Group coverage is becoming more and more prevalent in the business world. If you’re not entirely sure what that means—this is the right place for you to learn. Let’s start with the basics: what is group coverage exactly, and how does it differ from individual coverage? Furthermore, what should you look for when choosing group policy coverage plans? Do you even really need them for your business?
The answer to that last question is almost definitely going to be “yes.” A group policy is almost always a good idea. Some companies think they’ll be able to cut costs by not offering benefits to their employees, and that’s sometimes true—but only in the short term. This is due to several reasons, each of which presents a compelling argument for group coverage. In this guide, we’ll examine some of the largest advantages to group coverage, as well as delve into the typical costs associated with it and a few tips on what to look out for when choosing a plan.
Boosting Morale and Lowering Risks
Want to guess what the biggest and best reason for providing group health care is? Okay, here you go: group coverage is essential because companies without benefits often fail to provide compelling incentives for their best workers to stay on. Think about it: would you feel much loyalty towards a business that didn’t let you get onto a good health plan? Probably not, right? You’d probably look for a better job where you felt more secure. There are many reasons why businesses should consider purchasing group coverage, but this one is likely to be the most compelling: you don’t want to lose your best assets by failing to provide adequately for them.
On the other hand, a business that offers comprehensive group coverage is more likely to retain it’s best workers. This can keep your hiring costs low, and save you the time it takes to keep replacing employees who quit to find better jobs. In fact, an attractive policy may do more than just keep your best workers on board—it can even bring new skilled workers to you, increasing your ability to stay competitive and strengthening your company.
A lot of people also forget that the health of your employees has a tangible impact on their performance. If your people can’t come into work because they’re sick, or if they’re always fighting colds at the office because they can’t afford to take a sick day or see a doctor, then their chances of managing to do their best work are pretty slim. Saving on the cost of a health plan isn’t going to save your business if everybody is too sick to work there. Group coverage can prevent your office from becoming a hive of contagion, and keep your people healthy so they can always deliver their best work.
Those aren’t the only reasons to look into group coverage, though. When it comes down to it, the pros outweigh the cons quite significantly. Here’s another area where having group coverage can benefit you, especially if you’re a small business:
Did you know that providing group coverage can often come back around to reward you during tax season? Well, now you do. In most cases, businesses can write off 100% of their expenses related to the provision of healthcare for employees or dependents. That’s a good enough reason on its own to look into group coverage, but it gets better. You can (if you’re smart about it), even set up your taxes in a way that saves money for your staff. Try rigging things so that your employees contribute to the health insurance plan before taxes. If you deduct the premiums for their checks before state or federal taxes, it lowers their amount of taxable income. As a result, they end up going home with more money in their pockets, which is an excellent way to increase their morale and motivate them.
If you’re a small business, you may also be eligible for health care tax credits under the Affordable Care Plan. These have been available since 2010 and can net you tax credits of up to 50% in some cases. To qualify, all you have to do is pay at least half of your employees’ premiums, and have fewer than 25 employees working for you who each earn under $50,000 per year on a full-time basis. If you can fit your company into that box, then congratulations: group policy coverage stands to be ideal for you.
Dealing with the Price
Okay, we’ve talked about why group coverage can help out your business, but you might have a couple of questions. Chief among them is probably this one: if group coverage is so great, why doesn’t everybody do it? The answer, of course, is money. People are concerned about the cost and often won’t make the investment even if it stands to benefit them in the long run.
The US Department of Health and Human Services published a report in 2012 that listed the average cost of an individual employee’s health care premium at a whopping $5,359 per year. That’s way too much to be cost effective—or so many businesses think. Before you decide that the big numbers are scary, though, consider the following: there is often a difference between the total cost and the amount that the employer pays. Just because you’re providing group coverage doesn’t mean that the expenses all have to fall on your shoulders.
In fact, most businesses share the costs of their health plans with their employees. How much is shared? Well, that depends on the plan that you choose (this is why doing some research before you select a plan can save you in the long run). Typically the employer pays between 50-80% of the employee’s premium. That might not sound like a big discount, but saving even 20% on $5000 makes a significant difference. If you’re still balking at the numbers, though, be advised that there are other options available where you may be able to get away with paying quite a bit less than 50%. You’ll just have to talk to somebody who knows what the best options are going to be for you. It’s also important to remember that whatever you end up paying as an employer is probably going to be deductible as a business expense, so this shouldn’t be a too large concern.
There are other ways to reduce the costs of group coverage too that don’t involve having your employees pay a higher share (which can be a bit of a downer for the people who work for you). If you’d like to lower the amount you’re paying without hitting them where it hurts, here are a couple of ideas:
Change the Benefits
Not every employee needs a comprehensive health plan with all the bells and whistles, so it stands to reason that not every company needs to provide one either. In fact, you can probably keep your employees satisfied with something reasonably low key, as long as it covers a couple of key areas. The best way to find out what to keep and what to cut when looking at the benefits of your group health plan is to do some research on the demographics of the people who work for you. You can’t snoop around for sensitive medical information about the individuals who work for you (we’ve all seen that episode of The Office, remember?). However, you can make some educated guesses about what kind of benefits will be most important to your workers based on some basic information, like their average age, level of activity, and lifestyle choices. As with most things, making good decisions in this regard just means paying attention and getting to know the people you employ.
HSAs with High Deductibles
Another idea is to offer a health savings account (or HSA) with a high deductible plan. These are usually a lot cheaper than standard plans, and can be funded by taking the money from their paychecks before taxes to pay for medical costs until the deductible has been reached. This can buy them some wiggle room while providing you with significant savings. It’s not a perfect choice for every business, though, so you’ll need to look into this option further and probably consult with a professional to determine whether it’s a good strategy for your organization.
How to Choose the Right Type of Plan for Your Business
Now that you know a little bit about why group coverage is a good idea and have a few tricks under your belt for coping with the costs let’s look into what exactly is available when it comes to different types of plans. It used to be that group coverage fell into two broad categories: traditional indemnity or “fee for service” plans and managed care plans. Traditional indemnity allowed patients to choose their doctors, pay for their care and then receive a rebate from their insurance company after the fact, whereas managed care involves the insurance company paying medical professionals directly for the services covered by the health plan. Today, however, traditional indemnity is largely a thing of the past. Just about every form of group coverage policy around now is for a managed care plan—but there are still several distinct subcategories of managed care, and it’s important to understand the difference. We’ve already talked a bit about HSAs. Here are the other most common options out there:
Health Maintenance Organizations (HMOs)
HMOs are popular because they tend to be easier to handle and organize than other forms of managed care. Generally speaking, HMOs provide a network of providers, ranging from doctors to technicians to preventative care specialists. Patients choose a primary care physician, who then refers them to appropriate specialists from within this network. There are occasional exceptions for emergency services, but having most providers under the HMOs umbrella allows for some bureaucratic advantages, such as predictable cost sharing.
Preferred Provider Organizations (PPOs)
PPOs tend to offer a wider range of available providers than HMOs, but this choice often comes at the cost of higher premiums, and the out-of-pocket costs tend to be less straightforward. It’s a question of “you get what you pay for” though, and many employees prefer to have access to a larger number of options, even if it means paying a little more. Of course, as a business owner, you have to weigh the advantages of a PPO for your employees against the price of using one.
Point-of-Service Plans (POS)
Make jokes about the acronym if you like, but POS plans offer a degree of flexibility that makes them highly attractive to many companies and employees alike. As in the case of an HMO, POS participants choose their primary care provider from within a network. The difference is that under a POS plan, employees can still venture beyond the boundaries of their network for the services they need—they’ll still have to pay most of the cost for doing this, but if they can get a referral from their primary care provider then this can be seriously mitigated. Think of a POS as a cross between the other two models discussed above.
Health Insurance Exchange Plans
The Affordable Care Act threw another option into the mix in 2014, requiring every state to establish an online marketplace where the owners of small businesses could benefit from health insurance. The philosophy behind this is that by bringing their buying power together, businesses can collectively lower the costs of group coverage. Coverage for Health Insurance Exchange Plans is split up into four levels, each of which accounts for a different percentage of the expenses. Bronze is 60%, whereas Silver is 70%, Gold is 80%, and Platinum is 90%. Once an employer decides on the level of coverage they’re willing to offer; their employees are free to choose any plan listed on the exchange under that category.
One of the advantages to these plans is that certain services must be covered by each package. Plans for individuals and small groups are required to provide for emergency services, maternity and newborn care, mental health support, hospitalization, laboratory services, prescription drugs, preventative wellness and several other indispensable services.
What to Double Check Before Choosing
We’ve covered a lot of information so far, but you still shouldn’t rush before choosing a healthcare plan for your company. Yes, they’re often excellent ways to keep your workers happy and your office productive. Yes, it is possible to reduce the costs of your plan with some careful and smart strategy. Yes, there are different options available out there so that you can find the best fit for your business. However, choosing a healthcare plan for your business is still a complicated procedure that involves a lot of fine print and red tape. To help make sure you don’t get tripped up when choosing a plan, let’s look over some of the little things that could help you make the right decision—or save you from the wrong one.
Check to See Exactly What Your Plan Covers
Don’t ever sign up for a plan until you’ve seen every single benefit associated with it. The worst thing you can do (especially as far as your employees are concerned) is assume that the plan you picked is going to take care of their needs when in reality it’s inadequate. Yes, the costs will go up when you increase the scope of the coverage, but that’s why strategy helps. As we said before, try to figure out what you’re going to need and what you won’t—then make sure the plan you’re interested in fits the mold.
Find Out Who the Providers Are
If you’re dealing with an HMO or a POS plan, you’ll want to assemble detailed lists of exactly what providers are covered by your plan’s network. If you don’t, you could be putting people at a significant disadvantage. Imagine having a pressing medical problem and not knowing where you can go for help because your boss hasn’t done their research? That’s not something you want on your conscience.
Double Check the Costs
This one’s common sense, but it’s still incredibly important. People need to have an accurate idea of how much they’ll be paying ahead of time, so that they can budget accordingly. Do yourself a favor and check the numbers twice, to make sure that the figures are correct and account for any startup fees or copayments you might have missed. You’ll be glad you did.
Research the Company’s History
Last but not least, you’ll want to make sure that the plan you’re going with is offered by a company you can trust. Check ensure that they provide high-quality customer service, look for testimonials from other satisfied clients, and find out how long they’ve been in operation.
When it comes to group coverage, there are many excellent reasons to go for it. \You just have to be careful and do your research. If you do, you’ll be doing your employees a favor and reinforcing your company’s odds for success. Refer to this guide often, and you should have more than enough information to get started.