Buying health insurance for your employees used to be a fairly simple process-you didn't have a lot of choices, so there weren't many ways to make mistakes. Those days are gone. Today, the purchasing process is complex, with a dizzying array of coverage and pricing options that can confuse even the savviest business owner. And doing it wrong can cost you dearly-not only in cash, but also in lost productivity and employee morale.
David Mair, president of Applied Insurance Services Inc., a commercial insurance agency in Lake Mary, Florida, describes some of the most common mistakes business owners make when buying health insurance, along with how to avoid them:
1. Buying on price alone: Despite the fact that insurance is one of the most heavily regulated industries, coverage details and pricing vary widely. When evaluating price, consider the policy's total value; the lowest price doesn't necessarily mean the best deal.
2. Failing to fully research the level of service the insurer will provide: The coverage may look good on paper, and the price might seem reasonable, but you need to make sure the carrier pays claims promptly, doesn't deny or delay excessively and provides accurate service. Mair says the fastest and easiest way to determine the level of service a carrier provides is to ask a few doctors. "I advise clients to call the doctors they currently use-[doctors] they are familiar with-and ask them what they think of the service and efficiency of the insurance company," he says. "You'll get a very accurate impression as to what your experience is going to be. If the insurance company is looking after the doctors, they're going to look after your employees also."
3. Not taking advantage of the available tax breaks: A consultation with your accountant or tax advisor should definitely be part of your insurance-shopping process. For example, you and your employees may be able to pay insurance premiums with pretax dollars, which translates to tremendous savings all around.
4. Buying coverage employees don't want or need: Just because the policy looks good to you doesn't mean your employees will feel the same way. Before you begin shopping, get input from your staff about what's important to them. Are they willing to pay higher premiums for greater coverage, or would they prefer higher deductibles or co-pays to keep premiums down? Do they want to choose their own doctors, or are they willing to use an existing network? Do they need coverage for dependents? Mair recommends choosing a cafeteria-style plan so employees can choose the coverage that's most appropriate for them.
5. Failing to consider the cost of dependent coverage: It's not enough to make dependent coverage available, Mair says; it must also be affordable.
6. Choosing the wrong agent: You need an agent who will do more than just sell you a policy. "Select an agent who will service your account properly and give you the support you need when you have a problem," Mair advises.
7. Buying coverage from a financially troubled company: Mair recommends that you check companies' ratings with analysts such as A.M. Best and only buy from those with a rating of A minus or better.
Mair says it's very important to remember that health insurance is a key part of your overall compensation program, and, to be effective, it needs to have significant value for your employees. Do your homework and learn from your mistakes as well as those of others, and you'll put together an insurance benefit package that will increase productivity, improve morale and assist with employee retention.
- Applied Insurance Services Inc., www.insuranceflorida.com