An affordable, effective health care plan is a major incentive for attracting and retaining skilled employees, regardless of a company’s size. But contractors often struggle to find good health care plans at affordable rates. This is especially true for companies with less than 20 employees.There are several reasons for this. First, health care in the United States today is expensive. According to a March 2005 article at Entrepreneur.com, health insurance premiums have risen about 60 percent since 2001.
Census data in 2003 showed 45 million Americans were uninsured!. And a large portion of these uninsured workers were employed by small businesses. The study also revealed that in 2005, the average cost of single coverage was $335 per month, while family coverage cost around $907 per month across all professions.
Making the choice
Besides price, the biggest challenge many companies face in choosing a health care package is finding a plan that is a good fit for their specific requirements. There is no simple answer; premiums change every year, the employee co-pay often changes and state and federal rules can affect costs and coverage unpredictably.
At first glance, health care plans can be an alphabet soup of choices. But it’s important to understand the differences among plans so you can make an informed decision.
Several types of health care plans have been around for awhile. Traditional health care plans – also known as indemnity coverage – have the advantage of being flexible. They allow policy holders to visit any doctor they choose and receive any treatment covered by the policy. Usually a member of this plan can go to a specialist without a referral, whether the insurance company considers the visit necessary or not.
The disadvantage of these plans is cost. Since there are few oversights or cost-saving measures associated with traditional plans, premiums tend to be higher than other types of plans. Traditional plans also have higher out-of-pocket expenses and require high deductibles and a co-insurance setup in which the provider pays the majority of the bill, but the insured pays 5, 10 or 20 percent of each charge.
The first alternative to traditional insurance was the health maintenance organization, a plan that is recognizable to most Americans. HMOs work through a network of doctors and hospitals as a way to cut costs. This grouping of resources makes HMOs the plans with the lowest costs, but with the least amount of flexibility.
HMO members are given a list of primary care physicians who perform basic checkups and then refer the patient to other specialists. Visits to nonparticipating doctors or hospitals require the HMO member to pay for their own medical costs. This also means employees who use a physician outside the network have to switch doctors when starting the plan, or pay the full cost of the medical visit.
One of the most popular health plans available is the preferred provider organization. A PPO is a collection of physicians and hospitals that agree to provide medical care to PPO members at reduced costs. This is a way to limit costs to members without the restrictions of the HMO.
PPOs are similar to traditional health care plans. But unlike traditional plans, PPOs have two different levels of coverage depending on the providers used. Visits within a network require a low deductible and little or no co-insurance. Visits outside of this network require higher payments. This is designed to encourage PPO members to use specific physicians and hospitals.
While PPOs have the highest enrollment, they also have some of the highest premiums. In 2005, the average annual premium for single coverage in construction was $3,933, and family coverage was $10,301. The premium for single coverage from an HMO was $3,619, and family coverage was $10,994.
The point of service plan, or POS, is also known as an open-ended HMO because it combines the elements of both HMOs and PPOs. Like the HMO, members choose a primary care physician who provides referrals when needed. Members are free to visit out-of-network providers if they choose, with or without a referral, but they may also pay higher fees. These plans are popular because they have the savings of the HMO but still provide coverage if the member wants to choose a specific physician. POS plans usually have average single coverage costs, but offer savings with family plans. POS plans average $3,666 for annual single coverage but were the least expensive of all the plans with their $9,911 family coverage.
Help is available
“For certain insurance-related actions, such as unemployment claims, insurance payments and tax payments, the PEO assumes the role traditionally taken by an employer,” says Edie Clark, spokeswoman for the National Association of Professional Employer Organizations. “The IRS would look to the PEO if there was an issue with any kind of payment of social security or taxes. The PEO business client deals with the day-to-day activity such as paying the employee’s expenses when they travel. The PEO is like a human resources department in terms of its services.”
Once a company contracts with a PEO, the two become co-employers of the PEO client’s work site employees. PEOs do not employ the client’s workers in the traditional sense, but take over the responsibility for the firm’s employment operations such as human resources management, health insurance, payroll, employee tax compliance and workers compensation and claims management. The firm retains the management of its business operations and products.
According to NAPEO, 2 million to 3 million Americans are currently co-employed in a PEO arrangement. The average company that has a PEO agreement employs about 17 people. PEOs operate in all 50 states, although the licensing, registration and regulation of PEOs may differ from state to state.
There are two things you must understand about a PEO: First, they do not actually sell health insurance. The PEO offers health plans to its business clients through its arrangements with insurance carriers, and often these plans are similar to those offered by Fortune 500 companies. Second, many PEOs have concerns about working with high-risk industries such as construction firms. It will take a bit of research to find out which ones are friendly toward construction firms.
How to find health care
The most important step to finding the best health care for your small firm is to do proper research. Contact Crystal Pickering at National PEO 480-429-8098 to have all your questions answered. She will help you pick the plan that is right for you.