This week, we choose a benefits provider for health insurance. As a company, we spent a decent amount of time researching and debating the relative merits of the options.

Not very exciting, I realize, but this process is pretty typical of the day-to-day tasks and challenges of running a startup. And, like so many other decisions, there are repercussions from whichever option you choose.

I bring some experience and history in this area: I chose a benefits provider at my first startup, back in 2000, and then repeated the process for my next company five years later. Here’s what I’ve learned about offering health insurance:

  • It’s complicated: providers offer unique networks, reimbursement schedules, pricing, and coverage of procedures and prescriptions.
  • It’s expensive: while the other costs of starting a business have dropped significantly in the past 20 years, healthcare has progressively gotten more expensive each year.
  • It’s important: this decision has an indelible impact on employees and their families.

I come by these conclusions honestly: I badly screwed this up by going with the lowest cost provider the first time around. I figured I was safe as I had chosen a name-brand, but the physician network was terrible, the effective costs (once you factored in the exclusions) to the employees were steep, the complaints were endless (and justified), and I swore I’d never let price drive the decision again.

Even with market-accepted, reputable providers,there is significant variance in the key aspects of coverage, and the right decision for a small company is not obvious.

In many ways, it’s easier for a bigger company. In a large organization, you’re essentially practicing what my wife (a veterinarian) would call “herd medicine”: what is the best option for the entire group? The decision is driven by looking at average claims data and health needs for a general population, and the suffering of the minority is chalked up to market and practical realities.

It’s different when the decision maker and those impacted have a much closer relationship: at the end of the day, average claims data is irrelevant for the person sitting next to you if his chosen physician is not part of the network, prescription is not covered, or expected benefit is excluded.

Within Gain Compliance — especially given that evaluating boring and complicated documents and processes is our core business — this decision was well-suited to a crowdsourced process. Each employee (and spouse) read the two policies in detail and weighed in on the merits of the providers. Our insurance agent patiently fielded dozens of detailed questions on prescription coverage, exclusions, and physician networks. Only after gathering coverage and reimbursement information did we perform a cost-benefit analysis to make a decision.

Fun times — now back to building.

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