In the United States, it’s estimated that approximately 26 million people still remain without health insurance. Although that number is at an all-time low, having 26 million people uninsured aren’t words you want to associate with the world’s richest country.
For business owners, providing employee health insurance can be quite a costly investment, which puts off many business owners from implementing a health plan in the first place.
However, even with rising healthcare costs, providing an employee health plan is an investment in the well-being of their business and employees.
Benefits of Employee Health Insurance
There are numerous benefits to providing employee health insurance for business owners.
- Access to quality healthcare. First, by providing employee health insurance, you’re helping your employees access quality healthcare when they need it. This is important because healthy employees are more productive and less likely to miss work due to illness.
- Attract and retain talented employees. Additionally, employee health insurance can help businesses attract and retain talented employees. When 55 percent of Americans are stuck with medical debt, not having employer-sponsored health insurance can be a deal breaker.
- Reduced costs. Finally, providing employee health insurance can help businesses lower their costs by reducing the amount of money spent on lost productivity due to sick leave or on replacing employees lost over benefits.
As a business owner, providing employee health insurance is one of the best investments you can make.
Types of Employee Health Benefits
Managed care is a type of employee health benefit in which the employer contracts with a health insurance company to provide healthcare services for their employees. The insurance company will then provide a network of care providers that employees can access.
Managed care is often viewed as a more cost-effective option for employers because they are relatively cheaper than other fee-for-service plans and offer a broader range of health coverage.
How Managed Care Works
Managed care companies, or the insurance company, contracts with a wide range of health specialists, such as:
- General practitioners
The hospitals and physicians contracted with the insurance company may sometimes have their offices in one location, and other times they’ll be located wherever they like. The second option allows these hospitals and physicians to see other patients that are outside the contract with the insurance company.
Employees under managed care will typically be required to select a general practitioner as their primary care physician from a list of contracted physicians. If an employee tries to use a doctor outside the insurance company’s network, they will not be covered for those specific services. Instead, employees must first visit their primary care physician.
The primary care physician will then either treat the patient in-house or refer them to a specialist who is also in-network.
Generally speaking, most people who hate filing claims and keeping records will love the managed care employee health insurance benefits. This is because all responsibility for paperwork falls on the doctors and insurance companies.
Managed care plans are also ideal for employees with large families. however, employees who suffer from an ongoing medical condition or have special needs will likely find managed care to be cumbersome unless their physician is already in-network.
Managed Care Pros
- Lower healthcare costs and greater healthcare access. When people use in-network physicians and hospitals for their care, services are typically provided at a highly discounted rate. Managed care plans also typically come with lower monthly premiums.
- Rapid in-network referrals. Managed care benefits come with a large network of providers. This means referrals can be made rapidly when a service or procedure is required. For example, an employee can visit their primary care one day and get a referral to a specialist the very next day.
- Lack of paperwork. Even though providers use varying systems, as long as they’re in-network, there’s no need to carry around medical records copies. If a patient needs to see an out-of-network provider, they would need to give prior authorization to have the appropriate medical records sent over.
- Easier access for large households. Having the appropriate level of healthcare means developing a relationship between patient and provider. It’s essential to establish a relationship so that the provider will have all the necessary information they need to make an accurate diagnosis. For employees with large families, it’s worth seeing the same doctor.
- A certain standard for quality of care with in-network physicians and hospitals. For a provider to contract with an insurance company and become an in-network provider, they must pass several authorization processes. This means providers only contract with insurance companies after they pass processes that ensure a certain level of patient care.
Managed Care Cons
- Limited access. Depending on your location, your managed care options may be extremely limited. Those that have coverage but no access to in-network providers, often become emergency room frequent fliers. While pricey, this happens because emergency room services can’t be denied.
- Strict rules. Managed care benefits come with strict rules—especially when selecting a doctor. For example, if you’re not satisfied with the care you receive, it may be next to impossible to find another in-network provider that ticks all the boxes.
- Test stacking. While this con doesn’t necessarily fall on insurance companies, it should still be mentioned. One common complaint about managed care is that some in-network providers may order unnecessary tests to maximize the bill. Other times, patients may complain about doctors refusing to order a test because it would involve sending the patient to an out-of-network provider.
- Privacy concerns. At the end of the day, medical providers need full, unhindered access to a patient’s medical files. For some patients, the lack of having to send in a separate authorization form can feel like a breach of their privacy.
Fee-for-service (FFS) is the more traditional payment method healthcare services use. FFS is a type of employee health insurance in which the employee pays a fixed fee for each medical service they receive.
Generally speaking, this type of employee health insurance is best suited for employees who are relatively healthy and don’t require a lot of initial and ongoing medical care.
Under fee-for-service, the employee is responsible for paying their doctor’s bill upfront and then submitting a claim to the insurance company for reimbursement.
There are two types of FFS employee health insurance plans:
- Point-of-service (POS)
An indemnity employee health insurance plan or a supplement to a health plan that allows patients to receive care from any provider without worrying if they’re in-network or not. With an indemnity plan, the health insurance company will cover a certain percentage of the patient’s healthcare costs, but the patient will be responsible for the remaining amount.
The percentage that health insurance companies will cover is determined by the average cost of service in the patient’s area. Patients who choose this plan will also likely pay an annual deductible and may have to pay upfront for healthcare services.
If the patient pays upfront, they’ll need to keep track of paperwork to submit a claim for reimbursement. This can be a lot of unnecessary paperwork and record-keeping.
This type of health plan is best suited for employees who prioritize being able to choose the provider they want without needing a referral or worrying about them being in-network or not.
One downside to indemnity plans is that they can be expensive, especially if the employee requires a lot of ongoing medical services.
A point-of-service (POS) employee health insurance plan is a type of FFS plan that allows employees to receive care from any provider and be covered—even if they have to pay more out-of-pocket.
Although healthcare plans will vary, most POS plans can be considered a combination of Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) plans.
Like managed care plans, employees will need to select a primary care provider (PCP) that’ll serve as their home base to help manage their healthcare needs. The PCP will then refer patients to specialists if required.
Employees on a POS plan also have the freedom to visit out-of-network providers without requiring a referral.
Generally speaking, POS plans offer lower healthcare costs if the providers are in-network, and any paperwork for in-network care will be taken care of. Any out-of-network care will result in higher healthcare costs and higher paperwork responsibilities, like managing bill payments and record-keeping.
Fee For Service Pros
- Full access to necessary care. As long as you can pay for the services, employees on an FFS plan can receive the medical care they need. This means employees don’t need to worry about getting a referral to see a specialist if their PCP or insurance company disagrees with how they feel.
- Limitless non-experimental treatments. With most FFS plans, employees have an unlimited choice of providers when it comes to receiving medical care. This falls under the indemnity supplement that gives you the option to use any tried-and-true treatments.
- Encourages the best possible care. When employees have easy access to their providers, the quality of care they receive is bound to improve. And in most cases, patients are more willing to open up to providers that they choose, whether it’s from extensive online research or a personal recommendation. FFS plans encourage providers to provide the best care they can because patients can leave and pick another provider at any time.
Fee For Service Cons
- Denial of care. In some cases, FFS plans can result in a denial of care. For example, if a patient doesn’t have insurance at all and doesn’t qualify for Medicare or Medicaid, and lacks sufficient funds to pay for services, then a provider can refuse their services. This situation typically occurs when dealing with private providers. Emergency room visits, however, cannot be denied care.
- Higher costs. If an employee chooses the indemnity plan, they may end up paying more for it. The higher payment can be from higher premiums or higher out-of-pocket costs in addition to any deductibles and co-insurances.
- Upfront costs. With FFS plans, some providers may require patients to pay upfront for the services rendered. In this case, it’s up to the patient to actively send in a claim to their insurance company and wait for a reimbursement check. In most cases, this can take up to 60 days, but it’s also not unusual for claims to take up to 12 months to complete.
- Lacks preventative benefits. Some health insurance plans come with covered annual preventative services. These services include annual physicals, eye exams, vaccinations, and well-being appointments. Unfortunately, most FFS plans don’t provide these benefits, and when they do, they may require an expensive copay.
- Significant out-of-pocket costs. It’s no secret that healthcare costs for Americans are running rampant. In 2020, the U.S. healthcare spending reached $12,530 per person accounting for 19.7 percent of the country’s GDP. With the FFS model, covered individuals and families risk spending more out-of-pocket, paying into the skyrocketing healthcare costs.
Choosing The Right Healthcare Plan
Business Owner Considerations
Not all business owners are legally required to offer health insurance to employees, but businesses with 50 or more employees must provide health coverage. There are four main factors to consider when shopping for employee health insurance.
- Number of employees
- Employee health plan options
Running a business is expensive, and it can be easy to write off health insurance as unnecessary. However, providing employee health insurance isn’t something to dismiss. It’s an essential part of running a successful business that people want to work for and stay with.
Group Health Coverage
Most businesses offer a group health insurance plan to eligible employees. This is because group health insurance is generally much more affordable than individual insurance and offers more coverage.
Cost is extremely important, especially when businesses need to trim the fat to stay within budget as much as possible. In 2021, the average annual premium of employee health insurance plans increased to $22,221. In the same year, the average annual premium for individual plans also increased to $7,739.
The same survey found that the average annual for employers was $16,253 for family coverage and $6,440 for individual coverage. That means employers only paid 73 percent and 83 percent respectively of the employees’ premiums.
Increased Job Satisfaction and Retention
Having a few employee benefits, like unlimited soda and snacks, isn’t enough to retain employees these days. And health insurance is a given. Offering affordable, comprehensive employee health insurance is one way to increase your business’s chances of attracting and retaining the employees you need.
Also, providing comprehensive health insurance is beneficial to having happy and productive employees. This is because employees that don’t have health insurance are less likely to pay out-of-pocket for routine preventive care like annual checkups or visit the doctor when they feel sick.
In turn, this causes reduced productivity and an increase in sick days and days off of work. Even if you’re self-employed, it’s vital to have health insurance set up to help protect yourself and your dependents against jaw-dropping medical debt.
Another benefit to signing up for employee health insurance is that you, as a business owner, may qualify for the Small Business Health Care Tax Credit. This tax credit can be up to 50 percent of what you pay for your employees’ premiums.
However, all of the following must apply to qualify:
- Fewer than 25 full-time employees
- The average annual employee salary is $56,000 or less
- The employer pays at least 50 percent of full-time employees’ premium
- The employer offers Small Business Health Options Program (SHOP) coverage to full-time employees.
Other Costs to Consider
Premiums aren’t the only costs to consider as a business owner. Other costs to consider include:
- Employee costs
- Out-of-pocket expenses
Time costs are often disregarded when considering employee health insurance. However, they’re one of the most important parts of finding the most appropriate health plan.
As a business owner, you will likely be spending countless hours:
- Searching for the most appropriate providers to stay within budget
- Understanding your employees’ current needs and foreseeing future needs
- Setting up the plan itself
- Educating employees about the plan and its options
- Reviewing your employee health insurance plan each year during open enrollment
Monetary costs will depend on the health insurance plan you choose, the plan type, if you’re covering employees only or employees and dependents, and the number of benefits you want to include.
Monetary costs will also include determining the percentage of the monthly premium you’ll contribute as an employer and third-party costs.
Third-party costs can include fees from using a broker or a professional employer organization. Deductibles are often overlooked when people notice low premiums. Every employee health insurance plan has a deductible.
This is the amount of money that the policyholder or anyone covered under the policy has to pay before insurance benefits begin. However, there are also exceptions to the rule. Some exceptions include things like a free annual check-up that you can get done before you hit the deductible.
Let’s consider a larger medical expense. Assuming the plan your employee selects has a $10,000 deductible and is facing a $20,000 medical bill, your employee will have to pay $10,000 towards to bill before insurance offers any support.
The remaining $10,000 will be covered by insurance, as stated in the policy. Typically, the coverage amount is a certain percentage of the remaining bill.
When selecting employee health insurance, employee considerations are very similar to business owner considerations.
Employees should consider the premium, deductibles, and out-of-pocket expenses. They should also consider how much of the premium the employer will pay and whether the health plan only covers an individual or if it also covers a family.
The first step is to take some time to consider the health needs of everyone that’ll be covered. This means understanding the different types of health insurance plans.
- Health Maintenance Organizations (HMO)
- Point-Of-Service (POS)
- Preferred Provider Organization (PPO)
- Exclusive Provider Organization (EPO)
These plans were briefly mentioned earlier, but the main differentiating factor is whether the plan offers out-of-network coverage or not and whether you need a referral to see a specialist.
The healthcare industry is already confusing as is, but there’s nothing you can really do about the industry jargon. It’s one of those things that you just have to learn and familiarize yourself with.
Understanding industry terminology is an essential part of choosing the best employee health insurance plan.
For example, employees need to understand commonly used jargon such as premium, deductible, out-of-pocket maximum, and copayment. Just because one plan offers a lower monthly premium doesn’t necessarily mean it’s the best choice.
Consider two options. One plan has a $100 monthly premium, and the other has a $10 monthly premium. Most people may only see that the cheaper monthly premium is 10 percent of the other and go with that. But what they may miss is that the $10 plan has higher deductibles, out-of-pocket maximums, and a high copay.
That would mean the “cheaper” plan would only make sense to otherwise healthy individuals and families.
In that case, employees would benefit from taking the time to ask themselves the following questions:
- Do you or your dependents frequently visit your primary care physician?
- Do you or your dependents frequently visit the emergency room?
- How important is mental health coverage to you and your dependents?
- Do you or your dependents have an ongoing medical condition that needs extensive care?
- Do you or your dependents get regular lab work?
- Do you plan on growing your family in the near future?
- Are you currently expecting a new baby?
The last step for employees when considering an employer health plan is to compare what’s being offered. Look at all the benefits, the in-network providers, and the total costs.
As mentioned earlier, employers, on average, pay 83 percent of an individual’s monthly premium and 73 percent of family coverage plans.
Where to Find Health Insurance Plans
When looking for employee health insurance plans, business owners can work with a broker. A broker is an insurance agent who represents multiple insurance companies and can help business owners find the best employee health insurance plans.
A broker can also help business owners understand employee health insurance jargon and explain the different types of plans they have available to them. Business owners can find a broker by conducting a quick Google search or by contacting their state’s department of insurance.
Private health insurance is one of the more common ways that Americans receive medical coverage. This type of insurance is coverage that’s provided by a private entity like Redirect Health.
Insurance provided by the federal or state government isn’t private insurance—it’s considered public health insurance. Employer-sponsored group health insurance is a common type of private insurance. This coverage may be available to an individual, or it may extend to the individual’s spouse and dependents.
Private health insurance is a good option for employees who want more benefits and don’t mind paying more for them.
Business owners can find employee health insurance plans privately by contacting an insurance company directly or by using a broker. When contacting an insurance company, business owners should ask about their employee health insurance plans and what’s available.
Business owners can also purchase employee health insurance plans through the Affordable Care Act (ACA) marketplace by searching Healthcare.gov.
This marketplace allows business owners and individuals to compare available health plans and enroll immediately online, in person, or over the phone. Healthcare.gov is available in most states, but some offer their own marketplaces to select from.
There are a variety of ways for business owners to find employee health insurance plans.
By working with a broker, contacting an insurance company directly, or using the Affordable Care Act (ACA) marketplace, business owners can compare and enroll in employee health insurance plans quickly and easily.
It’s important for business owners to consider all their options when looking for employee health insurance plans. The type of plan that’s best for one company may not be the best for another.
For example, Redirect Health stands out from other employee health insurance plans by offering a comprehensive set of care services, including:
- $0 copays on all routine labs and low-cost immunizations
- $0 copays with appoints for routine care and mental health care
- Affordable prescription drug coverage
- 24/7/365 concierge service
- A network with over 700,000 providers
- And more!
Redirect Health’s tailored packages make it easy for businesses to create healthcare plans for their employees without having to worry about being overwhelmed with too many options.
That’s why it’s important to ask questions and compare what different insurances have to offer. Business owners should also take the time to research all their options before making a decision.
The more they know, the better equipped they’ll be to make the right choice for themselves and their employees.