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How to choose an agent or broker for group health insurance
by Heather Williams
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| Employee health insurance is by far the most popular benefit offered by U.S. employers, but buying it - especially for small firms - can be a bewildering experience. |
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| Insurance agents and brokers can streamline your health insurance purchase and become your ally if you run into insurance problems down the road. Before you put your business in an agent's hands, it makes sense to arm yourself with knowledge of the health insurance marketplace, and to find an agent or broker who is the right match for your business. |
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Getting started
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| Do your homework before you set foot inside an insurance agency. First, identify what you and your employees want in a health plan. Write it down. This list of features becomes your "summary plan description," which you'll ultimately give to agents and brokers in exchange for price quotes. |
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| The terms "agent" and "broker" are often used interchangeably, but is there a difference? Technically, an agent sells insurance from one insurance company, while brokers represent many carriers. An "independent agent" is unaffiliated with any particular insurer, and represents a range of companies. |
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| When it comes to your summary plan description, "start small," suggests Jamie Amaral, national director of health care for the National Federation of Independent Businesses (NFIB). In Amaral's experience, many small businesses buy health plans that are too rich in features to be sustainable through a bad financial quarter. Although this tendency is good-hearted - most companies want to reward employees when the business thrives - taking the health plan away is hardly a good employee-relations move. |
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| To avoid that scenario, Amaral recommends starting with a list of basic features (such as rehabilitation services or mental health coverage) before branching out into potentially costly add-ons such as domestic partner coverage. |
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| In addition, you'll need to consider what percentage of the premium the company will pay, and what percentage will be the employee's responsibility. You can also choose to cover a flat amount for each employee. According to Amaral, most small businesses split the cost 60/40, meaning the employer pays 60 percent of the premium and the employee contributes 40 percent. Of course, the split can vary. Some employers pay the full premium, while others may contribute only 10 percent. |
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| "Know what you want to cover, and whether you can afford it" |
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"Know what you want to cover, and whether you can afford it," advises Bob Rakowski, company' and now a small-business counselor with the Service Corps of Retired Executives (SCORE), a service of the U.S. Small Business Administration. |
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| "You sit down and make hard choices about what you want to cover, and who pays for the premium, acknowledging that each feature has a cost. For example, you might want to cover eating disorders, or drug and alcohol rehabilitation, but recognize that those may drive your premium beyond what you can afford." |
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| If you're just starting out and only have a few employees, you might even consider foregoing a full health plan such as an HMO or PPO in favor of a less-expensive, albeit temporary, route. Once the business has expanded and if employees demand it, you can switch to a traditional full-coverage plan. |
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| "Sometimes jumping into a full-blown plan with an expensive premium is not a good idea," especially for the smallest of the small, Amaral says. |
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| "Often you can cobble together different coverage, such as cancer insurance, an indemnity plan, or critical-illness policies, to get almost full coverage at a lower price to the business. That's not always the best option, but depending on your needs, it could work," says Amaral. "Let's say all of your employees are over 50 and unlikely to have children. Should you pay for maternity coverage? You might have to with a regular health plan, depending on the law in your state, unless you can put together an alternative plan." |
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Understand your options
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| Armed with your summary plan description, go online to find a ballpark premium. At employee benefits sites such as Firstdoor.com, or insurance quoting sites like eHealthinsurance.com and Quotesmith.com, you can find a range of prices for the policy you want. If it's not within your budget, consider eliminating some items from your summary plan description. |
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| Shopping online vs. using an agent There's no price difference between buying group health insurance through an agent and buying it online. An agent provides you with more support if you have a claims problem, but online shopping may be right for some. And Web sites can provide useful comparative rate quotes if you're in the shopping-around stage. |
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| Remember, though, that online quoting sites don't take into account the health status of your group, so their figures are not likely to reflect your final premium. Still, it helps to know what premium costs you're facing. |
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| "A lot of employers waste time because once they start talking price with an agent, the small businessperson is blown away," says Amaral. "Understanding the range of options can really help. I'm not recommending buying online necessarily, but shopping the quoting services gives small employers an idea of what they can afford. Also, some agents ignore low-commission products and might not recommend them initially. You can counter-offer the agent's initial quote if you know the general price range." |
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