Electronic enrollment is the foundation for a host of e-services. While they share the same foundation, electronic enrollment means different things to employers and employees.

Employee Benefits

Your staff will benefit from online:

• Claims access
• ID card requests
• Validation of benefits
• Enrollment (ending those tedious handwritten applications)
• Smart phone apps (for access to plan information and documents)

All of these developments are welcome in a market where the healthcare products and processes have become increasingly complex.

Employer Benefits

You should benefit enormously from enhanced employee satisfaction and to a larger extent, streamlined administration. Here’s what you can expect:

• Employee enrollment via a universal electronic application
• Automated reports to monitor and reconcile membership transactions
• Expedited HRA claims processing prior to billing
• COBRA and Continuation tracking
• Electronic feed of employee benefit election into your payroll system

Sign Me Up Today!

Well, not so fast. While all or most of these features and benefits are available, integration and rollout is still in its infancy. Let me explain.

Insurance companies use different IT platforms for different size businesses. The line of demarcation typically is set at 100 covered employees. If you are at or above 100, then most carriers will accept and process membership data via electronic upload. This is true electronic enrollment.

If you’re below 100, then you’ll benefit from roughly two-thirds of the process. You’ll probably still have your membership data keyed in manually (no matter how the data is submitted).

Our ultimate goal is to streamline the process using a universal online application for all enrollment transactions. This creates an electronic document that SBIS will use to send membership data directly to the carriers and generate pertinent reports. You’ll have access to a slew of new reports and have everything the 100+ market does except electronic upload of data.

Making the Best of Today’s IT

Unfortunately, employee benefits – specifically medical coverage – lags when it comes to IT conveniences. This is largely due to the complex regulatory environment, privacy concerns, and the increasing complexity of medical plan designs.

We are at the beginning of a revolution in administration where, in the end, the norm will become something akin to what we have with online banking services today. Until then, our mission is to apply all the available technology to help you, your staff, and SBIS improve both effectiveness and accountability.

Impact of ACA

With the passage of the Affordable Care Act (ACA), we were told that competition would increase which would, in turn, lead to lowered rates and more options. Well, two years later, the results don’t follow the promise. However, with ACA’s passage, we have seen some noticeable changes:

• We see a concentration of Health plans across the country.  In general, fewer plans leads to less competition, which usually leads to higher rates.
• Premiums haven’t gone down.  In fact, they’ve gone up in every state except one.  The increase in rates isn’t a minor jump either. The average increase for the 37 states that make this data available is 20%, with a high of 68% in Washington and a low of 5% in Massachusetts.  One state, Utah, had the only decrease of all 37 states coming in at a 17% decrease.

How Prior Approval Relates to Premiums

The most interesting aspect of the premium increases is how it relates to the “Prior Approval” portion of ACA. Through a federal subsidy, states were encouraged to give their Insurance Commissioners the ability to review and approve, or deny, any rate increases from Health Plans.

Prior to the ACA passage, 43 states already had some measure of reviewing rate increases and 3 states required nothing at all. Of the 37 that provide data, 16 states had the “file and use” review which basically means that the increases have to be submitted to the Commissioner of their state, but they cannot turn them down.  18 states do have a Prior Approval process in place, but even that did little to nothing to stem the increases since the passage.

Here are some stats about the approval process and the states:

• Of the 18 states that require Prior approval, the average increase was 20% with a high of 68% in the state of Washington.
• Of the 16 states that institute the “file and use” method, the average increase was 21% with a high of 50% in the state of Tennessee to a low of -17% in Utah.
• 3 of the 37 states that make data available do not require any approval.  These states averaged a 16% increase with a high of 22% in Georgia.

Bottom Line

So for now, the ACA does not support the premise that it will provide for more competition thereby reducing rates. The popular provision of requiring Prior Approval has also proved to be meaningless as the states that do not require any approval have a lower on average increase and the state that has the highest increase, Washington at 68%, is a prior approval state.

Only time will tell if the provisions of the Act will continue to result in these increases or will they change and go down.  But, given the cost of healthcare continues to rise it is probably a safe bet that it will not go down.

That’s why we started SBIS Referral Rewards. Here’s how it works:

• For every potential business customer you refer, we’ll give you a Starbuck’s gift card.
• For every referral who becomes a customer, we’ll give you a gift certificate to Morton’s (or any other restaurant you prefer).
• There’s no limit on how many referrals you can make.

It’s that simple. You fill up on coffee and steak and we get the opportunity to offer our services. Please contact us if you have any questions at all.

Thanks in advance for your referrals. Now go check your address book…

While participation audits don’t affect premiums, they can determine whether you’ll be offered renewal.  Note that these are different than Workers Compensation audits.

What triggers an audit?

There are many triggers and they vary by carrier. The top four we see are:

1. Enrollment of fewer than 2 employees.
2. Groups with less than 10 enrollees who have a Medicare-eligible participant or dependent spouse.
3. Significant changes in enrollment – usually plus or minus 30% in the participant count.
4. More participants located away from headquarters than when the contract was written.

What are participation requirements?

All carriers have participation requirements built into their contracts. In fact, when you applied for group coverage, your agent audited your payroll against your enrollment to ensure your group met the carrier requirement. The industry standard is 75% participation of those who are eligible.

Measuring participation varies somewhat by carrier, but in general it’s calculated as follows:

1. Take the total number of employees on your quarterly unemployment report and subtract those who are part-time and those who were terminated.
2. Next, subtract those who are enrolled as a dependent on a spouse’s employer plan.

From this number you are expected to have 75% submitting applications.

The concept is that only uninsured employees count against having 100% participation. Uninsured are those without insurance or those enrolled in non-group medical plans. Your carrier’s logic is that if you are required to pay a minimum of 50% of the single premium, then most employees would choose to be insured.

If you pass the audit…

Congratulations! Take what you’ve learned and review your participation prior every open enrollment. Better to know ahead of time if you have issues – then you can take steps to increase participation.

If you didn’t pass…

If you failed the audit, then you have a challenge on your hands. Here’s what you could be facing:

• Coverage could be terminated mid-contract (provided the carrier gave 30 days advance notice of their intent to terminate).
• You may receive a letter stating the carrier has issued a DNR (they decline to renew your contract), and your contract will terminate at its anniversary.
• The carrier may determine the contract was administered incorrectly and offer to have an open enrollment mid-contract. If the results of the open enrollment fail to satisfy the participation requirement, they will either terminate or DNR the contract.

If your contract is terminated…

If you’re terminated, the next step is to apply to another carrier (assuming you want to continue offering group coverage). At this point, it’s critical to understand how you got to this point in the first place. We know most employers want employees to participate, but occasionally can’t hit the 75% participation requirement. Here are the key factors that undermine employee participation:

• High premiums
• High deductibles
• Composite rates
• Calendar year deductibles

You should work closely with your agent to implement strategies for improving participation.

Takeaways

To successfully navigate an audit, immediately contact your agent. Make sure they review all of your documents prior to submission to the carrier. Also, take this time to review your employer and employee contribution amounts – an audit is a good time to review how your entire employee benefits package is performing. The good side of an audit is that it requires us all to focus on participation, which is the foundation for stable rates.

1. Plan Type – What type plan are you in? HMO, PPO or POS? If it’s a PPO or POS, why are you in that plan?  Many times the decision was made because a particular doctor was in-network or you wanted the ability to go outside as needed. Times change and so do networks. That doctor may now be in the HMO netowrk or the need to go out of network may not be so great. If we can get back to an HMO, it’s always a big money saver.
2. Number of Plans – How many plans do you offer? If you only offer one, this is another money saving area. By offering two, you can lower costs by offering a “Base” plan and the employees can pay the difference to purchase an “Enhanced” plan. This also has the benefit of giving your employees more options – making your benefit package more attractive.
3. Co-Pays – What are your co-pays? What do you pay when you see a physician? If we see a plan with a $5 or $10 copay, we can definitely save money by raising the co-pay.  Most plans are now written with a $20 or $30 co-pay.
4. Co-Pay for Hospital Stays – Is there a co-pay for inpatient hospital stays? If not, your plan is “too rich” and you’re leaving money on the table. Most plans now have a co-pay of $250 to $500 for each hospital confinement.
5. Deductible – Is there a deductible plan in your benefits package? A large percentage of our insureds now have a deductible plan in their benefits package. Deductible plans offer great savings yet their benefits are identical to non-deductible plans for items like doctor visits and pharmacy. Since the deductible usually only applies to hospitalization and diagnostic tests, many people in these plan will never experience the deductible.
6. HRA or HSA – Do you offer an HRA or HSA? This is similar to deductible plans in that these plans all have large deductibles, but in an HSA plan the deductible applies to all health care. The idea is if the savings in the HSA plan monthly premium are enough to pay the deductible, then the employer can help pay employee deductibles with the savings. You save more money because rarely do all employees use their full deductible.
7. Prescription Co-Pay – Check the co-pay on prescriptions. If it’s low, such as $10/$20/$35, you can save by increasing the co-pays or by putting in a deductible.
8. Turnover – Has there been alot of turnover in your list of insureds? If there has, we can re-run the average age. If it goes down, we can have the groups rates recalculated at the lower age and probably see some rate reduction. Keep in mind, this can usually only be done at renewal.
9. Plan Distribution – Like the previous note about offering two plans, the same can be said for the reverse. If you have 2 plan offerings but most of the employees are in one plan, you may get a discount by consolidating into a single plan. This makes it easier and cheaper for the company to administer.
10. Consolidate Carriers – If you offer ancillary coverage (dental, life, disability, etc.) do you have all your lines of coverage with one company? If you have dental with one company and life with another, you can save money by combining all lines with one company. This is also much easier for you to administer.

Of course, after we work through these 10 items, we dive much deeper into your specific needs. For now, take 15 minutes to review each of these to make sure you’re not leaving money behind.

Open Enrollment 101

The basics of Open Enrollment are:

• It affords employees one time each year to review their benefits and make changes where necessary.
• Changes are limited to what options the employer offers through their benefits package.
• Your Open Enrollment period is always the month preceding the day of  your benefits renewal.  So if your Group Health plan renews on September 1, then your open enrollment period is the month of August.
• Employees have the whole month to get any changes in to their benefit department prior to the renewal date.

During that month, you can change:

• Dependents – This is the time to review whether or not you need to add dependents onto your plan or take them off.  Usually this decision comes down to which employer (between the employee and their spouse) offers the most monetary contribution to the employees plan.  If the contributions from one employer changed during the year, now would be the time to move dependents from one plan to the other.   The decision can also come down to which employer offers the better benefits plan as well.
• Benefit Plans – Employees can move to a different plan during this time as well.  For example, if an employee is currently in an HMO plan but likes the freedom afforded by the PPO plan, they can move to the PPO plan at this time (provided a PPO plan is offered by their employer).  An employee may also have an ongoing condition and the benefits under one plan can be better financially for them then their current plan.

Because this only comes around once a year, it’s very important that employers communicate with their employees about their options.  You should hold staff meetings where your agent comes out to review the benefits or any changes that are happening.  It’s also important to emphasize timelines so employees know the deadlines for paperwork.

What about other benefits?

Other lines of coverage offered to employees will usually be affected by this as well.  But, most ancillary coverages (disability, life and dental) do not have an open enrollment periods.  This is very important to understand because when an employee waives out of these coverages upon their hire, the cannot just decide to come back in without some consequences.

Dental

Dental coverage may or may not have an open enrollment period.  If it does, then the employees will treat it just like their group health coverage  and they can make a change or switch plans (if more then one dental plan is offered) based on their benefit needs or on their dependents need for coverage.  It’s very important to review with your agent to see whether an open enrollment period is part of your current dental package.

Life and Disability

Most of the time these don’t come with an Open Enrollment period.  What this means to the employee is that they really need to enroll upon their initial offering unless they absolutely have no need for the coverage.

If the employee needs to enroll after their initial offering, they then become a late entrant.  Once they are a late entrant then they may be subject to waiting period or even medical underwriting which could affect their ability to obtain this coverage.

Just like dental coverage, it is extremely important to review with your agent what your late entrant provisions are.  I have found that most small business owners that offer these benefits have absolutely no idea about the late entrant provisions in their plan.

Qualifying Events

In most cases Open Enrollment will be the only time that an employee can make changes that are not considered “qualifying events”.  A qualifying event is a situation where an employee can make a change any time during the contract year.  A good example of this is marriage.  If an employee wants to add on their new spouse to the plan, this can be done any time during the year.  Another obvious example is the birth of a child.  The child will be covered upon birth, BUT it is up to the employee to provide the application for the addition within 30 days of the child’s birth.   So, if you just want to make a change just because you want to, then you have to wait until the Open Enrollment period.

Three Things You Really Should Do

1. Make sure you do an excellent job of communicating to employees about the upcoming open enrollment period and what it means to them.
2. Ensure your their employees know upon their hire whether or not any of their benefits have a late entrant provision.
3. Consider using Open Enrollment to add voluntary benefits into your benefits package.  These are benefits that the employer does not contribute to, but employees can purchase – usually much cheaper and easier than if they were to purchase them on their own.  This is an excellent way to expand your benefits offering.

2 Plans are Better than One

For most clients, we recommend that they offer two health plans.  The first we label as the “base” plan.  This is the lower cost plan of the two.  It’s the one that you’ll base your contribution on.  Most of the time this is an HMO plan that provides all the coverages your employees would need.

The second plan is always an upgrade to the first.  Most of the time I recommend a PPO plan, but that’s not always required.  You could offer a richer HMO plan to complement the “base” plan.  While the employer bases their contribution on the “base” plan, the employees who want the upgraded plan would pay the difference in the two.  This allows the employer the ability to offer more options to their employees, yet they are still keeping their costs in check.

Not just for Health insurance

We’ve used this option with dental insurance as well.  I have several clients who wanted to lower dental insurance costs.  So we put in a “base” plan that was rich on the in-network options but much less so on the out of network option.  They based their contribution on this “base” plan and the employees who were happy with the in-network dentists stayed in this plan.

For those employees who needed better out of network coverage, or just wanted more dentist selection freedom, we offered a richer out of network plan that still contained a very good in network plan.  The employees that opted for this coverage paid the difference between the two plans.

Why stop there?

If 2 plans are better than one, than three must be better then two, right?   This may not always be the case, but there are some situations where a three tier option is the best solution.

A typical scenario might be to have a HMO plan as its “base” plan and then a high deductible PPO plan as its first upgrade plan.  Then to top it off we put in a rich PPO plan for those employees that don’t like to pay the high deductible.  These type of arrangement may not be available to all groups from each insurance company.  Every insurance company’s requirements are different and some ask for a minimum number of employees before they will institute a multi option plan.

Strategy for Your Company’s First Plan

If you’re just getting ready to offer your first benefits plan, let me tell you a way it might work for you.

In the first scenario above, I mentioned offering a HMO plan as the “base” plan.  HMO’s are usually always the cheaper of the plans as they use more cost containment features.  What you might want to do is offer a HSA HMO plan as your “base” plan.  That will definitely get your costs down and still allow you to offer a good plan that will protect your employees.  Then to complement the “base” plan you would offer an upgrade to a richer HMO plan at the employees cost.  This is a great option for those employers that have lower wage employees and cannot afford much.

Review Your Plans

There are options for every client out there, it just takes a little work to find out what best suits your needs.  Take some time and look over your offerings and see if these ideas might help you out.  If you need some help, just give us a call.

What is it?

While the Annual Out of Pocket maximum has always been part of medical coverage policy limits, it’s been pretty well ignored. Up until recently, most plans didn’t involve extensive cost sharing – things like copayments, deductibles, and coinsurance. Without cost sharing, reaching the limit was fairly uncommon. Today, it’s much more important.

Why it’s so important today…

These days, policies are chock full of:

• Per Diem hospital confinement copayments
• Deductibles
• Coinsurance that range from 10% or 20% to 30% and more

Guidelines to Maximums

When comparing plans today it is critical to know the Annual Out of Pocket Maximum for each.  For starters, make sure you know if the deductible counts towards the published maximum. And remember, the higher the coinsurance, the more likely the limit can be reached.

Don’t fear a plan that has high copays, deductibles, or coinsurance so long as it has a competitive Annual Out of Pocket Maximum.  There are plenty of plans available with high levels of cost sharing that are good values. Our targets are $3,000 single / $6,000 family limits.

Takeaways

• Make sure the family maximum is no more than 2 times the single maximum.
• Target a $3,000 single, $6,000 in plan family limit.
• Check to validate that the policy deductible counts toward the published maximum.

What is Coinsurance?

Coinsurance is that percentage often illustrated as 90/10, 80/20, 70/30, etc. The first number is what the insurance company pays. The second is the insured’s responsibility. Services that are subject to the deductible will also be subject to coinsurance.

On an Evidence of Benefit (EOB), Coinsurance follows the deductible column.

How does it start?

The majority of the time it starts when the deductible is satisfied. In plans that don’t have a deductible, it commences immediately.

What does it apply to?

Just like any aspect of your coverage, coinsurance applies to approved charges. And, the same policy provisions that affect your deductible apply to your coinsurance:

• Coinsurance can be satisfied (meaning it’s not open-ended).
• It recycles on a plan year or calendar year basis depending on your group contract.
• There are different amounts for in and out of plan benefits.
• There are individual and family annual limits.
• The out of plan benefit generally involves more obligations on the part of the insured.

What if I have a BIG claim?

The fear that comes with coinsurance is typically based on a catastrophic claim. What if you had a $50,000 hospital claim? Would you be responsible for 10%, 20%, or 30% of the $50,000? The concern for an open ended financial obligation is what drives the fear surrounding coinsurance. Fortunately, the answer is no, an insured is protected from an open ended claim by their policies annual out of pocket maximum.

Takeaways

• Coinsurance is likely here to stay as it follows expenses more closely than a deductible or copayment.
• Avoid plans that place coinsurance on office visits or prescription drugs.
• 10% or 20% coinsurance is the market norm for what we would consider “good” coverage.
• Pay special attention to your annual out of pocket maximum as the only way to meet that limit is likely to be coinsurance.
• With Coinsurance, it is important not only to know the insured’s percentage (10%, 20% or 30%), but also the annual out of pocket maximum. Coinsurance will tell you the speed at which you are likely to reach that limit.

Next up…

In our final part of this series, we will address where all cost sharing provisions lead – the Annual Out of Pocket Maximum.

How Deductibles Work

A medical insurance deductible operates much like your auto insurance deductible. In each, the insured pays up to the deductible before the insurance benefit commences.  That’s why it’s called “first dollar coverage”.

Deductibles are a simple way to lower premiums and are easy to track. On your Evidence of Benefit (EOB) you’ll see Deductible as the first column following the approved charge. Since a deductible is “first dollar coverage” it certainly follows that it’s the first column on your EOB.

Deductible Terminology Defined

• Satisfied – Refers to meeting your deductible.  For example, if you have a $1,000 deductible and you have claims that equal or exceed $1,000, you’ve satisfied your deductible. Once your EOB reflects approved charges applied to the deductible column in an amount equal to the deductible, the deductible is “satisfied”. From this point forward additional charges will not be subject to the deductible.
• Plan vs. Calendar Year – Your deductible is counted on a 12 month cycle. The question is when does the counting begin and end? Under a Plan Year cycle, the deductible recycles when your plan renews. Under a Calendar Year, the deductible recycles on January 1st. Most plans today are Plan Year. In fact, SBIS highly advises a Plan Year cycle since it is easier to track and coincides with open enrollment.
• Approved Charges – The amount you are bill is not the amount that counts toward your deductible. The approved amount is the amount that is credited toward your deductible. Expenses beyond the approved amount are avoidable when using a Participating Provider.
• In / Out of Plan – Typically the out of plan deductible is twice the in plan deductible. It’s wise to make sure that the deductible referenced on your EOB is correct.
• Single / Family – The single deductible applies to each individual on the policy. The family deductible is typically limited to two or three times the single deductible. Once the family deductible is “satisfied” additional charges are not subject to the deductible.

Takeaways

• The deductible is making a strong comeback in medical insurance.
• It’s fairly simple, easy to calculate, and something you should double-check on your EOB.
• Adjusting the deductible a simple and effective way to reduce premiums.

Coming up next…

The next part in our series addresses coinsurance, that nuisance percentage that often follows the deductible. Not to worry, it’s a concept everyone struggles with and you will soon understand.