We’ve watched many small companies this year shoulder hefty health benefits price increases of 10%-15%. We fully expect to see this trend to continue for companies preparing to renew before the end of the year. With such large potential rate hikes on the horizon, now is the time to start thinking about what’s ahead. If you’re unsure of what’s best for your small company, examine the opportunities available.
Contrary to what some may expect, small groups have a variety of benefits options. Between traditional plans, level-funded plans, and captive plans, small groups can select the best option that works within the company’s budget while delivering the best possible care to employees.
Here are some of the advantages and disadvantages you’ll find in each plan type:
Traditional fully-insured plans are common among small groups, but they aren’t always the best option. Most plan providers, like UPMC, have a handful of plans that they lump all of their customers into, regardless of whether or not the plan is actually a good fit.
Advantages to Traditional Plans for Small Groups
The biggest advantages to traditional plans include:
- Better insight into plan costs
- Fewer cost variances from month-to-month
- The insurance company assumes all of the risk
Disadvantages to Traditional Plans For Small Groups
If you have a fully-insured plan, your advisor has less incentive to work on your behalf. If the insurance company predicts an average rate increase from one year to the next, your advisor may simply recommend a renewal instead of pursuing a new option that could lower your costs. With a fully-insured plan, you may encounter numerous other disadvantages, including:
- Plan rates set by the insurance company
- Few options for adding Health Savings Accounts (HSAs)
- Few options for adding Health Reimbursement Agreements (HRAs)
Level-funded plans combine traditional preferred provider organizations (PPO) plans with elements of reference-based pricing. With the PPO, employees are still locked into a health network, but the reference-based pricing grants the company greater transparency into health facilities and care outcomes to make better benefits decisions. Level funded plans are available to groups with as few as 10 people.
Advantages to Level Funded Plans
Some of the advantages of a level-funded plan include:
- Lower annual costs for your company and its employees
- Lower co-pays and deductibles
- Access to higher-quality care from better facilities, doctors, and specialists
Disadvantages of Level Funded Plans
Some of the disadvantages of level-funded plans include:
- Your company has more responsibility in making plan decisions
- The additional plan details can appear complicated to employees, requiring greater support from your internal team and advisor
In a captive plan, your company splits the risk with other businesses. When multiple businesses join together, your company can potentially reduce its annual costs and negotiate for better care and facilities. Businesses with as few as 25 employees can join a captive.
Advantages of Joining a Captive Coalition
Advantages of a captive coalition include:
- Potentially reduced risk
- Potentially lower prices
- Greater strength in negotiations
- Opportunities for a fully self-funded plan (assuming the captive reaches 100 or more total employees)
Disadvantages of Joining a Captive Coalition
The disadvantages of joining a captive coalition include:
- High claimants at another company could financially hurt you and your employees
- You have less control over the plan details since your company is no longer making decisions for itself
Know Your Options
Leaders at small companies often feel locked into traditional fully-insured health care plans, but they have more options than ever before. By exploring different plans, these leaders can pursue the best choice for their company and its employees. If you have questions about plan details, contact us.