That’s why we’ve put together this list for employers, meant to serve as a quick guide to small business health insurance. (For a more in-depth guide, download this free ebook.) 

Below, you’ll find facts, figures, and guidance on the following:

• When you should begin offering small business group health insurance 
• How to budget for small business health insurance costs
• How to get health insurance for small business
• What to look for in small business health insurance plans
• How to offer health benefits employees actually care about

1. If your business has 50+ full-time equivalent employees, you are legally required by the Affordable Care Act to provide health insurance to employees. If you have 1 to 49 employees, it is not legally required — though it is strongly suggested — to offer group health insurance.

2. Most businesses in the U.S. are small. Yet the smallest businesses are the least likely to provide employee health insurance, with its rising cost being the greatest deterrent for small business owners. In 2021, only 49% of businesses with 3 to 9 employees offered health coverage, compared to 65% of those with 10 to 24 employees, and 74% of those with 25 to 49 employees. 

3. The best time to start offering small business employee health insurance? ASAP. It’s critical if small businesses want to compete with larger ones for top talent. Some studies show that health benefits are even more important to workers than salary — 88% of job seekers give “some” or “heavy” consideration to better health, dental, and vision coverage when choosing between a high-paying job and a lower-paying job with better benefits.

4. While it is costly to offer small business health insurance, it is also costly to lose employees to jobs with better benefits. Replacing an employee in a technical role costs 100% to 150% of their salary — not to mention the negative effects losing a coworker can have on workplace morale and productivity.

5. Understanding the average cost of health insurance for small business will help you determine whether your budget is ready to accommodate the investment. On average, small businesses pay $6,485 for each covered individual and $13,737 for each covered family annually. Learn more about small business insurance costs. 

6. Before shopping for health insurance plans for small business, it’s wise to learn the differences between the most common plan types. That way, when you encounter the acronyms HMO, PPO, and EPO, you’ll already be familiar with their basic parameters. 

7. There are lots of places you can go to shop for health insurance for a small business — legacy carriers like Blue Cross Blue Shield, modern insurance companies like Sana, professional employer organizations (PEOs), and the online health insurance marketplace. Read more about where to shop for plans. 

8. A small business health insurance broker can help you find, quote, and secure employee
 benefits if you’d like professional guidance during your search — but keep in mind that using a broker is not required. You can go directly to the websites of most insurance companies to request a quote for your small business.

9. The plan you should choose is the one your employees will actually use. After all, the reason you’re investing in health insurance in the first place is to make your employees feel valued. Ask your employees about their preferences when weighing your small business health insurance options — for instance, do they value flexibility or affordability more highly when it comes to their healthcare?

10. Health insurance for small businesses should not be treated the same as health insurance for large corporations. Traditional health plans offered by legacy carriers tend to be more favorable for larger companies, while modern insurtech companies are leading the way in health plans built specifically with small businesses in mind.  

11. One of the reasons health plans from legacy carriers tend to be more expensive is because their pricing model involves negotiating “discounted rates” with providers and hospitals. But there is nothing stopping providers and hospitals from ignoring the actual cost of treatment when calculating rates — for instance, about 1 in 5 hospitals marks up drug prices at least 700%. That’s why it’s best to choose insurance companies with non-arbitrary, value-based pricing models.

12. A great way to offer affordable employee health coverage is to self-fund your employees’ healthcare — as opposed to paying a high monthly premium to an insurance carrier to fund it for you. Self-funding means you only owe money when your employees seek care. Learn more about self-funding and how to manage it.

13. Self-funded health plans are cost-effective and risk-free for small businesses when they are level-funded. Level-funding places an upper limit on healthcare costs so that unexpectedly high claims costs cannot wipe out your monthly budget — which is why level-funded self-insurance tends to be the best health insurance for small business. 

14. Giving employees access to wellness resources is an effective way for self-funded employers to keep small business health insurance costs low. The more opportunities employees have to take care of their own health, the lower their healthcare claims costs will be over time. Some health plans have built-in wellness resources, such as virtual health coaching and chronic condition management.

15. Mental health coverage is non-negotiable in 2022. According to a survey conducted for Fortune, the top three benefits employees want most in addition to medical coverage are: a flexible schedule, employer retirement contributions, and mental health coverage. Choose a health plan with low out-of-pocket costs for mental health services and common mental health medications.

16. 45% of small business owners spend one day or more each week on administrative human resources (HR) tasks. If your business has a lean or nonexistent HR department, be sure to choose a health insurance company that will help alleviate your HR burden. Modern insurance companies are more likely than legacy carriers to design health insurance for small business owners, offering intuitive technology that simplifies onboarding and benefits management.

The post Top 16 things to consider when offering small business health insurance appeared first on Sana Benefits.

Reference-based pricing (RBP) is an alternative to traditional healthcare pricing where reimbursement rates for medical services are based on a specific reference point rather than on a provider’s billed charge.

As an employer, the cost of your employees’ healthcare claims plays a critical role in the prices you pay for their health benefits. But understanding the actual cost of a healthcare claim can be a challenging task. Traditional insurance companies provide plans for a fixed monthly fee which is often inflated and opaque.

Companies that are seeking reasonable healthcare costs while offering attractive employee benefits may be overlooking reference-based pricing as an option. Are you?

How reference-based pricing works

As referenced above, reference-based pricing is a cost-containment model that pays claims based on an established benchmark rather than based on prices negotiated between a provider and payor.

This means employers’ healthcare costs are set based on prices set by a reference point like Medicare’s annual reimbursement schedule, and not based on arbitrary markups from healthcare providers and facilities. RBP is more common in self-funded health plans, since self-funded employers capture a greater portion of their claims savings than fully funded employers.

Defining benchmarks for pricing

The benchmarks for RBP are set by referencing a predetermined rate (or range of rates) for a specific medical service or procedure. So, how are these benchmarks set? That will depend on the program or plan — though the overarching goal is to set fair, reasonable prices for quality healthcare services.

Examples of organizations that establish pricing benchmarks:

• Centers for Medicare and Medicaid Services (CMS) for Medicare rates
• Self-insured employers that use historical claims data
• Healthcare providers that use their own cost data
• Professional associations or third-party vendors

Examples of common benchmarks created by these organizations:

• Medicare reimbursement rates
• Negotiated rates with provider networks
• Bundled payment rates for episodes of care
• Fair pricing data from third-party vendors
• Provider’s cost of performing a procedure

How reimbursement rates are calculated

Reference-based pricing methodologies vary greatly based on the preferences of the payor. A typical methodology is to calculate reimbursement rates as a percentage of an established benchmark.

How is reference-based pricing different from traditional health care pricing?

In a traditional, fully-funded plan, the insurer administers an employer’s healthcare claims for a fixed monthly fee. The carrier’s claims rates — the amount the insurance carrier will pay the healthcare provider for each medical service delivered — are privately negotiated between the carrier and the healthcare providers. The carrier’s estimate for those claims prices is just one element of the monthly fee. Other factors in the monthly fee include administrative expenses for managing claims or markups and premiums added on to claims prices.

Isolating the true cost of claims can be difficult at best on a fully-funded plan. Carriers are under no obligation to share the reasons behind their pricing, and their customers rarely ask. 

Even though healthcare costs are one of the biggest business expenses and they continue to rise, there is little-to-no pricing transparency. This makes budgeting for healthcare costs from year to year challenging for companies.

On the other hand, reference-based pricing sets claims costs based on established benchmarks such as Medicare prices. RBP is a model more frequently seen in self-funded plans, where employers pay for their own claims instead of paying an insurer a fixed fee for handling their claims. In the self-funded model, the employer has a huge incentive to keep provider payments under control.

Related: What to expect in a small business health insurance quote

Benefits of reference-based pricing

• Cost savings: By setting fair and reasonable pricing for medical services, RBP can help reduce the overall cost of healthcare.
• Increased transparency: By establishing clear, consistent pricing for healthcare services, RBP can help employers and employees better understand costs of care.
• No Out of Network Fees: Some RBP programs eliminate the concept of in- or out-of-network providers, essentially opening up healthcare options for employees.

Drawbacks of reference-based pricing

• Limited provider networks: There are some RBP programs that will only reimburse a limited network of providers that have agreed to RBP rates, and this can make it harder for employees to access the care they need.
• Balance billing: As mentioned previously, if a provider doesn’t accept the RBP reimbursement rate, then it’s likely that the employee will be billed the difference. This is usually experienced by the employee as surprise billing that creates confusion and financial hardship. See below on how this can be mitigated by partnering with a value-based healthcare company like Sana.
• Administrative burden: Establishing & maintaining accurate benchmarks, and managing contracts with provider networks can be a burden for large self-insured employers who may design and manage their own health plans.

How Sana overcomes these challenges

Sana’s reference-based pricing program is based on reimbursement rates designed to be fair and reasonable to providers. Sana uses Medicare and a variety of other pricing data sets to determine the benchmark for our RBP. As such, providers typically accept our RBP without issue — balance billing occurs with less than 2% of all Sana claims.

When balance billing does occur, Sana has your employees’ backs. We know balance bills can be stressful and overwhelming, but rest assured, Sana will do everything we can to minimize what members have to do, and that they will never owe more than the patient responsibility outlined in their plan.

Sana’s plans will also work with any provider and are never subject to out-of-network fees.

Related: Level-Funded Health Plans

How Does Reference-Based Pricing Save My Business Money?

Reference-based pricing in health care can lead to cost savings for employers in two ways.

Transparency

First of all, RBP increases transparency because it sets costs from a transparent, established benchmark. There’s no room for providers or facilities to disguise arbitrary pricing through hidden fees or opaque cost structures. As a result, employers can reasonably trust they’ll avoid markups and pay lower premiums. According to Mercer, the potential savings can be up to 40% on overall medical spend.

Alignment of Incentives

To understand why carriers allow their negotiated rates to get so much higher than Medicare’s pricing, you need to know the second driver of savings – the alignment of incentives. 

Traditional health insurance companies selling fully funded plans are actually incentivized to increase claims costs — an issue that puts them at odds with employers. This is due to the Affordable Care Act (ACA) mandating carriers to spend at least 80% of premiums on medical claims. Since their profit is limited by the amount of claims processed, fully funded plans can only grow profits by covering more lives or increasing the average cost of claims per life. That leaves them with little incentive to push back against providers increasing the price of their services each year. As the cost of claims (the 80%) goes up, the carrier’s potential profit (remaining 20%) grows accordingly. Employers are at the receiving end of these increases. 

Self-funded medical insurance plans for businesses lack these strange incentives, as the employer is paying the claims themselves. Referenced-based pricing provides an efficient way for those employers to arrive at fair, transparent pricing without creating contracts with every provider their members want to use.

Related: What can small business owners do for health insurance?

The post What is Reference-Based Pricing (RBP) in Healthcare? appeared first on Sana Benefits.