Ranked by employees as the top affordable benefit that would entice them to stay at their job, group health insurance can help you draw and retain quality talent. The challenge is learning how to control healthcare costs, which can often seem overwhelming.
Healthcare premiums for the average family reached $19,616 in 2018, with another moderate increase expected in 2019. As an employer, you want to offer your employees the best possible healthcare at a manageable cost. Understanding how premiums are calculated can help you reduce healthcare costs and provide optimal benefits for your employees.
Who sets group health insurance premiums?
Each state has its own set of regulations for group health insurance, making where you do business one of the most important factors affecting your premiums. Insurance carriers calculate premiums based on applicable regulations along with your group's age, whether the employee is insuring an individual or a family, and tobacco use to calculate the premiums you pay for different plan types. Under the Affordable Care Act (ACA), an individual's health, medical history, or gender cannot affect their premium.
When searching for a health plan for employees, small businesses can benefit from the Small Business Health Options Program (also known as SHOP). This program provides qualified smaller companies options to offer employees quality health and dental care plans. Participation in SHOP is required to qualify for the small business healthcare tax credit, which can equal up to 50 percent of their healthcare costs. Managed online, the SHOP marketplace is a resource that offers a number of healthcare plan choices by state. If a business qualifies, it can enroll and administer the programs online.
Which healthcare costs are under your control?
Research from the Kaiser Family Foundation shows that the average employer contribution to healthcare single premiums is $4,953. Multiply this amount by your number of employees and you can see how even a small cost control measure can make a big difference to your overall budget. Some of the most important factors affecting costs are under your control as an employer, and carriers often structure their plan offerings around them. Here is a look at some of them:
- Carrier: Identifying the best insurance carrier for your business is a key component in managing cost. Your plan premiums may be higher or lower depending on your choice of insurance carrier.
- Deductible: Plans with high deductibles typically feature lower premium amounts, and vice versa. You can choose which plan or range of plans provides the best balance of coverage and affordability.
- Copay: Offering a plan with a higher copay amount may help to reduce plan premiums. Lower co-pays for participants usually translate into higher premiums.
- Prescription: Coverage for prescriptions may be offered separately from your company's main health insurance plan, or not at all. In most cases, the more your prescription coverage pays for generic to highly specialized name brand medications, the higher the premium amount.
Once you've assessed variables important to your group, including but not limited to those listed above, the next step is to choose a plan.
Types of healthcare plans
The two most popular plan types are known as a Health Maintenance Organization (HMO), and a Preferred Provider Organization (PPO), but there are other categories that affect what you pay for health insurance.
- Health Maintenance Organization: An HMO is a group health plan in which physicians and medical personnel can either work directly for the HMO or under contract to provide medical care to its members. A primary care provider must be chosen to provide and coordinate your care. There is often an emphasis on disease prevention and participation in programs for better health.
- Preferred Provider Organization: In a PPO, policyholders can use any medical provider in the PPO network and pay the co-payment amount for each regular service. If you choose to go to an out-of-network provider, you must often pay the doctor's fees directly and file for reimbursement from the insurance company at a greater cost. For that reason, the PPO system encourages its policyholders to see doctors and health providers within the system.
- Point of Service (POS): POS group insurance acts as a combination of an HMO and a PPO. You must usually use a primary care provider, but you can use other network health providers, when needed, without a referral. You may also use providers outside the network without a referral, but you will pay more.
- High-Deductible Health Plan (HDHP): The HDHP features higher annual deductibles and out-of-pocket maximums for single or family coverage than other traditional health plans. However, HDHPs are usually the most affordable option that employers may offer. Depending on the HDHP you choose, you may have the choice of using in-network or out-of-network providers. Using in-network providers will save you money. With the exception of preventive care, you must meet the annual deductible before the plan pays benefits. Preventive care services are generally paid as first-dollar coverage, or after a small deductible or co-payment.
- Health Savings Account Qualified High-Deductible Health Plan (QHDHP): Enrollment in a QHDHP is required to make deposits into a health savings account (HSA). For a high-deductible health insurance policy to qualify, the deductible and annual out-of-pocket expenses must meet specific IRS guidelines.
Managing healthcare costs at your business
Healthcare costs can be difficult to manage, which is why it’s important to take time to research additional options early in the year. Here are a few additional ideas for reducing healthcare costs and making the most of the dollars spent.
- Wellness programs: Companies that actively seek ways to keep workers healthy may reap the benefits in lower healthcare costs. Many low-cost wellness programs can be implemented relatively quickly and easily. Smoking cessation programs, fitness class discounts, or even an organized activity center in the office can encourage employees to get moving and stick with a physical fitness plan.
- Healthcare assistance services: Though it may seem counter-intuitive, offering additional healthcare assistance services can help manage healthcare costs over the long-term. Research the cost of an outside healthcare assistance service or ask your insurance provider if they offer any assistance services. Hotlines staffed by nurses or experienced personnel can help employees with basic health issues, specialist referrals, or even help with insurance questions. Programs that help manage asthma and other chronic diseases are another area that can benefit your workers, and may reduce employee healthcare costs over the long term.
- Deductibles and co-pays: Companies looking to reduce healthcare costs may consider changing current deductibles or employee co-pays. For employees who rarely visit the doctor, paying more per visit may be preferable to an increased healthcare premium amount subtracted from their bi-weekly paycheck. Understanding how your workforce uses health plans can help you choose a plan that works well for everyone. Deductibles and other forms of cost-sharing, especially for individuals or families with low income levels, could take up a large portion of a worker's paycheck.
Keep in mind that there's also some disparity between healthcare costs paid by workers in different industries and geographic locations. To make sure your plan is competitive and that you're spending your healthcare budget most effectively, you'll want to compare your costs to relevant data, when possible.
With many different types of group insurance offered through different carriers, it can be difficult to know exactly which plan will help ensure that you and your employees have the appropriate coverage.
The more options you explore when choosing an insurance plan, the closer you can match the insurance needs of your business and employees to your budget. Engage a dedicated insurance agent to help you determine the best way to control costs.
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