An increasing number of businesses today have employees working in multiple states. Some companies need to be geographically spread out in order to serve specific customers or be closer to business partners, while others find that offering geographic flexibility allows them to recruit and retain the best talent. Businesses can still remain cohesive when operating in different states; modern, Web-based collaboration tools make it possible to create an effective, virtual organization.
Unlike many other sectors of the economy, health care remains mainly a local business. That creates challenges for employers who seek to purchase health plans for their far-flung employees. There are two main options, then, for these businesses: Obtain separate policies in each state, or sign up for a national plan.
Large multistate employers have been managing this issue for decades. Generally, they choose a national plan while sometimes adding local health plans for specific states or regions. Many smaller multistate employers will also find choosing a national plan to be the best option, but it’s still worth analyzing the specific circumstances before committing.
Here are some key questions to consider:
- How similar or different are the health insurance needs of employees in the different locations? If employee demographics and health statuses are reasonably similar across locations, then a national plan is likely to be most advantageous. If there are significant differences that are likely to persist, then it may be worth exploring specific local plans to meet those distinct needs.
- Administratively, will it be simpler to have a national plan or multiple state health plans? In general, it will be much simpler to manage one national account. There will be one point of contact, one renewal date, one utilization report, one price quote instead of one per state.
- Will costs differ between the options? Typically, premiums do not vary significantly between a national plan and a collection of state-based plans. There will be exceptions, so it makes sense to check prices in your specific locations.
- Will the company get better service from a national plan or from state plans? In general, a plan can provide a higher level of service when it is catering to a larger group, so pooling all employees in a national plan is often the better choice. On the other hand, some state-based plans may have greater familiarity with their specific markets and higher service levels. There is significant variation from plan to plan, independent of whether the insurer is national- or state-based.
- How will employees feel about the choice that’s made? Having a single national plan makes it easier to offer identical benefits to all employees, which is likely to be perceived as fair. However, the way that employees perceive the decision will vary by company and geography. Some employees may prefer a local plan with a strong reputation over a national player.
Companies with employees in multiple states have a choice between signing up for a single national plan or operating on a state-by-state basis. In most cases, a national plan is preferable, but there are exceptions. Each company should analyze its specific situation before deciding.
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.