The Business of Health: An Overview Guide to Employee Health Coverage

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As a small business owner, you know how important it is to provide your employees with high-quality, affordable health insurance coverage tailored to their needs. Health care benefits are one of the most important components of an employee’s compensation package. 

By offering health insurance to your employees, your business will appeal to the most qualified employees and retain them for a longer period of time. It may even surprise you that finding affordable health insurance for your employees can be incredibly simple.

Small business owners can investigate whether they will be able to offer these coverage options for their employees. Health insurance benefits are typically essential for employers to compete with other businesses and to avoid penalties issued due to health insurance reform.

By providing preventative care, your health insurance plans can contribute to work-life balance. Employees without health coverage may not receive preventative care or have their yearly physicals, which might make them need to take extended leaves of absence.

Most company-provided health benefits include an employer contribution and an employee contribution that is pre-taxed. 

Group Insurance Health Plans

A group health plan provides medical coverage through a healthcare insurance policy, reimbursement, or other means to employees and their dependents. These plans might be initiated by either an employer or by an employee organization.

Employees receive health insurance coverage when an employer buys health insurance on their behalf and that of their dependents. This type of insurance is typically referred to as group health insurance or full health insurance.

In most cases, group health insurance policies are provided at reduced costs since the insurer’s risk is spread across many policyholders. Group health insurance policies cover many people and when they contract for health insurance, it doesn’t limit them to individuals working for their company.

Employers can purchase individual health insurance plans or group insurance plans, which are offered to their employees. Some even offer wellness programs as part of the overall package. Individuals may only purchase individual health insurance plans. Employee health insurance plans are valid with a minimum of 70 percent participation. 

When the company has chosen a plan, members can decide whether they would like coverage. Depending on the type of plan chosen, plans may be classified into tiers (like gold, silver, bronze editions) that offer basic coverage and advanced plans with add-ons.

Provide your employees access to group purchasing. Even if you refuse to contribute to the health insurance of your employees, you can still ensure that they have access to group rates through your business. 

Health Reimbursement Arrangements (HRAs)

Health reimbursement arrangements (HRAs) are tax-favored options to traditional health insurance that allow employers to reimburse their employees for their individual insurance premiums and medical expenses on a pre-tax basis.

An employment-based HRA is an IRS-approved, employer-funded benefit that reimburses employees’ medical expenses and health insurance premiums that they incur out of pocket.

HRA plans allow employees to pay an insurance company or physician directly, then submit a claim for tax-deferred reimbursements. A company may offer one reimbursement amount to seasonal employees and another amount to part-time employees, helping get the total benefit spending to a manageable level within the business. 

Due to the affordability of individual health insurance when compared to group health insurance, many employers find that offering employees HRAs, which can be used to purchase individual health insurance, is a good alternative for employees to have flexibility and control over their health care costs.

The HRA was put in place to help small businesses manage the complexity and cost of group health insurance, which is often one-size-fits-all and too costly. Employee eligibility requirements can be outlined by the company, as long as all employees are enrolled.

Who’s covered by employer-paid insurance?

Employer-sponsored health benefits provide coverage for medical expenses and will usually include medical insurance paid for by the employer on behalf of the employees. This is usually the cornerstone of a comprehensive employee benefits package.

Today’s current health insurance market has changed drastically, which makes it easier and more affordable than ever for individuals to choose an affordable medical plan that’s right for them and their families.

With employee group health insurance, the group health plan may cover any dependent of an eligible employee. In addition to spouses and children, dependents include someone living with them, based on the employees’ circumstance, in certain cases not married couples. 

Enrich your benefits package with additional products. Adding health savings accounts, along with other spending accounts, allow your employees to control their medical expenses when they are offered a high-deductible health plan.

Self-Insurance Health Plans

A self-funded plan, otherwise known as self-insured insurance, is an insurance plan where an employer accepts financial responsibility for providing certain health plans for their employees.

There may be more flexibility with self-funding plans than with fully-insured, traditional plans. These kinds of plans are subject to fewer regulations, as well as providing businesses with a unique opportunity to customize their health care plan to meet their business’ specific needs. 

The fact that companies are only responsible for the individual health care costs of their own employees may result in them having money left over at the end of the year that they can spend on other business needs.

To avoid paying excessive premiums and the restrictions of group health insurance, some small businesses elect to purchase self-insured individual health policies from independent insurance companies.

Are there any risks to self-insurance health plans?

When businesses self-insure, they bear the financial risk of providing health care benefits to their employees. The business instead of paying a monthly premium to the insurer pays when an employee’s out-of-pocket insurance claim arises.

A self-funded health insurance program can help small businesses save money, especially in administrative costs. Trying to insure oneself can be risky in the sense that the substantial claims can outweigh the savings that can be accumulated. This is one of the reasons why larger businesses tend to self-fund health care.

Employee benefit programs are available from many employers and employee associations. An employer may choose and agree to provide health insurance and extend it to his or her employees and their dependents. 

If you need more information about how to obtain a healthcare plan, you should speak to a professional benefits consultant.

Vhanessa Hair writes and researches about health insurance for the insurance comparison site, TheTruthAboutInsurance.com. Vhanessa is passionate about helping businesses properly protect their employees.