Purchasing insurance for your business (group coverage) has different rules than purchasing cover for yourself or your family (individual coverage). With so many nuisances to take into consideration, it may seem overwhelming even knowing where to begin. Luckily, the experts at Petra Insurance Brokers are here to help and navigate. In this article we will provide you with a few tips designed to help you avoid unnecessary delays when it comes time to purchase your group insurance policy.
What Is Group Coverage?
Group medical insurance coverage refers to one policy issued to a group, typically a business with employees, that provides all eligible employees with insurance. In some cases, group coverage also covers employees’ dependents as well. Individual coverage is a single policy issued to a single person and/or their family.
Unlike individual coverage, which bases premium rates on individual medical history, group coverage premium price is determined based on risk factors balanced over the entire group of beneficiaries. These factors might include age, gender, or risk of industry. For example, group coverage for a high-risk industry where accidents are more likely to occur may have higher premiums than group coverage in an industry with minimal risk and lower accidents rates.
Once you have determined which insurance provider to purchase your group policy from, there are a few things to consider ensuring your policy is approved as quickly and efficiently as possible.
Budget
Before you start the process for group coverage it’s important to understand how much money your company can spend on your group coverage. Afterall, you don’t want to waste time filling out paperwork for a policy that’s outside of your budget capabilities. You can estimate this cost in a few different ways:
- Payroll percentage: calculate the amount as a percentage of your total monthly or annual payroll costs.
- Per employee: you can calculate how much you can spend per employee, per month on their coverage. This will help you determine a bottom-line maximum amount, without having to consider variables such as dependent coverage.
What Influences Group Coverage Costs?
There are many factors that influence the cost of your group insurance plan, including people, process, product, and the claims ratio of the policy.
People
When it comes to people, your insurance company will look at the number of people you wish to cover, including employee dependents (when applicable). Generally, the larger the number of people you cover, the lower your premiums will be. Businesses with more than 50 people can negotiate with the insurance providers over their group policy premiums. They will start by looking at the location of your business and the type of business you are. For example, construction workers are more likely to have accidents than software developers.
The insurance provider will also take into consideration the age and gender of your employees. Typically, the younger your employees, the less you will pay for coverage. However, female employees may need prenatal and pregnancy benefits, which can make premiums slightly higher. If you are an established business, your company will also look at your medical claim’s history, as well as your ongoing large claims when determining the price of your group coverage.
Process
Insurance companies pay for administrative processes associated with your account. These costs vary by company and by the level of service you desire. Some costs that impact your premium prices include:
- Claims processing
- Negotiating and maintaining a network of doctors and medical facilities
- Member services
- Company profit margin
- Claims auditing fees
- Reinsurance for large claims
Product
Lastly, depending on your location and your specific needs there are several different types of group insurance policies to consider, each with a different price point.
- Fully insured plans: by far the most traditional group insurance plan, fully insured plans involve the insurance company assuming the risks involved with healthcare costs and charging your business an annual premium, which is partially paid for by the employees.
- Level-funded plans: based on a monthly payment rate, insurance companies will use census information to determine the amount your business will pay.
- Health Maintenance Organization (HMO): group coverage setup where group members pay for specific health services through monthly premiums. With an HMO beneficiaries have access to a network of healthcare providers and locations, and coverage is limited to the network.
- Preferred Provider Organization (PPO): like an HMO, PPO’s have more flexibility and allow beneficiaries to see providers outside of the network by paying a higher deductible for services.
- High-Deductible Health Plan (HDHP): coverage is based around lower premiums and higher deductibles, which is appealing for companies with employees who may not require many medical services.
Claims Ratio
The claims ratio is the percentage of claims costs in comparison to the premiums earned. In other words, the more claims your insurance provider pays out on your group coverage, the higher your future premiums may be. Therefore, it is essential to have measures in place and to educate staff to ensure medical coverage is not misused.
Basic Information
While this seems like a no brainer, you’d be surprised how many group policies get kicked back and denied based on inaccurate business information. If you are using a broker or an agent, you can ask them for a checklist of what information they need to get the ball rolling. Typically, businesses will be required to provide the following information for their group coverage:
- Employer name: the legal name of your company (not a nickname or “doing business as” (DBA) name).
- Address: typically, your insurer will require a street name and will not accept a P.O. box number.
- A list of eligible employees: you will need to provide a list of eligible employees you wish to include in the group policy (not all employees will be eligible).
- Business identification number: depending on your location your business identification number may be a Tax Residency Certificate (TRC), employee identification number (EIN number), etc.
- Business background information: you may need to provide the date your business started, payroll records, and Standard Industry Code (SIC of NAIC) detailing what industry your business is in.
Employee Census
Insurers use an employee census to obtain specific information to help the insurance company estimate the costs your group policy might incur. An employee census does not include health records, race, religion, or sexual orientation. Typically, employee census will include the following information about your employees:
- Employer name, nature of business, and number of employees to be insured
- Current or prior company (if applicable)
- Effective date requested
- Specific plan requested
- Employee name, age, and date of birth
- Number of dependents for each employee and their personal information (i.e., names, birthdates, etc.)
- Post office box or zip code
- Employee medical records, hire date, position within the company
- Employee driver’s license or identification card
- And more
Schedule
When you start applying for group coverage it’s important to provide the insurer with the date you want coverage to begin and the type of plan cycle that works best for your company. Ideally you want to select a date that is at least six weeks away but no more than three months away. This will allow plenty of time for your paperwork to be approved through underwriting without waiting too long for coverage. As for the plan cycle, or what time of the month you want to start coverage, most employers choose the first of the month. You will also need to determine your renewal date. For example, do you want to go by the calendar year (January through December, your organizational fiscal year, or plan around your peak seasons. When deciding, ask yourself what time works best for your business.
Renewal Process
Every year you will need to renew your group insurance policy. Insurance companies use the renewal process to keep compliant with new regulations and to ensure you have the exact coverage you need for your business. For example, when your business grows, your employee’s benefits needs may change. The renewal process is comprised of five different steps:
- Reassessment: your insurance company will evaluate new pricing for the upcoming year based on new doctor’s fee, medical technology, general inflation, and other reasons.
- Presentation: once new rates are determined, your insurance provider will present your business with the new options for the upcoming year.
- Selection: your business will select the plan that best fits the specific needs of your company.
- Employee enrollment: during this period, your employees will be presented with the plans you’ve selected. This is their opportunity to switch plans due to changing life circumstances and based on their budgets.
- Completion: once your employees have selected their plans, coverage is effective on the date your insurance provider selects.
Group Insurance With Petra
At Petra Insurance, we take pride in helping our clients find the best group coverage to protect their employees and their business. Regardless of the size of your business, your employee medical history, age, or pre-existing medical conditions, our team of advisors is ready to help find the best coverage to meet your specific needs. Whether you need help reviewing your existing coverage or need a quote for new group coverage, we can help.
Having health insurance is essential, and purchasing it is easier than ever. Contact a member of our team today. You can also reach us on Facebook, Instagram, Twitter, and LinkedIn. Better yet, get your 30 medical insurance quotes today!
RAMZI GHURANI
Managing Partner