A County Guide to Health Care Purchasing
Insurance is not a one-time purchase, it is a long-term commitment to your employees. Here are some things to consider when investigating an organization that wants your health care business.

Rates
Everyone wants affordable rates but beware of rates that sound too good to be true. Health care is very expensive. Period. Here are a few things to consider:

• Some companies will try to ‘buy your business’ for a year and then give outrageous rate increases the second year. Others will only guarantee rates for six months, which could wreak havoc on a county’s budget. By then, your county may not be able to find coverage elsewhere and many counties are forced to stay with their carriers because of employees with serious illnesses or high-risk conditions.
• Poor service, a common problem with low-cost plans, is a major reason employers change health care plans. Evaluate the real cost benefit of a plan over a multi-year period. Look at the overall value not just the bottom line.

Network
Look for a managed care network that provides a broad network of doctors, hospitals and health care facilities. But a good network goes beyond a list of doctors. Credentialing procedures ensure that your employees receive high quality care and have adequate access to providers without long delays. A well-run managed care network can save your county money by offering health care services at a substantial discount.

• You can expect to pay a fee for access to a network. Beware of networks that charge you a ‘percent of savings.’ Administrators can artificially inflate the savings amount and then make you pay 25 percent or more of those ‘savings.’ These hidden expenses can really drive up health insurance costs.

Administration
Make sure you understand how claims are paid and again, ask questions. Do the doctors file claims for you, or will you have to pay upfront and wait for reimbursement? Are the claims filed electronically for faster turn around? How long does it usually take to get a claim paid? Where are claims paid? If claims problems do arise, it can be difficult to resolve them with out-of-state companies.

Plan Design
Be sure to carefully review and understand the plan design and documents. Don’t be afraid to ask questions and get everything in writing. Here are some details to ask about up-front: What are the deductibles and co-pays? Are lab costs included in the co-pay? Is serious mental illness covered as any other illness as required by law? What are the fees if you decide to change carriers?

With self-funding, by law your county becomes like an insurance company and your taxpayers bear the risk. If self-funded, do you know your specific or individual attachment point, as well as your aggregate attachment point? Does the self-funded plan cover ‘run-in’ or ‘run-out’? What period of time does the plan cover? (See County Guide to Self-Funding Health Care Benefits)

Financial Strength
If the plan is operating on a dangerously thin financial edge, it won’t matter how big the network is or how cheap the rates are. Mergers of large insurers have decreased competition and increased price. Many smaller insurers are struggling to stay afloat in the “hard market.” Before choosing a health plan, check out their financial statements.

• A fiscally stable plan will have a strong claims-paying ability and credit rating. For self-funded plans, counties are required by law to evaluate the financial solvency of their TPA (Third Party Administrator). If a TPA will not provide a county with up-to-date financial statements, they are not legally eligible to do business with counties.

Are you a Small Employer?
Texas law (Chap. 26, TX. Insurance Code) defines a small employer as one with 50 or fewer covered employees. Because of past ‘cherry picking’ in the insurance industry, the state now enforces regulations that put small employers on an even playing field. As with most laws, there are advantages and disadvantages.

• A small employer now has increased access to insurance coverage and maximum rate caps, but now, renewal rates are set by a formula and your rates must be comparable to other employers in your class of business. If your rates are much lower than other employers in your class, chances are you’ll get a hefty rate increase. And because rates are set by a formula, individual employers can no longer negotiate on rates. In the small group market, insurance companies may issue solicitation rates during the proposal process. The rates seem very attractive, but are subject to final medical underwriting. Once you select that carrier, you must provide them with employee medical information. Final rates are often disclosed after a group has been enrolled and can be as much as 60 percent higher than the solicitation rates. Avoid this problem by clearly stating in the RFP that all rates must be final and by allowing adequate time for companies to gather needed information to underwrite a proposal. Carefully read the fine print of any proposal to make sure the rates are guaranteed. With many new requirements for counties, it is important to be aware of your county’s obligations. For example, many small counties do not meet the minimum size requirements for self-funding.

Legal Obligations and Restrictions
There are many legal requirements for counties, and it is important that you are aware of your county’s obligations. Additionally, counties operate under legal restrictions that do not apply to other local government entities. Consult a qualified attorney who can advise you on health care legislation as it applies to counties, and review all plan documents and Chapter 157 and 172 of the Local Government Code to be sure that you are in compliance with the law, especially if you are self-funded. Failure to comply can leave your county taxpayers open to serious liabilities.

For more information call the Group Health Department at the Texas Association of Counties at 1-800-456-5974.