Employers who operate in more than one state face important choices when deciding which health care plans to offer their employees. At a high level, there are two main options: Offer a single, multistate plan to employees everywhere, or offer separate plans in each state. If you decide to offer separate plans, you’ll have the opportunity to tailor each plan to the needs of the relevant state’s employees and the dynamics of the local health care delivery system.
One Plan for All States
The simplest approach is to offer a single plan for all states in which you operate. You only need to make one decision, and it comes with the added convenience of having one point of contact and one bill. You may also perceive it as the fairest option, because all employees have access to the same plan and benefits.
Although state insurance regulations differ, there are at least two ways a business can offer the same plan across state lines. The Affordable Care Act provides for multistate, fully insured plans through the SHOP exchange, so if your company qualifies to participate in SHOP, selecting a single plan is one option. Self-insured/ERISA plans provide another way to offer the same benefits in multiple states because these plans are exempt from state requirements. Traditionally, only large companies could self-insure, but the introduction of new stop-loss products and level funding options make self-insurance feasible for smaller employers.
A single plan is the most attractive option when some or all of the following conditions are in place:
- A company’s operations are in contiguous states.
- Workforce demographics are similar among company offices.
- Transfers are frequent.
- The structures of the health care delivery systems are similar in each state.
- Attractive multistate plans are available on the SHOP exchange.
- Self-funding is an option.
Different Plans for Each State
Many employers will find it’s more beneficial for the company and its employees to offer different plans in different states. Key considerations include:
- Do employee demographics differ? For example, families with children have different needs than single employees and empty nesters.
- What is the health status of employees at each site? Active, healthier employees have different needs than sedentary workers. An employer may therefore choose to provide more or different wellness benefits for certain employee populations.
- How do wages compare? Lower-wage employees are typically more sensitive to out-of-pocket payments, place high value on first-dollar coverage and can afford only relatively low contributions to premiums. Higher earners, on the other hand, generally prefer high-deductible health care plans and the opportunity to set aside funds in tax-advantaged health savings accounts (HSAs).
- How do the health care delivery systems differ? In some geographic regions, there are dramatic differences in price among health systems, but in others, price variation may be modest. A narrow-network insurance product would yield significant cost savings in an area with high price variation but achieve very little savings elsewhere.
- Is a multistate plan available? Employers that do not qualify for SHOP may need to offer different plans in each state because they lack a single-plan option.
David E. Williams is president of Health Business Group, a strategy consulting firm serving clients in technology-enabled health care services, pharmaceuticals, biotech, medical devices and software. He is frequently quoted in the media on the business of health care and is the author of the Health Business Blog. David sits on the board of both private health care companies and nonprofits.