Does your company offer health insurance as a company benefit? If you do, then that’s great! If you don’t, is the cost one of the reasons? Yes, it can be one of the biggest expenses you have – it’s certainly not inexpensive. But if you hire employees, offering a health insurance plan may be the differentiator between the prospective employee saying yes to your offer of employment or saying no.

It’s a complicated service

“I’ve had health insurance for years”

Choosing a plan for you and your family is very different from choosing a plan for your business. There are a lot of factors that are part of the decision-making process such as:

• Choosing a plan type (i.e., HMO, PPO, and upgraded HMO)
• Deciding if the health insurance plans offered will include only medical or will include medical, dental, vision and prescription
• Choosing a plan for employees that are working in only one state versus choosing a plan for employees in multiple states versus choosing a plan that allows you to expand to other states
• Determining the federal requirements related to health insurance plans
• Determining if there are any state specific requirements related to health insurance plans
• Deciding if you want to do a self funded (or self insured) plan
• Deciding the co-pay and deductible amounts, which will affect the premium amount
• Deciding if you will pay part or all of the employee’s insurance premium or part or all of the employee’s and dependent coverage premiums
• Deciding when an employee becomes eligible to participate under the company’s plan (i.e., the first of the month following 30 days of employment or another timeframe)
• Deciding who is eligible for health insurance (i.e., full time employees only or full- and part-time employees)
• Deciding if you want to offer a Health Reimbursement Arrangement (HRA), which is a tax free employer-funded health benefit used to reimburse employees for healthcare expenses such as health insurance premiums, out-of-pocket medical expenses, or a combination of the two
• Deciding if you want to offer a Health Savings Account (HSA) , which allows employees to set aside money on a pre-tax basis to pay for qualified medical expenses.

These are just examples; your situation may have additional factors to consider.

Who pays for the premiums?

Another decision area is around who pays for the premiums. This is a key-factor in many small businesses. Some may be in the position to pay all of the premiums, while others might not be. What many business owners and decision-makers may not know is that employers can contribute a different amounts towards the premiums as long as it’s done in a non-discriminatory manner. For example, you can pay 100% towards the employee’s HMO premium and then contribute the same amount towards a higher plan premium with the employee paying the difference. You can also have the employee responsible for some or all of the dependent coverage premiums. There’s “no one size fits all” strategy.

Side note for business owners: if you want the company to pay 100% of your premiums and pay only part of the employee’s premiums, make sure your company’s documentation is set up correctly to avoid any accounting and legal issues. You should get advice from a professional with experience in this area before doing this.

Plan costs: OhEmGee! This is expensive!

Health insurance premiums have been rising for years. Businesses must review the new policy or plan renewals policies before selecting one (or more) to determine what they want to cover and where they can cut costs. It’s a balancing act.

Co-pays and deductibles play a big role in the premium costs. Whenever you look into getting or changing plans, you should get quotes for more than one plan level and from more than one company so you can do a cost comparison (e.g., higher premiums/lower deductibles and co-pays; lower premiums/higher deductibles and co-pays, etc) and also compare what the plan(s) cover.

This is where having more than one plan can be beneficial. You can offer a lower priced plan with fewer bells and whistles, and you can offer another plan that includes the kitchen sink. If you offer more than one plan, the monthly premiums and out-of-pocket amounts are usually what influences your employee when deciding which plan to choose. Be aware that company size may dictate if you can offer more than one plan.

What else influences the premiums?

There is another thing to consider when selecting a health insurance plan. This term may be known to business owners on their personal health insurance plans, but something they don’t know enough about to consider when selecting a plan for their organization. It’s called coinsurance.

In most circumstances, you and your employees will have to pay for services at some level when the plan commences as many insurance companies don’t start off paying at 100%. The policy holder or dependent(s) must either pays co-pays or must meet their deductible (which has to happen before the insurance company starts to pay). If there’s a deductible, then there is co-insurance that has to be paid after the deductible is met. A common one is 80%/20%. The plan covers 80% and the policy holder pays 20%, usually after the deductible is met. There are a variety of co-insurance percentages which will be included in the plan proposal. Changing the percentages will affect your premium rates, so if you need a lower rate one way to do this is to change the co-insurance amounts.

This is a great article explaining the differences between copays and co-insurance posted by Blue Ridge Risk Partners. Click here to read it. We know them well and have worked with them for over two decades. They are also one of our teaming partners and our go-to resource for health insurance services.

Need help with next steps or have questions about this topic?

Health insurance is a complex and confusing topic, and we just touched the surface on it. It’s also an expensive business expense…one that is tied to a 12-month contract than cannot be canceled except in extenuating circumstances. It’s important to make the best decision possible before you sign with a carrier.

If you don’t have an insurance background, it’s best to get outside support. We recommend working with a trusted, experienced broker who can help you navigate this changing industry. If you don’t have an insurance broker, or have one who may not be the best fit, reach out via the contact page and we can set up a call to talk. We can help find a solution that works for you and your company, and also make some introductions.

We’re also happy to answer questions about this post. Leave us a note in the comment section, or reach out on the contact page.