When you’re starting a business, there are a lot of decisions you have to make. What sort of business model will you use, will you rent or buy a building, and how will you handle the hiring process? But one of the big questions you’ll have to answer is what sort of group health insurance plan you’ll get.
Health insurance is one of the standard benefits employees expect their job to provide. But how do you know which sort of group health insurance plan is right for you? Read on to learn more about group health insurance and how the different plan models work.
What Is Group Health Insurance?
Group health insurance is a type of coverage provided by an employer or an employment group. An employer purchases and manages the insurance plan. They then offer coverage through the plan to employees or group members and their dependents or other immediate family members.
With a group health insurance plan, the risk of health expenses is spread across the entire company. Everyone pays a predetermined amount that covers routine expenses like check-ups and such, plus a little extra. That extra goes towards covering more major expenses like an employee’s dialysis or chemotherapy treatments.
How It Works
When you have a group health insurance plan, your insurance company pays for a portion of your employees’ medical care. If someone has a regular check-up, for instance, they may only have to pay $20 of the expenses for the appointment. This portion they have to cover is called a co-pay.
Once a patient reaches a certain point in their medical expenses, however, group health insurance will start fully covering some of their expenses. This amount is called their deductible, and it’s usually somewhere north of $1,000. If an employee winds up in the hospital for an accident or illness, this deductible is a small amount for them to pay compared to their full bill.
Advantages of a Group Health Plan
There are several advantages to having a group health insurance plan. First of all, the better your employees’ medical care, the fewer sick days they’ll have to take off. If someone can go to a doctor and get a flu test and a prescription for the proper medication, they may be able to get back to work within twenty-four hours, compared to several days without treatment.
However, having a group health insurance plan can also help improve your workplace culture. For one thing, your current employees will be more likely to be loyal to your company if their job there allows them to get excellent medical care. You’ll also be able to recruit better-quality employees if you can offer a competitive benefits package, including excellent health insurance.
Fully Insured Plans
There are several different styles of group health insurance plans, starting with fully insured plans. This type is a more traditional model that involves the insurance company taking on more of the risks associated with healthcare costs. They then charge your business an annual premium for the benefits the policy provides, and your employees pay some of that premium, in turn.
The insurance company uses several factors to determine what your particular company premium will be. This can include the size and average age and health status of your workforce. They may also look at which industry your company is in, what level of coverage you want, and your corporate claims history.
A self-funded plan is a model that places control over – and responsibility for – your plan in your hands. Whereas in a fully insured plan, your insurance company assumes the risks associated with health insurance, in a self-funded plan, you take on that risk. But you also have full control over the coverage and benefits you offer to your employees.
If you have a relatively healthy workforce, a self-funded plan can save your company some money. But if one of your employees is diagnosed with a chronic, expensive disease, you’ll be responsible for covering those expenses. Small businesses can go for a partially self-funded plan that involves certain cost limits after which your company isn’t required to cover expenses out of pocket.
Level-funded plans are similar to fully insured plans in that the insurance company assumes the risk of the health insurance plan. They assess your workforce based on a number of factors, including census data. However, they also base your rate in part on claims allowances, fees, and stop-loss premiums, as well as other features you want included in your plan.
Where level-funded plans really differ is that they can change premium rates every year. When your plan renews, your insurer will evaluate how many claims your company made during the year. If you made relatively few claims, your premium may drop, or if you had several expensive claims, it may rise.
Health Maintenance Organization
A health maintenance organization is somewhat like the country club of insurance plans. Under this model, your employees will pay for a specific set of health services through a list of approved providers. If an employee sees a provider outside of the network, they may have to pay the full bill for the appointment.
Health maintenance organizations can be a somewhat cheaper option for group health insurance since you’re only paying for a given set of services. However, this model does leave your employees at greater risk of having uncovered medical expenses. Certain specialists may not be included in your network, but an employee may have to see them and be forced to pay out of pocket for the expense anyhow.
Preferred Provider Organization
A preferred provider organization plan is something of a hybrid model of the health maintenance organization. Your plan will still have a specific network of care providers that it will cover fully. However, there will be more flexibility for your employees with this plan model.
Rather than having to foot the entire bill for appointments outside your preferred network, employees may have to pay higher copays or additional service costs. This allows you to take advantage of the lower costs of a specific network of providers. But it also provides your employees with more protection and coverage than a health maintenance organization offers.
High-Deductible Group Health Insurance Plan
If you’re looking for low monthly premiums for a group that doesn’t use a lot of health services, a high-deductible health plan can be a great option. As the name suggests, these plans have a relatively high deductible – sometimes in the neighborhood of $6,000 or $7,000. The tradeoff is that these plans also tend to have very low monthly premiums.
If you have a relatively healthy workforce, they may not pay a tremendous amount towards their deductible each year. Having lower monthly premiums can help them save money on their health insurance expenses. And while they will have to pay more out of pocket in the event of a catastrophe, they’ll still have the protection of a full health insurance plan in that event.
Health Savings and Reimbursement Accounts
Oftentimes, high-deductible health plans are paired with health savings accounts. These savings accounts are tax-free, and the money there can be used to pay for health expenses. If they choose, your employees can take the extra money they’re saving on their low premiums and put it in one of these accounts to help cover the higher deductibles.
As an employer, you can choose to help employees contribute to these accounts. A health reimbursement account works the same way as a health savings account, except that you are also contributing to the account. In combination with a high-deductible health plan, this can be a great way to get your employees affordable coverage.
Deciding on the Right Group Health Plan for You
There’s no one right answer to which group health care plan is right for you. You should take a look at your workforce and their overall medical needs. You also need to take a hard look at your budget and determine how much money you can devote to health insurance.
If you have a young, healthy workforce and your industry carries low health risks, high-deductible or self-funded plans can be a great option to save money. But if you have an older or less healthy workforce, or if your industry carries more health risks, you might be better off with a traditional plan. This will offer your employees the protection they need without exposing you to undue risk.
Learn More About Group Health Insurance Options
Group health insurance has become one of the standard benefits employers offer to their workers. Choosing which variety of a group insurance plan you want to offer depends on your specific situation. Evaluate your workforce needs and your budget, and you’ll find a plan that works well for your employees’ health, and your bottom line.
If you’d like to get more help managing your company’s group health insurance, check out the rest of our site at Your FundingTree. We provide growing businesses with budget-friendly employee benefits and group health coverage. Learn more about our group health coverage options today to start better protecting both your employees and your business.