Insurance FAQs

In the case of small businesses under 100 employees, most rates are standardized. Group health insurance rates are the same whether you purchase directly or through an insurance broker. Working with us gives you access to substantial expertise and options you may not be aware of, as well as administrative and compliance support that you would not get from working with the carrier. In unique circumstances where the carrier or product allows flexibility in cost structure, we will discuss those options with you so that you can make the best decision for your company.

Because you and your employees are unique, there is no one answer or solution that fits all organizations. In some cases, a customized survey for the employees to share their needs and preferences as it pertains to specialists, provider networks, financial planning goals, etc. is a good starting point.

There is no cookie-cutter approach. As a standard practice, we will assist you in the fact finding process, help you prioritize goals, and determine the options best suited for your company. Additionally, because change is inevitable, we will help you reassess when necessary and upon your annual review.

Does the broker have a good reputation?

First, find out if your insurance broker is trustworthy. There are several ways to determine if a broker has a good reputation:

• Insurance brokers are required to hold a state license and print the license number on business cards and letterhead. Each state has a website which will allow you to review which companies a broker represents and compliance with continuing education requirements.
• Examine disciplinary records. Even when a broker is properly licensed, it is important to examine any disciplinary records. The state insurance commissioner’s offices and the Better Business Bureau keep track of all complaints against licensed brokers. You should also ask the broker for references.

How long has the broker worked in the insurance industry?

How well does your broker know the insurance industry and its products? Your insurance broker needs to have extensive knowledge, and be able to keep you current with industry trends and policy changes.

Does your broker maintain good communication with existing clients and provide ongoing support?

An insurance broker doesn’t have to stay in touch with his or her clients all the time, but should go over your policy at least once a year and inform you on new developments in the industry that may affect you. The broker should be easily reachable if you need to ask any questions or require assistance throughout the year.

Unfortunately some brokers are unable or unmotivated to provide support beyond the initial sale, like educating staff on options, onboarding new employees during the year and helping handle crises. Also, some payroll companies and enterprise-level providers provide insurance solutions, but often businesses find themselves stuck with an inexperienced, junior-level person providing support or in a DIY situation, where they don’t have any support beyond enrollment.

Does the broker provide onboarding and offboarding services for new or departing employees?

Ask how your broker may address these and support other needs such as claims issues and COBRA coverage.

Does the broker represent all major plans in your area?

Your advisor should be objective in providing multiple plan and cost options that best address your personal or business concerns. It’s important to understand if your broker is independent to be able to advise on multiple carriers, vendors and plan options. Those that are contracted or employed by one company may have some bias in their suggestions.

In most instances the answer is yes. There are a few insurance companies that contractually “vest” the policy with the original agent, however this is rare.

Many clients feel abandoned by their agent after they have made their purchase. They may be happy with their coverage and their insurance company but they can’t seem to reach their agent or get them to respond. Rathbun Sargent is focused on being highly accessible and resolving every issue on a favorable basis for our clients.

Normally all that needs to be done is drafting an “agent of record change” letter and submitting it to the existing insurance company.

Most traditional benefits plans that fall under Employee Retirement Income Security Act (ERISA) law require that these plans are offered on a non-discriminatory basis to your employees. That said, employers may be able to distinguish between groups if they use classifications that are consistent with their usual business practice, not just for use in group health plans. Creating classifications of employees may allow an organization to offer different benefits or levels of benefits to select employees, i.e., salaried vs. non-salaried, full-time vs. part time, management vs. non-management, by occupational categories, geography, length of service, or bargaining unit. Conversely, non-qualified plans do not need to abide by ERISA and enable an employer to pick and choose who they want to benefit. It’s always best to consult with your legal advisors to make sure your plan is in compliance.

It depends on geography, laws and tax regulations. If your locations are within the same state, uniform benefits plans can be implemented. When locations run across state lines, benefits do tend to vary and consideration should be given to make sure that benefits offered are equitable. For example, state disability insurance is not available in all states. In such cases, an organization may want to consider implementing a short-term disability program to augment existing benefits so that employees have similar coverage to those in other states.

With the Affordable Care Act (ACA), providers’ networks can vary substantially within the same state. Thus, careful examination of available plans, provider networks and carrier flexibility are vital to accommodating your employees in multiple locations. Rathbun Sargent can point out these relevant details to avoid surprises down the line.

A broker should have the experience to identify your needs and source products and solutions to best achieve your goals. He or she should advise on any changes that could materially affect you such as legislation, rates and carrier updates. A broker should strive to remain abreast of their profession through continuing education and professional development.

A broker should be resourceful and be able to provide ongoing support. The process of enrollment, renewal or transitioning to new insurance plans can be cumbersome and stressful. You want to work with a broker who can help manage and streamline this process.

Most importantly, a broker needs to be your advocate and be able to advise what’s in your best interest.

While the premiums and cost sharing for PPO plans tend to be higher than for HMO plans, it is important to consider the pros and cons of both plans.

Most people are unaware that under HMO plans, the costs are paid by their medical group, not by the insurance company. This creates an incentive for the medical group to “manage” your care prudently, which may offer some limitations for those who want more control over their course of treatments. In considering an HMO, choosing a well-managed medical group with a large base of specialists is crucial. Otherwise, referrals, tests, scheduling surgeries, or even a simple office visit to your primary care physician can be met with delays.

If you have a condition that requires various specialists, or you desire greater flexibility, a PPO may be a better fit. You typically do not need to select a primary care doctor and you can even choose to see a provider that does not take insurance. Although the freedom of choice is attractive, there are some factors to consider. PPOs do tend to be more costly with respect to premiums and out-of-pocket costs. Additionally, your doctor or hospital may refer and utilize out-of-network providers without your knowledge or authorization, which means less coverage and higher expenses for you.

HMO or PPO, it’s imperative that you are wholly involved in your care, understanding how your coverage works, asking questions, and getting second opinions so that you have more control and avoid unfavorable and unpredictable outcomes.

In the majority of cases, you are better off providing health insurance to your employees through a group plan. Insurance carriers and third party administrators follow state and federal rules pertaining to benefit requirements, cost structure and eligibility guidelines. Thus, employers can be assured that offering a group plan is compliant.

Offering an allowance or reimbursement for employees to purchase individual insurance is considered an employer sponsored group health plan by the Department of Labor, so it must meet the same ERISA standards. Unfortunately, individual insurance does not comply with these standards in various ways with respect to cost, benefits, COBRA and discrimination, making it extremely difficult for the employer to remain in compliance with ERISA. Businesses with plans that violate these laws can face penalties of up to $36,500 a year for each affected employee.

It depends. For the right company, self-insurance may result in customized benefits and the ability to control costs and obtain savings over time. A third party administrator or insurance carrier provides regular reports on plan utilization, claims activities and cost outlay, which can provide significant insight on how to tailor a health plan specific to your workforce. Self-insured group health plans allow the employer to be more nimble, as they do not need to abide by state insurance rules or pay state premium taxes, nor are they required to pre-pay a premium, resulting in more cash-flow.

Good cash flow and reserves are crucial in companies that are self-insured because they assume the risk of paying claims, which can be substantial and unpredictable. Larger, well established employers fit this description more readily than smaller businesses, which may not have the resources to implement self-insured plans. That said, there are organizations of under 50 employees with self-insured plans.

Our partners have strong alliances with multiple carriers and administrators that specialize in self-insured plans in California and across the states to provide initial setup and ongoing support.

A Health Savings Account (HSA) is a tax-advantaged personal savings account designed to provide funds to pay for qualified medical expenses, including health insurance deductibles and copayments.

Funds can be used to cover expenses that may not be fully covered by your health insurance plan like eye wear, acupuncture and other alternative treatments, dental work, and uncovered expenses from out of-network providers. Funds can also be used for COBRA premiums or health insurance premiums if you are receiving unemployment compensation.

Current law allows contributions into your HSA on a pre-tax basis, which means you don’t have to pay tax on money you put into your account. Distributions for qualified medical expenses are not taxable, including any investment earnings from the account. Furthermore, funding your HSA account does not offset pension, 401(k) or IRA contributions.

At normal retirement or age 67, any remaining funds can be used for qualifying long-term care insurance premiums and services or Medicare Parts A, B, D, Medicare HMO plans and Medicare Advantage premiums (but not Medicare supplemental policy premiums). Remaining funds can also be distributed for any expenses, but they would be taxed like an IRA.

You must purchase a qualified high-deductible health plan (HDHP) to be eligible to have an HSA savings account.

The financial impact of an HSA can be realized best by consulting your tax advisor in conjunction with your insurance broker. Specific medical history, non-coverage or inadequate coverage for treatments and tax situation are just some factors to consider whether an HSA is right for you.

Information is readily available thanks to technology and social media. However, staying current with health care legislation is an overwhelming task. Rules and regulations vary from state to state. The push to overhaul health care in the United States has resulted in more confusion than ever.

Don’t hesitate to reach out to us with any questions. We stay on top of changes in regulations, and, if you have a question we can’t answer, we’ll research it and find the answer for you.

You can either withdraw or borrow against your available cash value in your whole life policy but not a term life insurance policy. This is because permanent life insurance policies have an insurance and a savings or investment component, resulting in the accrual of equity, similar to a savings account. That account becomes an asset that may be used to acquire a loan, acting as collateral.

Under current tax law, growth in cash value is not taxed, and accessing the equity can also be structured to avoid or minimize taxes. An asset that can be used as collateral and its corresponding tax advantages are features that make whole life an attractive vehicle in retirement and financial planning.

However, it’s important to explore your current financial situation as well as other assets prior to using your life insurance equity. You should consider the type of policy you have, carrier procedures and treatment of interest rates, loan costs and tax ramifications. But the main factor is that using the cash value may compromise your life insurance policy and jeopardize your plan to protect your family, your estate and/or legacy. Don’t do that; let us understand your needs and provide you with options to avoid unwanted consequences.

If you stop paying life insurance premiums for term life insurance, your policy will terminate. Generally, there is no penalty fee charged and no return on your premiums.

If you stop paying premiums on permanent life insurance, i.e. whole life, universal life, or variable universal life, the cash value or equity of the policy may continue to pay the premiums for a certain amount of time. How long your policy will remain in force will depend on the amount of cash value, crediting interest rates, growth of equity, any outstanding loan costs as well as mortality and administrative expenses.

The ideal situation in which a loan or withdrawal is considered would involve a whole life policy that is 12 to 15 years old in which the insurance company pays dividends on that contract. You may use the dividends in the policy to pay part or all the premiums. Dividends can be withdrawn rather than borrowed, thus not incurring any loan fees or interest. Note that dividends are not guaranteed and may have significant fluctuations. Plan with a conservative projection of dividends to minimize policy termination and avoid a big tax bill.

You can also request that your whole life insurance policy be reduced and paid up (commonly known as reduced paid-up) which allows coverage to remain in force without paying additional premiums. However, the death benefit of the original policy will decrease.

Lastly, should your policy lapse, you may be able to reinstate it, according to the terms and procedures required by the insurance company. This may entail new medical exams, back premiums and/or additional fees to return the policy back to its original state. It’s important to evaluate whether or not reinstating or obtaining a new policy is better at this junction. It can also be unnerving when you need coverage and don’t have it, especially when you’ve had a change in health. Rathbun Sargent can help you understand the best course of action and navigate any obstacles that may arise in the underwriting process.