When looking at all of the healthcare benefit options available, your head might start spinning. Here is a simple list of questions to ask, and get answered, when making a decision.
1. What is the cost share?
How much you can afford to pay toward your employees’ healthcare premiums is really the most important question. After figuring out what you and your business can afford, you may be priced out of certain healthcare networks or plan types.
2. What is covered?
You will often sacrifice broader coverage for lower monthly premiums. Here’s the best way to look at it: the more coverage that’s offered, the more your employees won’t need to worry about any recurring or acute health issues. The lower the monthly premium, the less coverage they have, meaning that a recurring health issue or a catastrophic health issue could cause your employees a lot of stress.
3. How extensive is the health care provider network?
A lower monthly premium typically translates to a smaller list of doctors that are considered “in network,” causing your employees to spend less out of pocket.
4. What is the plan type?
Health insurance is not a one-size-fits-all proposition. A variety of acronyms make up your choices: HMO, PPS, POS, and EPO. The general consensus is that the HMO plans (Health Management Organizations) are the budget option, while PPOs (Preferred Provider Networks) are the BMW of plans. POS and EPO plans fall somewhere in-between the two. More details can be found here.
5. How much are deductibles, co-pays, co-insurance, and premiums?
We’ve been discussing premiums throughout this article: they are the monthly amount that you and the employee pays for the health insurance plan. However, there are other costs that should be considered as well.
A co-pay is the out-of-pocket amount someone pays for an office visit with any physician or specialist. This is a flat rate that doesn’t change during the calendar year. A co-insurance is also an out-of-pocket cost, but it’s calculated by using a percentage of the appointment’s cost, and it’s not a flat rate. A deductible is a set amount of money that the employee must spend before the insurance plan will cover all or most expenses, with little to no cost to the employee.
Typically, co-pays and co-insurance paid out of pocket counts toward the deductible, as does anything spent for prescriptions. Deductibles can range from zero to $10,000, $15,000, or more.
6. What benefits do you and your employees absolutely need?
You are not legally allowed to ask your employees about their medical history, but you can make some assumptions regarding how much coverage might be needed. If your employees are generally young and relatively healthy and single, then less coverage (and a lower monthly cost) might be sufficient. If your employee base is a bit older, married, or has small or teenage children, then more coverage might be preferred. You can ask your employees things such as, “Would you rather pay a lower monthly premium vs. a lower deductible?”
7. What is the reputation of the insurance company?
Make sure to take a look at customer reviews, ask other small business owners you know, and check to see how financially viable the organization is before making a decision. Gut feeling also isn’t a bad measure—if you don’t like the way they treat you when you’re first asking about plans, or you find their website confusing, those issues will definitely not go away once they are dealing with your employees. Those issues can cause your employees massive amounts of stress if they need to interface with the company at all.
Integrate health insurance premiums into payroll
Health insurance premiums can either be deducted from an employee’s salary pre-tax or post-tax. Pre-tax saves the employee money in the long run, as the healthcare costs are removed from gross payroll and not subject to any federal, state, social security, or Medicare taxes.
In most cases, employees who participate in employer health insurance plans have their deductions taken pre-tax. In order to make sure that you are in compliance with federal law, your employee health benefits plan must be compliant with IRS Code Section 125.
Post-tax deductions are normally calculated for employees who choose their own health insurance plans and opt-out of their employer’s pre-tax option.
Make a decision that best fits your business and employees
Based on all the considerations listed above, it’s easy to see how small business owners will need to devote a significant amount of time to vetting the different group health insurance options available. It’s important to remember that this won’t be a snap decision to make, and you don’t want it to be. You will be making a significant financial commitment, and it makes sense to take time making that decision.
Moreover, it’s important to get it right the first time. While it’s possible to switch plans during the open enrollment period (which typically falls around November, December, or January), changing plans means you and your employees may need to find new doctors and adapt to the ins and outs of a brand new company. That can be highly annoying and stressful, too.
Offering your employees health insurance benefits makes you competitive in the job market, improves employee morale, and can qualify you for tax breaks. It’s worth getting it right when you’re making such a huge decision that affects everyone on your staff.