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

Nation's Business, Oct, 1992 by Roger Thompson

The time invested in finding the right broker pays dividends, says Jim Hostetler, publisher of For Brokers Only, an industry newsletter based in Raleigh, N.C. Good brokers, he says, "serve as consultants and hand-holders" to help each small-business client find a health plan tailored to the company's particular requirements.

How do brokers shop the health-insurance market?

There are hundreds of insurance companies writing thousands of policies for the small-group market. But most brokers narrow the field by doing business with insurers who meet their standards for financial stability and customer service.

"We set agency standards on the types of companies we will do business with," says Lee Buckley, vice president of Edwin L. Buckley & Son Inc., an independent agency in Wilmington, Del., and a member of the Independent Insurance Agents of America.

Computerized database services now make it possible for brokers to obtain detailed information on insurers and specific policies at the touch of a computer keyboard.

These services include Dinan (1-800-346-2610), 346-2610), Group Benefit Shoppers (1-800-231-8495), Quotesmith (1-800-556-9393), and Signal Data (1-615-266-8848).

Can a small business get quotes from insurance databases?

Yes, but an employer should be aware of their limitations. Dinan, based in New Almaden, Calif., Quotesmith, in Palatine, Ill., and Signal Data, in Chattanooga, Tenn., provide shopping services for small businesses.

Dinan will produce a price list of all plans that match a small employer's specifications and also will supply detailed benefit and rate information on the three least-expensive plans. The service costs $59, says CEO Terry Hardtke.

For a $15 fee, Quotesmith provides a price list of all plans that match specified needs. Without an extra charge, you may then obtain a detailed benefit analysis of specific policies that look most appealing. (See the chart beginning on Page 18.)

"There is a mind-boggling array of options out there--HMOs, PPOs, Blue Cross and Blue Shield plans, and traditional plans--that have to be sorted through and winnowed down," says Robert Bland, Quotesmith's president. "If you arm yourself with market knowledge, you are better equipped to deal with your agent or broker."

For a $25 fee, companies with up to 50 employees can obtain a price-comparison list from Signal Data. In addition, Signal provides a relative-benefit index report that ranks the plans shown, taking into account overall price, out-of-pocket expenses such as deductibles and coinsurance, and projected claims based on the age of participants. "The information gives employers a benchmark to judge the plans the broker brings in," says Frank Cowan, Signal's president.

What are the limitations to use of databases?

Not all insurers make their policy and price information available to databases. But the biggest problem, according to critics, is that databases promote shopping for price rather than quality.

"We're not in Quotesmith. I refuse to be a part of it," says Gary Kadlec, a vice president of John Alden Life Insurance Co., a leading small-group-market insurer. "They focus too much on the initial rate rather than on the insurance company behind the policy"