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Shopping for employee health coverage? Here's what to consider

A column about keeping your practice in good health

By Victoria Stagg Elliottis a longtime staff member. She covered practice management issues and wrote the "Practice Management" column from 2009 to 2013. She also covered public health and science from 2000 to 2009. Posted Sept. 27, 2010.

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Health system reform has added a few new wrinkles to shopping for health insurance for the staff of your medical practice.

"There are implications that we have never had before, even if you opt to stay with the same carrier," said Carl Kleimann, president of Odyssey OneSource of Euless, Texas, a human resources outsourcing firm that provides services to practices with six to 400 employees.

Physician practices, like many small businesses, have long been saddled with higher per-employee health insurance premium costs than larger companies pay. The disparity promises to become even larger as many insurers have announced small group plan rate increases or have left the market segment completely.

Most medical practices continue to include health coverage in employee benefit packages. About 91% of small to midsize medical practices offer employees health insurance, according to the Professional Assn. of Health Care Office Management.

Some aspects of health system reform legislation may equalize the playing field and make it easier and less expensive for small businesses to provide insurance coverage to workers. Though many components of the legislation do not come into play until 2014, there are some factors that practices have to weigh immediately.

For example, staying with the same plan the practice had on March 23, when President Obama signed the Patient Protection and Affordable Care Act, allows the plan to maintain a "grandfathered" status. That means as an employer, the practice would be exempt from some health reform rules, such as the mandate to fully cover certain preventive services and report on wellness initiatives to the Dept. of Health and Human Services.

But grandfathered status might be put in jeopardy if a practice switches insurers or makes significant changes to its plan, such as cutting benefits, raising co-pays and deductibles or increasing employees' share of premium costs. With so much uncertainty, experts said some practices may want to stick with their plans because they are known quantities. Insurers, however, may ultimately reduce the availability of grandfathered plans.

Deciding whether to stick with a grandfathered plan or go with a new plan "is an important conversation to have," said Frank Buster, a broker with the Robert H. Clarkson Insurance Agency in Louisville, Ky., and the endorsed agent for the Kentucky Medical Assn. "Right now, you need to know that making changes changes your position."

Much of the financial data practices need for an informed decision are not yet available because the long-term price impact of health reform remains unclear. For example, there is significant debate about whether grandfathered plans will truly be less expensive over the long term, since most of the effects of maintaining or losing grandfathered status will probably not become apparent until 2014.

The impact of a tax credit for small businesses that pay at least half of employee premiums needs to be taken into account. In 2011, practices that have a staff of fewer than 25 full-time-equivalents who earn an average wage of less than $50,000 can take a tax credit of up to 35% of their share of the premiums. A physician-owner's salary is not worked into these calculations, but the wages of physician employees are.

"When you take doctors' earnings completely out of the equation, a lot of practices do qualify for these tax credits, and I think they should be taken into consideration," Kleimann said.

Additionally, practices should consider the implications of health reform that went into effect this year, such as the bans on lifetime limits and rescissions. Insurers and brokers can help weigh the options.

Reform has changed some factors of health insurance shopping, but many strategies for lowering insurance costs still apply, especially if a practice is not concerned about keeping a grandfathered plan.

Experts say the first step is to approach brokers and insurers with a census of the staff and any family members expected to be covered. This should include the ages and genders of all potential beneficiaries, although information required will vary from state to state. The data need to include employees' children 26 and younger, but should not include any more information about health status than is required.

"Make sure the employees only list what is absolutely necessary. Too much and unnecessary info may increase your premiums," said John Friedel, administrator of Georgia Anesthesiologists in Marietta, Ga. The group has 72 employees, including 61 anesthesiologists, nurse anesthetists and physician assistants.

Many small business organizations and medical societies may be a source of discounted health insurance. For instance, the American Medical Association offers medical practices coverage through its AMA Insurance Agency.

Insurers and brokers should come back with prices for several plans, and the next step is to use this information to get prices down even further. For instance, Friedel just signed a contract for the practice's 2011 plan after using a broker to help obtain numerous offers.

"We don't accept anyone's first offer," he said. "We always go back to our current plan and ask them to rebid and see if we can squeeze out any more reductions. Sometimes we go back three times."

Varying deductibles and co-pays or introducing some form of health reimbursement account may be used in the negotiation. Experts suggest talking to employees first before altering plans significantly, particularly if changes will result in a loss of benefits.

"The most common mistake that we see in buying health insurance is designing the plan around the needs and wants and desires of the business owner rather than the needs and wants and desires of the employees, and making changes that affect employees without communicating the reasons why," Kleimann said.

Victoria Stagg Elliott is a longtime staff member. She covered practice management issues and wrote the "Practice Management" column from 2009 to 2013. She also covered public health and science from 2000 to 2009.

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