How to Buy Health Insurance for Your Employees

To offer health insurance or not to offer health insurance− it’s a decision small business owners face the minute they take on employees. And it’s a decision they shouldn’t take lightly.

Why? Health insurance generally attracts workers, keeps them around, and boosts morale and productivity.

“Companies who do not offer health insurance to their employees are at a competitive disadvantage in recruiting, while absenteeism and productivity issues will surely arise,” says Jamie Zelewicz, assistant vice president of Wells Fargo Insurance Services of Ohio, the Columbus Chamber’s health insurance partner.

About 50 percent of small businesses currently offer health insurance, he says. However, in light of recent health care reform, all companies with more than 50 employees will be required to offer coverage (or pay a penalty) beginning in 2014.

When determining which insurer and products are right for you, we hope you find the steps outlined in this how-to guide useful.

1. Talk to your employees

Before selecting a health plan, survey your employees to find out what coverage they consider particularly important, such as deductive and co-payment levels, preventative care, or dental and vision coverage, says John Charlton, communications director for the Ohio Department of Insurance.

2. Work with a specialized agent

“Before purchasing any insurance policy, interview several licensed insurance agents specializing in the health insurance needs of small businesses,” Charlton says.

It’s important for companies to partner with an independent broker who can access all carriers in the insurance market  to negotiate the best deal on behalf of the company, Zelewicz says.

“Additionally, a company should select a broker who provides value-added services to the company and employees,” he continues. “With health care reform changing the industry, a broker who can lead a company through the complex changes is a necessary business partner.”

3. Know what influences the cost of small group coverage

The range of premium rates an insurer can charge a small business are typically set by state law for employers offering plans with the same benefits design and who have similar “case characteristics,” Charlton says.

“Factors impacting price include the overall age of the group of employees, the male to female ratio, company industry, zip code, health conditions, company size, and plan selection,” Zelewicz says.

4. Shop Around

Compare the costs of equivalent coverage from several insurers to ensure you are getting the best deal possible.

“I see premiums as low as $70 per month for employee coverage and as high as $3,000 per month,” Zelewicz says. “But overall, I think the national average is about $400 per month for single coverage and $1,200 per month for family coverage. In Columbus, we’re slightly below the national average.”

Small business owners should focus on purchasing a plan with the best overall value.

“While premium is important, the bottom line decision should factor in the total cost of using the plan,” Zelewicz says. “Therefore, selecting a strong insurance carrier with a vast network and strong negotiated discounts is essential. Also, the type of plan is crucial in estimating annual expenses. For some, a health savings account, where all services apply to a high deductible, may be the best solution.

“For others, copays for office visits and prescription drugs are a better fit. Just because something works for one person doesn’t mean it’s the best choice for everyone. When possible, a business owner should estimate their total annual expenses and select a carrier and plan based on the total cash outlay of premium, discounts, and cost-share responsibility.”

Additionally, Charlton suggests asking an insurer how its premiums have increased over the last five years.

In the Columbus market, the most popular plans for small businesses offer a $1,000 to $2,000 deductible and HSAs are gaining traction to offset the rising cost of health insurance, Zelewicz says.

5. Consider your contribution

A business owner must strike a delicate balance between managing a budget and remaining competitive.

“It’s important for companies to contribute enough to encourage healthy employees to participate, but not too much to attract spouses who may have access to coverage through their own employer,” Zelewicz says. “If a company doesn’t contribute enough, they may run into participation issues and ‘adverse selection,’ which means that only the high risk utilizers will enroll. This will lead to higher-than-average renewals. ”

Insurance companies require that a company pay at least 50 percent of the cost for employee-only coverage. Contributing to the cost of dependent coverage is optional.

6. Don’t forget to do your homework

In other words, don’t take an agent, broker, or insurer at their word.

Confirm with the Ohio Department of Insurance that an agent or broker is licensed. The department’s website is Insurance.ohio.gov; it’s consumer hotline is 800-686-1526.

Also, the Better Business Bureau recommends checking out an insurer’s BBB Reliability Report online at BBB.org. The reports are free and will tell you how many complaints the business has received, whether government actions have been brought against the business, as well as the BBB’s overall rating.