When contracts are legally binding, it’s imperative you know exactly what you’re agreeing to before signing the dotted line.
Knowing what to look out for, as well as what makes a good, well-rounded policy, will put you in good stead when committing yourself to your contract. But it can all get a bit confusing if you don’t understand what everything means.
That’s why we’ve compiled all you need to know about your employee medical insurance contract, and the 7 hallmarks of a great health insurance plan. The reason it’s hard to decipher what your insurance provider offers – or doesn’t – is that, like most people, you probably skip reading the fine print. And who could blame you? These terms and conditions are buried in complex, long-winded explanations. Most people would simply click ‘I agree’ and then move on to their next task.
A study of a US company with more than 50,000 workers showed that 65 percent of the employees chose the wrong plan when presented with insurance options, costing the company $337 in unnecessary annual spending per worker. That’s a whopping $10,952,500 in completely unnecessary overpayments. Imagine how much better that money could have been spent. So, to help you avoid making such a costly mistake, I’ve listed exactly what you should look out for before signing a medical insurance contract.
Here’s what you should look out for:
Last entry age
Most insurance firms will no longer provide coverage when your employees reach a certain age. Even if providers agree to extend coverage to older workers, your premium could balloon out. In a country where firms are encouraged to retain senior workers, employing workers above 65 years old is becoming more common. If your company’s demographic is leaning to the mature side, the last entry age is an important point to note.
Being uninformed about the rallying premium rate can put you in a difficult position of having to choose between cost reducing measure and keeping older but valuable workers. In the case of Associated Underwriters, Inc, their decision to retrench senior employees to lower the premium and avoid paying medical fees of those no longer covered by insurance landed them in a long, legal battle with the employee.
Amount of claims eligible
Despite their rosy and often tear-jerking advertisement that can beat any Jodi Picoult’s novel, private insurance companies are for profit. Should your claims in a year exceed or nearing the premium you’ve paid threatening the insurers’ bottom-line, they can terminate or impose limitations on your medical benefits insurance. So, before signing, you must be familiar with the type of policies offered. Ensure that your policies guarantee that your plan will stay in force as long as you pay the premium.
But even with guarantee, some policies still give insurers the rights to cancel your plan with a written notice before the policies are due for renewal. Insurance companies can also modify your plans, reducing the amount covered or increasing the premium after a big claim.
Therefore, the best way to protect your employees’ medical benefits is to consult with your insurer or broker about the amount you can claim per year. To avoid a spike in your premium or possibility of cancellation, it’s advisable to claim no more than 70 percent of the premium yearly.
Definition of the coverage
Let’s get it out here first, there is no such thing as full coverage. A healthcare insider defined insurance coverage as less of a blanket and more like a Swiss cheese- it’s full of holes. For instance, the annual out-of-pocket limit on your plan, i.e. the amount of money that you need to fork out yourself to pay for medical fees, is based on the number the insurers are obligated to cover and not the amount you’ll eventually pay for the entire care.
Knowing this, it’s pertinent to know exactly the definition of the coverage, especially in cases whereby your company could be held liable such as deaths during employment. Find out how insurers define deaths: accidental, natural, or self-inflicted, and the amount of coverage given for each case. You may think that we’re being ridiculous and death is death. But, you’ll be surprised. US health device manufacturers and physicians have gotten away labelling different death cases as injuries, which could impact the amount of coverage given to the affected employees and their families. Better be precise than sorry.
Typically insurance companies would disburse two or three times the annual salary, but it’s possible to get sweeter deal like paying the deceased’s spouse 50 percent of the salary for ten years, Google it.
Going back to the Swiss cheese situation, apart from a few caveats in the definition of the coverage, insurance firms also have a set list of approved illnesses that they will cover. However, they don’t usually disclose what this covered until the bill comes out. While exclusion for pre-existing condition is common knowledge, there are other exclusions that you should look out for. Some policies will not cover alternative care such as Traditional Chinese Medicine or certain procedures and medications even though the doctors prescribe them.
You should also check the coverage for psychotic treatment. Most insurers in Singapore exclude outpatient treatment such as drugs, visits to therapy and psychiatrist, which poses the biggest financial burden for those with psychiatric conditions. Getting the best plan for your employees that also will not bleed the company’s budget dry can be tough. Even when you think you’ve got everything covered, you may still be short-changed by strategically placed asterisks in the contract. So, before you sign a health insurance benefits contract, it’s best to call your broker or insurer to discuss the mentioned caveats.
Now you’re better educated as to what you should look out for before signing your contract, let’s take a look at what makes a great employee benefit plan.