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Boca Raton News

ARTICLE

Date ArticleType
10/15/2020 General
2021 Open Enrollment:

2021 Open Enrollment: Health Insurance Options for Business Owners

As a Trusted Advisor in the Health Insurance space, I work with Business Owners to determine coverage options that make the most sense at the ideal intersection of price and coverage.  This means considering Major Medical, Defined Benefit and Level-funded plans. 

With Open Enrollment quickly approaching, it’s important that you know your options and you’re well-prepared, so you’re not rushing to obtain coverage that doesn’t best address your needs and the needs of your family and employees, if applicable.

The option that everyone is familiar with is the traditional Major Medical Plan (Blue Cross Blue Shield is an example).  There are both positives and negatives to all plans, so let’s jump in and take a look.  

Positives of Major Medical Plans:   

•Unlimited Lifetime Maximum Payouts

•Guaranteed Issue – You cannot be denied coverage for Pre-existing Conditions

•Pregnancy Benefits (subject to deductible and co-insurance amounts)

•Expensive drug coverage (Not every Major Medical Plan pays for expensive medications)

•HSA Eligibility

•Subsidy Eligibility (if you don’t earn more than 400% than the federal poverty level, you’re eligible).  This means that a single person, for example, cannot earn more than $49,960 per year, whether that be through an LLC, S Corp or C Corp.  Go to www.healthsherpa.com to determine subsidy eligibility.

 Negatives of Major Medical Plans:   

•Premiums are expensive without subsidies, and tend to increase by material percentages year over year.

•If you’re not satisfying your annual deductible, you’re paying into a plan that you’re not getting any benefit from.  In other words, you’re self-insuring (or functionally uninsured).

•In the event of a serious accident or illness with an extended recovery time, it doesn’t address your personal bills that are still due, even though you’re unable work.

•Tied to a specific network. Out of Network Providers results in higher deductibles and higher coinsurance.

•Enrollment is limited to Nov. 1st to Dec. 15th, unless a qualifying life event occurs (loss of coverage, divorce, birth of child, relocation, etc…)

Another option that’s been gaining traction, especially since the Penalty for not being insured disappeared beginning Jan 1, 2019 (California is the exception), are Defined Benefit (Fixed Indemnity) Plans.  Let’s take a look at the positives and negatives of these: 

Positives of Defined Benefit Plans:   

•Premiums tend to be a fraction of the cost (sometimes as much as 50%) of a ‘Silver’ Plan on the ACA/Obamacare Marketplace

•Zero-deductible and no Copays for any Outpatient Care, including Ambulatory Surgical Centers.

•Since the Benefit is defined, any provider can be used, without any penalties for going out of network.

•If the provider is owed less than your benefit, you’re reimbursed the difference.

•In the event of a serious accident or illness, the Catastrophic portion of the policy pays medical bills while the base health plan continues to pay tax-free benefits, enabling you to meet your personal obligations (mortgage, food, etc…)

Negatives of Defined Benefit Plans:   

•Plans are Medically underwritten, so you’d need to be relatively healthy to qualify (no cancer, insulin-diabetes, heart disease, etc…)

•Not Subsidy or HSA Eligible

•Lifetime Maximums are capped (at $5 million, for example)

•Pays benefits for medically necessary procedures only (for example, no pregnancy benefits unless an emergency c-section is required)

•Would not be adequate if very expensive medication is needed (eg: Humira)

•Pre-existing condition exclusion period, typically 12 months

Another type of health plan that’s becoming more and more popular is the level-funded plan.  Typically best for organizations with at least five employees, these types of plans work as follows:   

•Premiums paid to insurance companies are divided into three buckets: 1) Claims bucket that’s used to pay medical bills up to a certain amount; 2) Administrative Cost Bucket that pays to administer the plan, and includes any other fees, sales commissions, etc; and 3) A bucket that pays premiums to the insurance company, in exchange for covering claims in excess of the ‘claims bucket’ amount.

•Less expensive than a traditional Major Medical Group Plan because risk is shared between the insured and the insurance company.

•Either a portion or the entire amount of unused premium in the claims bucket is refunded back to the insured company/organization at year end.

 More information: eric@puresurance.com or 212-810-9244.