Risk averse

Health care costs have been increasing at an alarming rate and many employers are considering switching plans in search of better bang for their bucks.

January and July are the most common months for group health insurance renewals, but before you switch plans, there are numerous issues to consider. If your plan’s renewal is coming up in July, have you mapped out your game plan?

Here are some issues to think about.

* Who are you going to for advice? The two most common choices are to utilize a broker or a consultant. A small minority of employers purchase group coverage directly from the providers.

* Should you use a broker, a consultant or go direct to purchase for coverage? The real question is what value is received by each of these directions. If you use a broker or consultant, ask what value they bring to you and the participants prior to the sale of a new program, during the process of applying for coverage and afterward. If you are going direct, you may want to first consider whether you have the knowledge and market savvy to take on this challenge.

* Did you assess the pre-existing conditions in your group to see if it’s even viable to go out to the marketplace this year?

* Did you study your existing plan before going out to the marketplace to assess strengths and weaknesses?

* Are you prepared to do a funding analysis?

* Do you know how to do a proper due diligence analysis? What about a contractual language analysis or basic benefits spread sheet analysis?

If your head is spinning, it’s probably worth having a qualified broker or consultant assist you in the evaluation and purchase of your benefits package.

No matter which direction you choose, determining when to switch can be critical. Most providers require 30 days written notice before canceling coverage. If you cancel your existing plan without giving proper notice, your provider may send you a premium bill that it probably can collect on.

This risk is small, however, in comparison to the one you open your company up to if you purchase new coverage and send a cancellation notice before you have written approval from the new carrier.

Potentially, if your group has more than 50 eligible employees, a provider may deny coverage based on its group-underwriting guidelines. That means you’ve just found yourself self-insured.

There are many other risks to consider as you think about your company’s health plan. The most important factor is to be as well informed as possible. Robert Arnoff ([email protected]) is president of Arnoff and Associates Inc., an employees benefits firm. He can be reached at (440) 717-1775 or through his Web site at www.arnoffandassociates.com.