The process of comparing employee health insurance plans is daunting for anyone -- and even more so for small business owners, who usually don’t have deep experience deciphering providers’ individual approaches to costs and coverage.
The system is undeniably complex. Numerous providers, brokers, consultants and other intermediaries all vie for a piece of the $3.5 trillion U.S. health care pie. And besides a monthly premium, or base cost, every group policy is defined by a plethora of terms that aren’t readily understood but are important considerations when choosing a plan.
Once you’ve selected an insurance partner you can trust, make sure to comparison shop before you select the health plan or plans you will offer your employees. Most employers choose a managed care plan, which includes preferred-provider organizations (PPOs), point of service (POS) plans and health maintenance organizations (HMOs). These plans, also known as comprehensive major medical plans, offer a network of preferred health care providers and are subject to the provisions required under the federal Affordable Care Act (ACA).
Since the whole idea of health insurance is to help pay for medical expenses, the extent of coverage is one of the first things you should evaluate. Plans that offer low premiums also may impose dollar limits on benefits or may not provide coverage for services that are mandatory for ACA-qualified plans.
When you’re deciding what plan to offer, consider how often your employees visit doctors and their general state of well-being. Even if your current coverage has been satisfactory, there may be newer options that allow you to offer several plans employees can choose from based on how healthy or not healthy they are or based on anticipated health events – such as impending childbirth – for which they know they’ll need coverage. It is important to compare costs and understand differences in benefits, networks, prescription cost structures, out-of-pocket maximums and other rules.
Generally speaking, low-cost plans are accompanied by high premiums. High-deductible plans may offer lower premiums, but they require employees to pay more out-of-pocket costs before the insurance company payments kick in. Depending on the plan, employees also may be required to pay a fixed dollar amount or fixed percentage of the cost for each health-related service they use.
Offering several kinds of plans to employees gives them freedom to choose the appropriate level of coverage for their individual situations. You don’t have to take a one-size-fits-all approach and find a single plan that attempts to meet the needs of all your employees.
The ACA mandates that companies with more than 50 full-time employees provide them with health insurance, and some states require employers to pay a specific portion of the monthly premiums. If businesses decline to provide coverage, they must pay a penalty – but for some companies, going this route is more cost-effective than providing insurance benefits would be.
Recognizing the recruiting and retention advantages they achieve, however, many small businesses elect to provide employees with insurance benefits. And, even when the law does not dictate employer subsidies, they choose to contribute enough to keep health coverage affordable.
If you have decided to provide coverage: As you consider how much of your employees’ health care costs you will pay, remember that premiums on small business plans are tax-deductible. Additionally, small businesses with fewer than 25 employees and payroll costs of under $50,000 per employee potentially qualify for tax credits of up to 50 percent if they purchase health insurance through federal government’s Small Business Health Options Program (SHOP) marketplace. These tax benefits can significantly reduce the cost of coverage.
Offering health insurance as part of your employee benefits package gives you a competitive advantage, reduces employee turnover and encourages your employees to take care of themselves. So, it’s worth the time and effort to analyze your options.
A professional employer organization (PEO) like Axcet can help. For small and mid-sized business owners, PEOs alleviate the burden of having to gather and compare health insurance information from multiple providers. They also can save small business owners money on employee benefits, and they can manage other human resources tasks like compliance, payroll and workers’ compensation.
Using a PEO to lower administrative burdens allows small business owners to focus on what they’re best at – growing their companies – while employment experts handle complicated issues like health insurance.