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Choosing the Right Health Insurance for Your Employees
Most employees consider health insurance to be one of the most valuable employee benefits when evaluating a prospective employer. Employers often find that offering health insurance helps them better attract and retain top talent. There are also other benefits for employers building a competitive employee benefits package, such as tax deductions and reduced absenteeism in the workplace. However, not all health insurance plans are adequate. Learn more about the different types of health insurance for employees and what to consider when choosing health insurance for your business.
Self-Funded vs. Fully-Insured Plans
Employers that offer health insurance may finance these benefits in one of two ways. Self-funded benefits are health insurance benefits provided directly to employees. Fully-insured benefits involve purchasing health insurance from an insurance company. With a self-funded health insurance plan, an employer operates their own health plan as opposed to purchasing a plan from an insurance carrier. While self-funded plans carry a much larger risk (which can be mitigated with a stop loss add on), many employers choose this option as it saves them significant money. Larger firms typically choose self-funded plans. As of 2008, 89 percent of employees in firms with 5,000 or more employees were in self-funded plans.
Traditional fully-insured health insurance plan involves the company paying a premium to the insurance carrier. These premium rates are fixed for a year and are typically based on the number of employees enrolled. With fully-insured plans, the covered persons (e.g. employees and their covered dependents) are responsible for any co-payments or deductible amounts required for services covered by the policy. Small businesses with fewer employees are often fully-insured. As of 2008, 88 percent of workers in firms with between 3 and 199 employees had fully-insured health insurance plans.
PPO and POS Health Insurance Plans
When developing your employee benefits package, one of the biggest decisions is a choice between health insurance plans. Choosing between Preferred Provider Organization (PPO) and Point of Service (POS) will ultimately depend on the features you desire most in a health plan. PPO is a managed healthcare system consisting of a group of doctors and/or hospitals that provide medical service to an exclusive association or group. A PPO may be sponsored by one or more employers by a particular insurance company or by another type of organization. With PPO, there are limited out-of-pocket costs. However, there is less coverage offered for treatment provided by non-PPO physicians.
POS plans are also managed healthcare systems. Under a POS plan, there is no deductible and the employee is only required to pay a minimal co-payment when using a healthcare provider within the network. There are several key advantages of POS insurance, including greater options for physicians, and the freedom to go outside the POS network for treatment without having to consult your primary care physician (PCP). However, going outside your network will result in significantly more out-of-pocket costs. With a POS plan, it can be slightly trickier to get a referral for specialized care as you must consult with your PCP first.
HSA, HRA, and HMO Insurance Plans
Having the right health insurance plan can improve employee health and productivity. The most common types of insurance plan include HSA, HRA, and HMO plans. Health Maintenance Organization (HMO) health insurance plans typically require less out-of-pocket costs, but can have less flexibility in the choice of hospitals and physicians. With an HMO, you may be required to choose a PCP who will take care of most of your health needs. To see a specialist, you will need to obtain a referral from your primary doctor. With a HMO, you will likely have wider coverage, including more coverage for preventive services.
A Health Reimbursement Arrangement (HRA), also known as a health reimbursement account, is an employer-funded health benefit plan that reimburses workers for individual health insurance premiums and out-of-pocket health expenses. With an HRA, the account is funded completely by the employer, meaning the employee is not responsible for contributing any money to the account. Each year, the employer contributes a set amount to each worker’s HRA. The funds can be used towards any eligible HRA purchases.
Another option is a Health Savings Account (HSA). While not exactly a health plan, a HSA is a savings account that is typically used in conjunction with a high deductible health plan which pays for qualifying medical expenses. An HSA may be a good option for your employees if you want to provide them with greater control over how, when, what, and how much is paid for healthcare, would like them to save tax-free money for current or future medical expenses, or would like them to gain better control over the health plan. With a HSA insurance plan, any funds contributed to an account are not subject to federal income tax at the time of deposit.
Tips for Choosing Health Insurance
Whether you’re an established organization and are looking to switch health insurance plans, or are a new entrepreneur in search of the ideal health insurance for your growing staff, it’s important to choose your health insurance carefully. When selecting health insurance, be mindful of whom your employees are. If your workforce is made up of mostly young and healthy adults, you may want to choose a plan with a low monthly premium and higher deductible as these individuals are less likely to use their insurance on a regular basis. You may also want to take the time to see what your competitors are offering so you can gain an upper hand when it comes to attracting new talent.
When choosing a health insurance plan for your employees, take the time to really think about what plans could benefit their life, and in turn, create a thriving workforce. When an employer has the means to meet the healthcare needs of employees, attendance, motivation, and productivity is greatly affected. Whether you’re considering a PPO, POS, HSA, HMO, or HRA, you’ll want to learn the various benefits and downfalls of each. If you’re having trouble making a decision, contact the professionals at the Wilson Consulting Group for guidance.