How to buy health insurance - includes related article on types of businesses denied insurance - Cover Story

Nation's Business, Oct, 1992 by Roger Thompson

Buying health insurance has never been tougher. It's an experience most small-business owners put on a par with a root canal--complex, time-consuming, and painful. Unlike a root canal, however, the job is never really done. The whole frustrating process starts all over again in six months or a year when the renewal notice shows up in the mailbox.

The cost--averaging $3,573 per employee a year--is the biggest barrier for small companies. But it's not insurmountable. Millions of small-business owners, like Robert E. Wood, president of All Rents, an equipment-rental company in Fayetteville, Ark., do buy health insurance. But Wood acknowledges that he feels more than a little overwhelmed by what it takes to get the right policy at the best price for his 17 employees.

"I have a limited amount of time with a lot of hats to wear," he says. "Between my wife and me, once a year at renewal, we spend a lot of time on and off for 30 days talking to different agents," shopping for the best policy.

"In the olden days, when health insurance wasn't the catastrophe it is now, we didn't have to shop rates every year," says Wood. "But now it seems that we have to shop for rates every year or two" because of relentless premium increases.

Not surprisingly, most small-business owners feel they are victims of a process over which they have little control. Says Thomas J. Treffert, president of J.T.L. Trucking Inc., in Fond du Lac, Wis.: "I've been with the same health insurer for a good 10 or 12 years; I'm basically at their mercy.

"I used to think that truck payments were bad," adds Treffert, whose plan covers most of his trucking firm's 22 employees. "But now health coverage is getting as expensive as truck payments. And benefits have declined in the last three or four years."

Treffert's options are more limited than most because trucking firms are among the businesses that some health insurers deem too risky for coverage. (See the box on Page 20.)

Whether you are facing renewal or buying insurance for the first time, the dilemma is the same: How do you know you are getting the most for your money?

"Most small-business owners don't have a clue" about how to shop for the best health plan, says Roy Wilkinson, president of Wilkinson Benefit Consultants Inc., in Towson, Md.

But if you know what questions to ask, you can take charge and feel more in control," he adds.

What follows is a buyer's guide to finding the best health-insurance policy for your company. It answers some common questions and will sharpen your skills at deciding which questions you should ask before buying your next health plan.

How do I find a good agent or broker?

This question is the place to start. Agents work for one insurer; brokers do business with many. But the terms frequently are used interchangeably. A good agent or broker is your best ally in making the right purchase.

J. Beryl Clifford, president-elect of the Association of Health Insurance Agents and a consultant with ABI/CBSA Administrative Services Inc., in Minneapolis, says that small employers don't have the time or the expertise to shop the vast number of health plans on their own. It's a decision that requires the assistance of an experienced professional.

But what is a good agent or broker? After all, there are more than 1 million licensed insurance brokers nationwide. Not all of them can be masters of this complex field.

First, find out what kind of experience the person references of business clients, get their phone numbers, and call them. "It's really dumb to give your business to someone who is inexperienced."

Experience counts because the broker plays the role of chief cook and bottle washer for small-group plans," says Sam J. Cunningham, president of Anderson and Anderson/benefits Insurance Brokers Inc., in Irvine, Calif. In addition, you need someone who is available to answer your questions and help you solve your problems after the commission has been paid.

Major insurance companies and professional associations for independent agents/brokers, such as the Independent Insurance Agents of America and the National Association of Professional Insurance Agents, provide continuing-education programs to help those in the selling area of health insurance remain up to date on the changes that affect their work.

Professional credentials are good clues to a broker's commitment to employee benefits.

Is the broker a chartered financial consultant (ChFC), a chartered life underwriter (CLU), a registered health underwriter (RHU), or a registered employee-benefits consultant (REBC)?

All of these designations require successful completion of an intensive course of study and indicate a broker's investment in his or her own professional education.

Does the agent or broker belong to key associations that specialize in health care, such as the Association of Health Insurance Agents, the Society for Professional Benefits Administrators, or the National Association of Health Underwriters?

These groups promote professional standards and education designed to hone a broker's skills.