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Q:  Erica, can you give us a little background on yourself and your firm?

A:  We actually started our agency in New York in 1975, went to New Hampshire for a few years, and then relocated to Georgia in 1981.  Our focus the last 38 years has been predominately health insurance.  We are a small family-owned business; my husband has his own book of business, and my son works with me on my book of business.  Our main focus has been to provide a customer service relationship we can be proud of; we do everything we would want someone to do for us if the roles were reversed.

It can be quite a battle dealing with health insurance, not just in terms of getting billing straight or paying claims, but understanding what the product is.  There’s an education process that most people don’t realize they need.  People have always had health insurance; it’s no big deal, it’s like driving a car, and often you don’t pay too much attention to your car insurance until you have an accident.  When you have to use it, it can be an eye-opener.

That’s where recent changes have almost been a blessing, because it is forcing everyone to recognize that they really don’t understand this product, and they really never have.  Now that the paradigm is being changed on what and how things are being covered, it is leading to a new conversation.  Now that it’s a conversation, we can take a closer look at how business owners and their employees are using these products, and make sure we have the right size and right style shoe for the foot, so that, for example, young people who rarely use coverage won’t be paying for benefits that would be the same as a young married couple with children having to make a lot of doctors’ visits.  So that’s really been our objective, to do the education process and to do the shopping to make sure we get the best carrier at the best value for the money being spent.

Q:  You talk about education.  What are the biggest educational points you need to have in such a conversation with your clients?

A:  It doesn’t really matter whether it’s an employer or a family–the question is the same:  how do you use this stuff?  If you have ongoing hospital stays or ongoing surgeries, that’s a different profile than most Americans who have just doctor office visits and prescriptions.  Price is almost irrelevant to begin with, because you can pay a lot or pay a little and not have what you need.  We start with what you need and how you use this product, then we move to assessing providers.  If people don’t mind changing doctors and labs then that’s great, but most have a relationship with someone, even if just one of their doctors.  Prescriptions are even more important.  Drug formularies are becoming more restrictive.  This year many of them are  closed formularies, meaning that they cover what they, no exceptions.  It doesn’t matter that the doctor writes “dispense as written” on the script; it’s not going to be covered.  That becomes a very important part of the evaluation.

After that, we start looking at what carriers make the most sense and preferences on plan design, then we look at the premium.  At that point there are usually a couple of different options, and the question becomes which of those options is the best for the price point you are willing to pay.

So that’s really the education, it’s going through the funnel and touching all the different levels, and not simply saying you want a low deductible with a low premium.  You can get that if you want it, but your doctors probably aren’t going to be there, you will have to jump through hoops to see anybody, and your prescriptions coverage certainly won’t be what you expect.

Finally, another consideration is that the carrier you have known for decades may not be the same carrier today that it was even last year.  As an example, BlueCross/BlueShield made a conscientious decision for their individual 2014 products to only offer a limited HMO network.  That’s a problem.  Humana also has one plan with a very restrictive HMO network.  Be aware; carriers change over time, sometimes from one year to the next.  One has to be alert to such changes.

Q:  What are the biggest misconceptions you have to clear up about the Affordable Care Act’s impact on a small business?

A:  The most interesting one that struck me recently was an older owner of a business who has watched employees who started with her ten to twenty years ago and are now middle aged marrieds with children.  She was in tears because she feared that her group health insurance was going to escalate in price dramatically, and that she was going to have to send everyone out to the Exchange where there is “garbage insurance” and “garbage coverage.”  We said to her, “Stop listening to the talking heads.”

Some things about the new plans are actually better, some things are different, and some things are not as good.  That’s always going to be the case–that’s life.  But it’s not as bad as the right side of the aisle is making it out to be when they say you have these huge out of pockets that you didn’t have before.  Sure, it’s certainly true if you go out of network.  On the other hand, it’s not as good as the left side of the aisle is saying when they say you have free coverage.  Yes, you have free preventive coverage, but you also have co-pays and deductibles and co-insurance.  The biggest misconception is that it is something which can be discussed intelligently by talk and radio chowderheads, I call them, who don’t ever give full disclosure.  They can’t in part because they are not from the industry and don’t understand how it works.  They pick one part, jump on it, and pound it to death.  All they do is confuse and upset people.

I had a long conversation the other day with a CPA of a client who wants him to consult with about going to a PEO.  What he was told by the PEO is that now we are going to have national rates, such that we in the Southeast would suffer because charges for higher cost states for California and New York will now impact what we pay.  I told them that’s not the case at all.  We are not paying New York or California rates.  There’s a lot of inflammatory information producing a lot of misconceptions, the biggest of which are “hideously expensive,” “unaffordable in terms of utilization,” and “garbage coverage.”  Those are the three big categories.

The one thing where there is not a misconception is the issue of affordability.  The subsidies have to be paid somewhere, from someone’s budget.  My fear is that it will be paid from the Medicare budget, which is a problem, because that is where the largest increase of our population is going at the rate of 10,000 people a day.  Not everyone will survive, but with that rate going into Medicare there will be a huge impact, and if the government thinks at the same time they are going to pull money away from Medicare, that’s where the explosion is going to come.

Q:  So, if I’m a small business owner, how do I deal with these changes in terms of doing the best I can for my employees?  How do I explain all the nuances of these changes to my employees, as the blowback of their concerns, justified or not, are going to come back on me?

A:  The first thing you do is get a good insurance broker, someone who is willing to deal day to day with the employees and be available when they have questions.  Encourage employees to call the broker or the insurance company BEFORE they have a claim.  For someone needing an MRI, for example, the doctor’s office may require a copay, but for anything billed through a hospital system, instead of just a copay, you are paying out of pocket up to thousands of dollars.

At renewal, the conversation needs to really look outside the box.  I just spent a couple of hours with a client in which we looked at a renewal with their current carrier which entailed a 42% rate increase–pretty significant.  Had they early renewed, they would have ONLY had a 20% rate increase.  But there are other options, one of which going into a partially self-funded plan, where there is medical underwriting.  If that doesn’t work, let’s look at plans with similar benefits.  What are the options carrier vs. carrier, what are the options within a carrier, and what are the options with a private exchange, where the employees will go through what is almost like a 401-K investment questionnaire with a mutual fund company.  In the latter option, employees key in information on their family and it spews out coverage ideas   and allows the individual employees to  select their own plans, rather than the employer trying to make a standardized decision which over-insures the majority of employees and under-insures a couple of employees.

Research recently has shown that when employees get a choice of their benefits, over 80% select less expensive plans.  So if, for example, an employer puts in a 100% plan and employees have to pay dependent coverage, employees balk because of the expense associated with all the benefits they don’t really use.  Many see that they might never meet the deductible.

It makes more sense, when they are offered the option, for an employee to take the savings from a less than full-featured policy and apply it to a disability policy or dental coverage.  The latter risks are ones faced daily and are potentially more frightening than a hospital stay.

In my 27 years of having children, we’ve had one year with one child maxing out the deductible, because he had cancer.  That’s 27 years with five people in our family.  Stop and look at those numbers and figure:  if I put those savings in a jar, wouldn’t I have come out ahead?  So employees are looking at how dollars are being spent for the first time, when they are given the opportunity, and are coming up with different decisions than what the employer comes up with.

Q:  I’ve heard you talk about for some small businesses, it makes better sense to have all their employees self-insure individually.  Can you explain the circumstances under which that makes sense?

A:  Sure, I did it recently for a small company where salaries were low enough that employees qualified for subsidies.  The subsidy left their premium at about the level they were paying as their portion of the employer-based plan, but the employer got out from under about $6,000 a month in premium.  That employer now has more cash flow which they can potentially use to provide other benefits to employees and further wed them to the business.

Q:  If a small business has already selected a plan for this year, what should they do going forward, particularly as they look to renewal time?

A:  A business owner should start looking at it 90 days ahead of the renewal and a wise owner should poll the employees, asking how they use their insurance.  The employer will probably have an eye-opening experience, as the finding will probably be that thousands of dollars of unnecessary premiums have been paid over the years.  It will certainly be an eye-opening experience for the employee, because they have probably never been asked to collaborate on the decision.

The reason employers offer health insurance benefits is to attract and retain good employees, so what about taking it to the next level?  Get them involved, ask questions like whether having a low deductible plan for hospitalization is more attractive or whether a program with co-pays where the focus is on doctors’ office visits and prescriptions would be more appreciated.  You have to be careful, because you don’t want to be perceived as prying into confidential medical information.  Having such conversations, though, allows a small business owner to be creative about what’s actually valued by their employees and be perceived as being more caring.

Q:  You’ve given us a lot to think about, Erica.  Thank you for joining us.