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Many businesses provide medical insurance as a benefit to attract and retain their employees.  This affords the employees the opportunity to utilize preventative care services and to maintain their health as well as protect themselves and their families against minor and major illnesses. 

The health insurance industry is always evolving.  Over the years the traditional types of plans (HMO and PPO) have changed and often look very similar to each other when comparing the benefits.  And the insurance companies are constantly introducing innovative products including high deductible plans that may be used in conjunction with tax-advantaged Health Savings Accounts (HSAs), HMOs with national networks, and plans with wellness components built-in providing financial incentives to receive health assessments.

When evaluating the cost of a health plan, there are three major components to consider. The first is the premium.  Most people only focus on the premium because the other two factors are not as apparent, but should be considered along with the premium.  The second component are the costs associated with using the plan.  High deductible plans are less expensive, but these will require the member (patient) to pay the “first dollar” of almost every every service and for prescription medications until the deductible is met.  For a person who utilizes medical services infrequently, this may be a good option.  But for someone who utilizes medical care frequently, the total cost (premium + cost of service) should be a more important indicator as to whether the plan is cost effective.  The third factor is the drug formulary.  Every insurance company (carrier) has a drug formulary and these are usually three-tier plans segregating generics, preferred brand name drugs, and non-preferred brand name drugs.  Some carriers will have a lower premium relative to the other carriers because most of the brand name drugs are in the non-preferred category  requiring higher copays.  Plans are not always what they seem on the surface.

Impact of Claims on Large Groups
Claims directly impact larger companies.  The strategy for larger companies should be to implement programs to minimize claims.  For example, a person with an unidentified high blood pressure condition could continue living his/her life normally until one day the condition becomes severe enough requiring an emergency surgery, a hospital stay, and loss of work. If the condition was identified early, the emergency may have been prevented with medication.  There are available programs to identify chronic diseases through health assessments and predictive modeling.  The objective is to minimize the large, catastrophic claims by identifying the employees/dependents with chronic conditions before the conditions become critical.

Assessment Questions

  • Do you distribute the mandatory HIPAA notification form to new hires?  Do you know what HIPAA rights are?


  • Do you know how pre-existing conditions impact claims?  Do you know how pre-existing conditions are treated differently with most HMO and PPO plans?


  • Do you know companies with less than 20 employees must provide termed employees with the opportunity to enroll in State continuation coverage?  Penalties for not informing termed employees are similar to Federal COBRA penalties.


  • Do you understand how balance billing works with non-participating providers and how to avoid being balance billed?


  • Do you and your broker follow the HIPAA and HITECH regulations regarding electronic transmission of Protected Health Information?  Are you emailing Social Security numbers and sensitive health information with unsecured email?


  • If you have an HSA plan, do your employees know how to use it?


  • Does your broker regularly educate you and your employees on the details of your plans?


  • Does your broker resolve your claims issues or prevent potential problems?


  • For large groups, has your broker ever explained the relationship between the “trend” and the renewal increase?  If not, your broker is probably also not negotiating your renewal so you can share in a good claim year rather than padding the carrier's profit margin.


  • Also for large groups, is your broker helping you file your 5500?   

For more information, please contact Bridgeport Benefit Advisors.

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The material on this page is intended as general descriptions of the concepts presented.  It is for educational purposes only and it not intended to provide specific financial or tax advice.  These descriptions cannot take into account your specific conditions and situation including the data required for underwriting purposes, financial circumstances, risk tolerance, and other factors.