Purchasing health insurance for a business has a different set of rules than shopping for individual coverage. Group health insurance refers to a single policy issued to a group that covers all eligible employees and sometimes their dependents.
With group health insurance, the insurer’s risk is calculated differently than with an individual plan. Group health insurance rates are determined based on risk factors balanced over an entire group, using general information such as age and gender.
Business owners choose between several different types of group health insurance plans that offer varying levels of coverage and requirements. Here is a look at some of the most common types of group health insurance plans a business can purchase.
Health Maintenance Organization (HMO) Plans
An HMO is designed to keep costs low and predictable for plan participants. Under an HMO, a person has just one primary care doctor to coordinate their care for a more personalized doctor-patient relationship. HMO health plans also offer monthly premiums, deductibles, and copays that are generally lower than other plans.
Patients have access to a team of doctors and hospitals in their HMO provider network that helps limit expenses. An HMO network is usually made up of doctors, hospitals, labs, clinics, pharmacies, medical equipment vendors, and imaging centers. HMOs can also save employers on health care costs.
Preferred Provider Organization (PPO) Plans
PPO plans provide employees with the flexibility of choosing their doctors, hospitals, and other healthcare providers. This type of group health insurance does not require an employee to get a referral from the primary care provider (PCP) and workers can see providers out of the plan’s network.
However, this freedom to see any provider comes at a cost. PPO plans have higher monthly premiums and out-of-pocket expenses like coinsurance, copay, and deductibles.
Although PPOs offer a wide range of deductible options, a PPO with a small deductible is likely to be the most expensive of all health plans. In addition, these plans generally become more costly as employees age.
Exclusive Provider Organization (EPO) Plans
An EPO plan allows employees to use doctors and hospitals within the plan’s network. There are no out-of-network benefits, meaning employees that see providers out-of-network must cover the full cost themselves.
However, EPO plans are an excellent option for employees that do not want to get a referral to see a specialist. EPO plans are often more affordable than PPO plans.
The network of providers and medical facilities is often fairly limited with EPO plans. When employees stay in-network, they can enjoy minimal out-of-pocket costs.
Fully-Insured vs. Self-Funded vs. Level-Funded Plans
Employers looking to save money on group health insurance are often interested in learning about alternative options to group health care for employees. There are three main types of health care options offered by businesses, including the following:
Fully-Insured – Fully-insured health care is the most common type. The employee or the employer pays a premium to the insurance carrier and in return, the insurance carrier assumes responsibility for paying any future medical claims that are covered in the policy’s contract.
There is usually an out-of-pocket maximum that the individual or family must pay upfront for medical services with a fully-insured plan.
Self-Funded – Self-funded insurance refers to a structure in which a company provides the funds needed to pay for employees’ expected medical claims. The employer forms an “insurance pool” with the participants in the pool consisting of eligible employees.
Self-funded employers usually require reinsurance or stop-loss insurance that helps cover any claims that exceed the predicted expenses. Self-funded insurance is more common among larger businesses and can save employers a significant amount of money.
Level-Funded – Level-funded insurance is a popular option among both small and large employers. In simple terms, level-funding is essentially self-funding that is done on a smaller scale.
A level-funded health plan combines the customization aspect and cost-savings of a self-funded plan with the predictability and safety of a fully-funded plan.
There are benefits of level-funding for both employers and employees, including cost-savings, flexible plan design, and fewer regulatory requirements than traditional, fully-insured plans.
Speak with an Experienced Benefits Consulting Firm About Group Health Insurance
Offering group health coverage to employees is a major decision for any business that should not be taken lightly. However, choosing between the various types of group health insurance plans can sometimes be challenging.
When selecting a group health insurance plan, it is important to consider aspects like cost, flexibility, amount of coverage, and the age and overall health of the employees. To learn more about the types of group health insurance plans available to businesses or to speak with an experienced benefits consulting firm, contact New City Insurance today.