In survey after survey, employees rank health benefits as one of the most important things they look for in a job. Most employers offer health insurance, finding the favorable tax treatment benefits both the employer and the employees.
Did you know that employers with as few as two employees can buy group health insurance to cover employees and, if you choose, their dependents? We can tailor health coverage solutions for groups of any size. We work with the best health insurers doing business in our area and will work with you to find a solution that meets your needs and budget.
- Preferred provider organizations (PPOs)
- Health maintenance organizations (HMOs)
- Point-of-service (POS) plans
- Consumer-driven health plans, including health savings accounts
- Voluntary (employee-paid) health insurance
You can read more here about small vs. large groups and the various types of plan, including HMOs, high deductible and self-insured plans.
Small vs. Large Group Health Plans
The number of coverage-eligible employees determines whether you fall into the small group market or large group market.
Small group plans cover groups with 2-50 lives.
The Health Insurance Portability and Accessibility Act (HIPAA) requires insurers to write small group plans on a guaranteed issue basis. This means the insurer must cover the group, no matter what health conditions employees might have. Plans exclude coverage for a particular employee’s pre-existing health condition, but HIPAA limits that exclusion to no more than 12 months (18 months for late enrollees).
Large group health insurance:
Large group plans (51+ individuals) cannot exclude any employee who is eligible for benefits based on medical history. However, guaranteed-issue rules do not apply to groups of this size, so an insurer can deny coverage to your group based on claims history.
With all group plans, the employer typically pays for at least 50 percent of each employee’s monthly premiums, and employees pay the remainder. The employer can also contribute to premiums for dependent coverage, if it chooses.
Regardless of the size of your group, we can help you find a plan designed to provide the benefits your employees need to stay healthy, while controlling premium costs.
Group Health Plan Types
Preferred provider organization (PPO) plans:
PPOs are the most common type of health plan today. A PPO contracts with a network of doctors; plans typically reimburse a higher percentage of fees for in-network doctors. Members can use non-network providers but will have higher copayments. Plans usually include features to avoid unnecessary health expenditures, such as requiring pre-authorization for elective procedures or a primary care physician’s referral for visits to specialists. Most plans also include wellness or disease management benefits designed to keep your employees healthy and control your claim costs.
Health maintenance organization (HMO) plans:
An HMO requires members to use physicians within the HMO’s network; HMOs typically do not pay anything for out-of-network treatment, except in case of emergency. HMOs give your employees less flexibility in provider choice, but often cost less and involve lower out-of-pocket payments than other plans.
Point-of-service (POS) plans:
POS plans combine features of HMOs and PPOs. Most POS plans require members to choose a primary care physician from within the POS network, but allow them to use out-of-network specialists with a referral from a primary care physician. Co-payments will be higher for out-of-network services.
Consumer-driven health plans:
So-called consumer-driven plans aim to control healthcare costs by giving individuals more control over healthcare expenditures and by rewarding the ones who use their healthcare funds wisely. Most employer-provided consumer-driven health plans consist of a high-deductible health plan (HDHP) with a health savings account (HSA); however, health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs) can also be considered consumer-driven plans.
High-deductible health plans (HDHPs) with a Health Savings Account (HSA):
Only individuals with an eligible high-deductible health plans and no other health insurance can have an HSA. Either an employer or employee can fund an HSA. Employees can use account balances to pay for qualified health expenses; funds can accumulate from year to year.
This healthcare funding choice offers advantages to employers and employees. Employer contributions to an HSA are not considered taxable income; employee contributions are tax deductible. Withdrawals used for eligible medical expenses are not taxable to the employee; employees can also withdraw funds for other purposes (subject to a tax penalty). Funds accrue year to year and are owned solely by the employee.
Employees open and manage their own accounts, relieving employers of administrative duties. Employers or employees may deposit funds into the account (subject to maximums), giving employers flexibility. An HDHP might cost less than the employer’s existing group health plan. Please contact us for more information.
Self-Insured Health Plans
Larger employers might want to consider self-insuring. Self-insured employers pay for each claim, out of pocket, as it is incurred. This differs from a fully insured plan, in which the employer pays a fixed premium to an insurance carrier, which pays covered claims on the employer’s behalf. Typically, a self-insured employer will set up a special trust fund to pay claims and purchase special “stop loss” insurance to cover catastrophic or unusual losses.
Self-insuring isn’t for every employer, but it does offer a number of benefits. Federal law (ERISA) governs self-insured plans, so they do not have to comply with varying state health insurance regulations and benefit mandates. You can customize benefits to meet the specific needs of your workforce, as opposed to purchasing a “one-size-fits-all” insurance policy. You don’t have to pre-pay for coverage, improving cash flow. You maintain control over health plan reserves, enabling you to maximize interest income. And in most states, your plan won’t be subject to premium taxes.
Some self-insured employers also administer their own health plans, but many enlist the services of a third-party administrator (TPA), which can provide expertise not readily available in most HR departments. Our benefit specialists can help you determine if self-insuring makes sense for your firm.
Health Savings Options
In addition to health insurance, employers can choose from a variety of health savings options to either supplement or replace an insured or self-insured health plan. Any size employer can use these options.
Health reimbursement arrangements (HRAs):
An HRA is an employer-funded account that reimburses employees for qualified medical expenses. HRAs will work with any health plan, and employers can specify what types of expenses an HRA will reimburse. They can also opt to limit the amount of unspent funds employees can roll over from one year to another. Any unused balances revert to the employer when an employee leaves the company.
Healthcare flexible spending accounts (FSAs):
Also known as Section 125 Plans, FSAs let employees use pre-tax dollars to pay for healthcare expenses, reducing their taxable income and reducing the employer’s payroll. Employees elect how much of their salary to contribute, although most employers cap contributions. Unlike HRAs, FSAs are “use it or lose it” plans. This means that anything left at the end of the year goes to the employer to cover administrative costs.
Health Savings Accounts (HSAs):
Are tax-sheltered accounts from which consumers may pay HSA-specific qualified medical expenses. In order to enroll in an HSA, an individual must have a qualified high-deductible health plan, or HDHP, and no other health insurance. An employer can buy HDHPs for employees, or employees may buy coverage on an individual basis. HSAs may be funded by contributions from employers, employees or both; however, the employee opens and administers his/her own account. An HSA must be held at a qualified financial institution. Employees retain control of their HSA accounts. Unspent balances roll over from year to year and follow the employee to subsequent employers.
If you elect to contribute to employees’ HSAs, you may contribute an amount up to the HDHP deductible, subject to certain restrictions. The IRS considers employers’ contributions to an HSA qualified medical benefits, so they are excluded from employees’ gross income.