What Are the Common Types of Business Health Insurance?
Health spending in the United States continues to rise every year. In 2022, that spending was up to $4.3 trillion. Health care spending goes into things like hospital care, physician services, home health, and more.
Most people consider health insurance coverage to be a staple when it comes to work benefits. While smaller companies are not legally required to offer coverage, ones with over 50 full-time employees must. They can offer either one plan or a selection of health insurance options to choose from.
Here are some of your choices when it comes to business health insurance in the U.S.
Common Types of Business Health Insurance
There are four main options when it comes to group health insurance in NY. These are as follows:
• Preferred provider organization (PPO)
• Point of Service (POS)
• Health maintenance organization (HMO)
• Exclusive provider organization (EPO)
• HSA-eligible plans
Each type of plan has its benefits and drawbacks, and your business may prefer one over another. It’s important to understand those differences before you commit to any of them.
A preferred provider organization (PPO) health care plan offers the flexibility to go out of your provider network and see a specialist without a referral from a primary care provider.
Getting care outside your network gives you more options than other health plans, but that freedom comes at a higher cost. Out-of-network care typically costs more than if you stay in network and has higher health insurance premiums. Plus, reimbursement for out of network medical care is much lower than if you used a provider in network.
While not common plan type anymore, a point-of-service (POS) plan is similar to a PPO plan. A POS plan allows members to pay less for their care when they visit a medical provider inside the plan’s network. but also allows members to seek care out of network. To receive care outside of your network you must get a referral from your primary care physician and pay the extra cost for your out of network provider.
A health maintenance organization plan requires members to receive medical care in-network only and requires you to choose a specific primary care physician. Typically, your primary care physician coordinates most of the care you receive when you have an HMO. For example, you likely will need a referral to see a specialist. An HMO won’t cover your care if you go outside the plan’s network, except if you need emergency care. However, an HMO is more budget-friendly and has lower monthly premiums.
An EPO is similar to an HMO which requires you to stay in-network, but you do not need a referral from your primary provider. An HMO does not cover any out-of-network care except for emergencies. In other words, an EPO is not as strict as an HMO but not as flexible as a PPO.
Health Savings Account (HSA) are tax-advantaged accounts that let you save pre-tax dollars for future qualified medical expenses including copays, prescriptions, dental, vision care and much more. These plans have higher deductibles and usually have lower insurance premiums, but no medical expenses are covered until you meet your plan deductible each year. Funds that are deposited into an HSA grow tax-deferred and un-used funds roll over each year.
Small Business Health Insurance Options
Even though small businesses may not need health insurance options for their employees, there are plenty of options available. Some function better for much smaller groups, while others are great for scaling with your company’s growth.
Small Group Health Insurance
Small group health insurance is specifically made for companies with a lower number of employees. These employers pay a fixed premium for these policies and can pass on a portion of that cost to their employees. Employees handle copays and deductibles.
Plans that offer group health in NY are community-rated, which means all employees get the same rate regardless of age or gender. This motivates all of your employees to perform their best to earn their share of the benefits. Small employers also get access to certain tax benefits.
Individual Coverage HRA (ICHRA)
With ICHRA, an employer reimburses employees for their health insurance premiums and medical expenses. The employee can find their own individual health coverage outside of the company. Reimbursement only covers up to the agreed allowance amount and no more.
This is useful for smaller companies that don’t want to enroll in group plans yet. However, ICHRA is available for employers of any size.
Qualified Small Employer HRA (QSEHRA)
A QSEHRA is an IRS-approved benefit for smaller employers. It functions like an ICHRA except that employees don’t need a qualifying health insurance policy. In addition, employers have a cap on how much allowance they can offer.
The IRS sets minimum contribution limits for both individual and family coverage. An ICHRA has no minimum limits, and a QSEHRA has annual caps.
What this means for employees is that they have more flexibility in terms of health insurance options.
Self-Funded Health Insurance
Instead of paying exorbitant premiums and obeying restrictions, a small business may opt to self-insure. In this kind of arrangement, the business assumes all financial risks regarding healthcare benefits. They pay for each out-of-pocket claim as they come up.
The business will set up a trust fund for the money that will go towards these claims. Third-party administrators manage the claims and other filings. Businesses may also purchase stop-loss insurance to limit their risk.
Self-insurance is generally very risky, as large claims could endanger the business. Even though you can choose to use this policy for your small business, it works better for larger companies that can afford these expenses.
Smaller businesses may offer health stipends to help pay for medical expenses. In this model, a business may offer either a stipend in advance or reimbursements on medical bills. The employer has the option to approve or deny the amount.
This is a good idea for smaller businesses that can’t afford formal group health insurance in NY. However, employees must pay taxes on the amounts they receive as income.
Choose the Best Plan for Your Business
Good employee benefits should also be a priority if a business wants to succeed. That includes analyzing what your employees want and need and then picking the best health insurance option in your area. For smaller businesses, that might mean paying off their medical bills until you’ve had more time to grow your customer or client base.
HealthPlansNY was formed in 2005 to help small business owners save money and provide quality group insurance plans. Gain access to a variety of group and personal insurance options. Contact us today at: 914-633-1717 to get a free instant quote and learn more about our services.