead to a better outcome of treatment, which leads to less cost. The HMO does not use the fee for service schedules to pay doctors. The doctor is paid the same amount no matter the amount of treatments the member receives.
The group hmo is another option that employers should look at. This can bring significant saving in premiums, but employees may have to switch doctors. The switching doctors can be a difficult because most people do not want to be told where they can receive care. If your company is debated on dropping coverage or need to reduce costs, the HMO may be the best option.
Accountable Care Organizations (ACO), this is a new concept introduced under the ACA. Under this arrangements, medical providers are rewarded for positive treatment outcomes. Think about it, who would not want to use a plan, where the doctor is paid on performance. What a concept!
The ACO has been slow to develop because of the medical community. Since the ACO reduces costs, that leads to a reduction in revenues. Many medical groups have built their practice on the fee for service schedules, so shifting to a ACO model, could be cost prohibitive.
This may be one of the best features of the ACA because it addresses the actual cost of care. Once these networks are established, group products will follow. At that time, I think everyone in Indiana should look at an ACO network.
Health Insurance through SHOP
SHOP, is the group health insurance option that can be purchased through the marketplace. The reason to go to the SHOP, is if the employer is going to qualify for tax credits. The way the tax works is you are eligible for up to 50% of what you contribute towards the employee’s premiums. That 50% is on a sliding scale that is impacted by what your average employees salary is. The SHOP has not had a lot of success in Indiana. For 2017, there are about 150 employees insured through the shop. There are a lot of reasons why we have not seen greater success. A few of the reasons are the network on the SHOP is limited vs the off the exchange plan and they cost the same amount. Why would an owner choose a plan that cost the same but has less options. Unless they are not understanding what they are buying. Another issue, why would an employer want to deal with the marketplace until is has proven itself and smooth running.
Shifting Group to Individual
This are options for many small Indiana companies. Certain small companies can benefit from this approach. If you are not looking to grow your company, if your employees qualify for large tax credits, if you have low turnover & if the individual plans have network access, then this can work. Indiana companies with less than 10 lives have taken advantage of this option and some have saved large amounts of money. The problem with this approach now, tax credits are smaller, smaller drug list, and larger out of pockets. It can still be an option but know all the facts so you can make an informed decision.