This article is for people / companies who are brand new to group health insurance. It’ll set the air for how the process will “feel” so you can emotionally prepare for it. Think of this as a “so you’re purchasing your first home with a mortgage” equivalent article. Other group insurance coverages are not as high stakes as health insurance… but when it comes to health insurance, the stakes are very high! One medical claim can rack up millions of dollars of costs, and the paperwork process reflects that.
If you’re considering group health insurance, you are considering entering into a contractual relationship with a quasi-government institution. Like banks, health insurance companies are highly regulated because they are an extension of government policy and power: The Power of Pre-Tax Deductions. A good mindset to have is that health insurance companies ASSUME that you are trying to launder drug money, trying to steal from them, that you are trying to sneak very high risk people who aren’t eligible into the group plan, that you are a tax cheat. That is what the underwriter will be testing you for. BE PREPARED, your paperwork must be IMMACULATE! If it is not, it will only cause further scrutiny depending on the human individual (called the underwriter) assigned to your case. Some underwriters will let you correct the mistake, while others will “put you through the ringer”. I often wonder if these underwriters derive satisfaction from defending the interests of the bankers & billionaires who own insurance companies… but I digress.
Most of the scrutiny will occur with the GROUP application process. You’ll have to produce documents PROVING everything: tax ID number, address, employee names, etc… BE TIMELY, do not wait until the last minute. Give yourself plenty of time to go through underwriting… remember, you have to prove you aren’t trying to cheat the insurance company. IF you have all your tax documents, form 1120, 1065, 941’s, 940’s, etc etc… AND you know exactly where they are and can pull them from your records within a few minutes… you’ll be fine. IF you cannot… get READY!
The process is similar to the banking “know your customer” laws. If there’s any red flag, you will be heavily scrutinized. If you are “flagged”, it’s not pleasant. IF you are not good with this sort of thing, have your accountant be in direct contact with your representation (probably Diversified Human Solutions if you’re reading this). IF your documents are not in order, I highly recommend you do NOT pursue group health insurance until your documents are in order.
During this process, one OWNER / OFFICER should take the lead fiduciary responsibility of interacting with this quasi-government entity AND having all stakeholders at the company informed and on-board with the process.
You’ve been Accepted!
Once you’ve been accepted for group coverage, you’ll receive a group confirmation number…. however, employees / enrolled participants will not receive ID cards for 7-10 days, and up to 21 days in some instances. You should prepare for various levels of emotional energy from employees who want to cancel their old insurance, but will not have confirmation of coverage that they are enrolled into the group plan. This can be avoided with starting the application process early and getting the paperwork in and cleared with lots of time to spare. For some people, this uncertainty will cause them great emotional stress. Unfortunately there are only 2 options, have faith that the group coverage is in place as intended, OR keep both coverages and pay for 2 insurance policies that overlap (Think of it like when you are moving your physical address… you may decide to pay rent/mortgage for both the old & new address, so that you can move your possessions from one house to another in a non-stressful way).
Another frustrating thing will occur… during that 7-10 day gap, and sometimes 21 day gap… employees will ask you, “what’s with my insurance!? I need confirmation, I have a doctor’s appointment tomorrow!” Unfortunately, there is nothing that can be done until the insurance company updates their computer databases. The good news is that doctors & other medical providers see this ALL THE TIME! Usually just telling them that the insurance is changing and that new info can be provided shortly will be OK. Then it would be up to the employee to provide the new insurance info once it arrives. There other alternatives are to reschedule the doctors appointment, OR to pay for the full cost of the visit up front and then request reimbursement directly from Blue Cross. Also, you’ll receive reports from employees saying that the insurance is “expired”. It’s probably not. The doctor is trying to bill the employee’s old insurance because the employee did not provide updated insurance info.
Insurance companies are retroactive, in that changes will be made in hindsight, not as they happen. Everything is about 1-2 months behind. For example, your invoice lists people who should not be enrolled?! It’ll happen all the time. The insurance companies usually create invoices, mail out ID cards, etc… on a schedule. That schedule occurs early in each month, so more recent changes won’t appear on the invoices/documents you receive. This will happen for ID cards, invoices, renewal documents, etc… they are all produced about one month early so the information will be old and FEEL inaccurate. Emotionally, this can be frustrating… but think of it as a cash flow consideration with the overall dollar amounts involved. Some months you will owe the insurance company some premium and visa versa. If you audit the invoices each month / quarter, you can correct any mistakes (write yourself notes). Most of the time, invoice mistakes are resolved on following invoices. THE MOST CRUCIAL thing is informing the proper people (usually us) when an employee should be removed from the insurance. I’ve seen quite large sums of money spent on employees who left the company years ago and they remained on the health plan. That’s the largest risk.
Group coverage involves ONE and only one invoice. USUALLY the prices are good for ONE YEAR… they do not change during the year, even IF the prices are “age banded” and people get one year older during the year. The price is set to the AGE they were WHEN ENROLLED if the rates are age banded (I have not ever seen otherwise). That invoice is sent to the address you entered into the EMPLOYER application. EMPLOYEES do NOT receive their own personalized invoice. An employee should NEVER receive a group health insurance invoice. It is 100% the responsibility of the employer / company to withhold money from the employee… then to pay the entire health insurance bill in whatever way was agreed upon (between the employee & the company). The insurance company will NOT itemize the bill to show how much is owed by the company & how much is owed by the employee. You will see one name, and a price / cost next to that name. Again, it is up to you to sort this out. Here’s an article how to do that: How to Calculate Payroll Deductions
Most health insurance companies allow for payment via check, online, or via phone in emergency situations.
If all this sound like a nightmare… welcome to owning a growing small business! As the company grows, the more it will be called upon to execute the policy of government entities. It’s not terribly difficult and is actually quite easy if you are a “routine” based person (and eventually you’ll have to hire a “person / department”). Put in control measures and you’ll be fine. However, if math and paperwork are terribly painful for you, our PEO option may be a good option if you’d like to avoid & offload these responsibilities: https://fellowpeo.com/