Employees often obtain health insurance coverage through their employer. This is known as group health insurance coverage and consists of numerous employees covered under a single health insurance policy. When employees are pooled together to acquire insurance coverage, they can enjoy lower premiums compared to individual health coverage as the risk is spread out among a group of members.
Although there are many benefits to acquiring group health insurance, it is not suitable for all businesses. There are several things that business owners should consider before deciding to purchase this kind of insurance.
Advantages of Group Health Insurance
Knowing what makes group health insurance a popular choice for businesses is the first step in deciding if group coverage is right for a particular business.
One of the biggest benefits of group health insurance is the cost savings to organizations and their workers.
Many employees cannot afford individual health insurance policies but can afford lower-priced group coverage for themselves and their families.
Business owners can enjoy certain tax incentives when they offer health insurance coverage to employees. These tax incentives are available to eligible employees in the form of a small business health care tax credit.
Employees can also enjoy certain perks when they enroll in an insurance plan. Group coverage often offers better plans than individual health insurance, and there can be more coverage for pre-existing conditions.
Employees are generally not required to undergo regular checkups, and there is no waiting period before coverage begins.
Offering group health insurance can also be an excellent recruitment tool for businesses. When undergoing the job search process, many candidates look for benefits like health insurance.
If competitors offer better coverage options, a business may lose an opportunity to bring new talent to its workforce. It can also help create a more positive work environment and, overall, more satisfied employees.
Problems with Group Health Insurance
With many options for health coverage on the market, business owners must analyze their unique situation to determine if group health insurance is the best option.
Although it is generally more affordable than individual policies, it can still be a major financial decision for small businesses.
Not all businesses can afford group coverage and may decide not to if they are not legally required to provide insurance to employees.
Some businesses may not have the time or workforce needed to administer and manage this kind of insurance effectively.
Group health coverage is not just a costly endeavor but can also be complex. Any business that chooses to offer coverage to employees must consider the renewal requirements, regulatory changes and other aspects that may require extensive time and commitment.
Companies that choose to provide insurance often have to hire a dedicated team to handle all aspects of coverage.
Not all businesses meet the eligibility requirements for purchasing an insurance policy. Insurance companies have minimum participation requirements that vary by state, but often times at least 70 percent of a business’s employees must agree to enroll before coverage is provided.
Small businesses may have trouble getting enough employees to participate in the coverage and businesses that face high turnover rates may encounter drops in participation rates.
When shopping for insurance, businesses may have difficulty finding a policy that fits the needs of all employees.
This is especially common in highly diverse workplaces with employees of all ages and with many different health conditions or injuries.
With a broad range of ages and unique healthcare needs, it can be tough to find a highly accommodating policy. Remember that there is no one-size-fits-all approach to insurance.
Alternative Options for Health Insurance
Group health insurance is a popular option for many businesses but it is not the only option available. Alternatively, small businesses may want to consider self-funded plans or health reimbursement arrangements.
Self-funding can be an effective way to save money as employers are responsible for paying claims out-of-pocket as they arise instead of paying the insurance company a predetermined premium for a group plan.
A health reimbursement arrangement is a tax-advantaged and affordable option where employers reimburse employees for any medical expenses or individual insurance premiums on a pre-tax basis.
Employees are responsible for paying the doctor’s office or insurance company directly. An employee then makes a claim to be reimbursed for the money they paid out tax-free.
Speak with an Insurance Professional
Group health insurance involves many complex components, such as deductibles, copayments, coinsurance and premiums.
Each policy is different and the amount that a business may pay for coverage is dependent on many factors, such as the number of employees. To learn more about insurance options or to speak with an insurance professional, contact New City Insurance.