Reading and Comparing Proposals

When an agent or an insurance company gives you a proposal, it's likely to contain lots of glossy materials designed to make having insurance with this company look like a life-enriching experience. There are a few critical pieces of information the proposal should contain that you should look at:

• the premium schedule
• the benefits schedule
• the list of doctors in the network, if applicable
• the itemization of the cost breakdown
• a copy of the policy

Web tool is available. To assist small employers with the decisions they have to make regarding health insurance choices, the U.S. Department of Health and Human Services offers a customized web tool.

The premium schedule. Somewhere in the proposal, there should be a document that tells how much your insurance plan will cost per employee per month. Generally, the proposal will not break down any cost-sharing arrangement between you and the employee.

If the premium schedule says that the cost is $250 per month per employee, that just means that between you and your employee, you have to come up with $250 per month. You could pay $100 and they could pay $150, or vice versa, or any combination in between. Insurers generally let you do the math to figure out how much each party will pay.

The benefits schedule. You should also locate the benefits schedule, which should give you a general overview of the benefits the plan includes, with specifics such as inpatient care, outpatient care, and office visits, with specific information about how much copayment will be for each service and any limitations on the number of days of a covered treatment or procedure. This form should be easy enough to understand that you can distribute it to employees as a reference.

The list of network doctors. It is imperative that you look at the list of network doctors if you are going with any managed care plan, such as an HMO or PPO. Check to see how many of the doctors are in your area or in the service area of your employees. If there are only one or two doctors in your town, your employees may have to travel a long distance to get a doctor. Look closely at the list to see how many doctors are not taking new patients. That's a sign of an overburdened network that may make it difficult to get timely appointments.

The itemization/cost breakdown. There should be a document in your proposals that shows how your insurance company/agent arrived at the figures he or she has given you. Pay particular attention to this sheet. It may help you when you try to bargain on the price of the care.

Save Money Pay special attention to a figure called "retention." This is a code word for insurance company's profit, and it's a good place to start chipping away at their prices if you feel it's too high.

Copy of the policy. The proposal should include a copy of the actual contract that contains all the specific coverage levels and limitations. Make sure that this document reflects what you understand your policy to cover. Once it's signed, you won't be able to negotiate. Make sure it matches the benefits schedule referenced above, too.

Health care reform. Under the Patient Protection and Affordable Care Act, insurance companies are required to spend 80 to 85 percent of premium dollars on medical care and health care quality improvement rather than administrative costs. If they don't, the insurance companies will be required to provide a rebate to their customers beginning in 2012. The intent of this provision is to make the insurance marketplace more transparent and make it easier for consumers to purchase plans that provide better value for their money. Detailed information on the requirements of the "medical loss ratio" provision is available on the government health care website.