Eddy’s HR Mavericks Encyclopedia
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Health Insurance Benefits
Understanding health insurance benefits and their pros and cons can take your company from good to great. Should your company offer health insurance benefits? How can you determine which kinds to offer? Continue reading to find the answers to these questions and more.
What Are Health Insurance Benefits?
Health insurance benefits can be a great convenience to your company’s employees. They help protect and maintain the standard of living for your workforce.
88% of employees rate health-related benefits as very important
Compensation and Benefits StatisticsThere are several health insurance benefits that a company can choose to provide. When a company decides to offer benefits to their employees, they must be aware of the costs along with how to be legally compliant.
Should a Company Offer Health Insurance Benefits?
Health insurance benefits can play an important role in a company’s retention strategy. They can be a deciding factor for job candidates looking for a role within your company and can provide tax benefits depending on the size of your organization.
Pros of Offering Health Insurance Benefits
- Retention. Survey results indicate that “56 percent of U.S. adults with employer-sponsored health benefits said that whether or not they like their health coverage is a key factor in deciding to stay at their current job.” If employers can provide a comprehensive and affordable benefits package to their workforce, they obtain a leg up on the competition and will be more likely to retain employees.
- Recruiting. Whether or not a company offers health insurance benefits may be a deciding factor for job candidates. Consider whether or not the competition is offering health insurance benefits and what kind. This could determine the types of benefits you choose to offer to both attract and retain employees.
- Tax benefits. Depending on the size of your company, you may be eligible to receive a small business healthcare tax credit that could be “worth up to 50% of the costs you pay for your employees’ premiums (35% for non-profit employers).” There is also a tax advantage for employees who pay pre-taxed premiums because they reduce their taxable income. For employers, money paid towards premiums is generally considered tax deductible.
Cons of Offering Health Insurance Benefits
- Cost. Although there are certain tax advantages for offering health insurance benefits, it is one of the largest employee costs that employers face in the United States. Companies also have to consider that they’ll deal with coinsurance and copayments when deciding whether or not to offer health insurance. The cost of insurance tends to increase over time. Processing claims and administering the benefits may require you to hire additional help in your HR department to manage health insurance benefits.
- Limited coverage. The plan you choose to provide to employees could offer a limited network, which might be insufficient for their needs. Additionally, if there are certain benefits you decide to carve out of your plan, you may run the risk of overlooking benefits that your workforce considers essential.
- Administrative complications. Managing benefit plans can be very complicated, especially when it comes to the size of your company. Larger companies that operate on a national level may find it difficult to manage multiple healthcare plans. Even though consolidating plans is an option, this can take a lot of time and administrative costs to accomplish.
Types of Health Insurance Plans
There are several types of health insurance plans to choose from. A few examples include a Preferred Provider Organization plan, a Point of Service plan, and a Health Maintenance Organization plan.
Preferred Provider Organization (PPO)
PPO plans offer employees a great way to view health insurance providers that are both in network and out of network. Although some services are covered out of network, employees should be encouraged to go to providers that are within network so they can obtain the service rates that have already been negotiated for them. If employees go out of network, they are more likely to pay larger amounts.
Point of Service Plan (POS)
Similar to the PPO, the POS plan allows members to obtain services within network at a negotiated rate. Although members on a POS plan have limited coverage towards locations out of network, the copay is generally larger. If they need to go out of network (for example, to see a specialist), employees need to obtain a referral from their primary care physician.
Health Maintenance Organization (HMO)
SHRM defines an HMO plan as, “A health plan that provides care through contracted or employed physicians and hospitals located in particular geographic or service areas. HMOs emphasize prevention and early detection of illness.” Since an HMO typically has narrower coverage compared to other health insurance plans, there typically isn’t a deductible and premiums are lower.
How to Determine What Health Insurance Benefits to Offer
Determining what kind of health insurance benefits to offer can be accomplished by understanding your employees’ needs and evaluating benefits on quality rather than cost. Consider working with a broker to help navigate the complex world of health insurance benefits.
Step 1: Understand and Evaluate Employees’ Needs
Although most companies offer basic health insurance benefits (such as medical, dental and vision), determine the benefits your company offers based on your employees’ needs. For example, you might anticipate specific benefits that fit their budget and lifestyle, such as the distribution of health services through telecommunication (telehealth). It’s also important to ensure that benefits are easily accessible through a broad network. If providers aren’t located anywhere near your employees, they will be less likely to enroll in coverage. Since a company benefits package plays a large role in attracting and retaining talent, consider the health insurance benefits that are being offered by other companies in your industry and area.
Step 2: Cost vs Quality
Picking health insurance benefits based solely on the cost for your company and employees may result in sacrificing quality. As you review deductibles, copay and other factors, take into account network coverage, different plan types and how the benefits help your company achieve your strategy. Sometimes paying a bit more can help your company achieve its long-term goals by focusing on quality over cost.
Step 3: Consider Working With a Broker
Due to the complexities of health insurance, you may consider working with a broker who can help you determine what benefits are ideal for your organization. Sometimes benefits that are personalized for your workforce can be difficult to find, but a broker (or health insurance concierge service) may be able to help you with a more tailored approach.
Topics
James Barrett
James has worked in the HR field going on 5+ years and has held various positions of leadership. His areas of expertise are in benefits, recruiting, onboarding, HR analytics, engagement, employee relations, and workforce development. He has earned a masters degree in HR, along with a nationally recognized SHRM-SCP certification.
Frequently asked questions
Other Related Terms
Eddy’s HR Mavericks Encyclopedia
Health Insurance Benefits
Understanding health insurance benefits and their pros and cons can take your company from good to great. Should your company offer health insurance benefits? How can you determine which kinds to offer? Continue reading to find the answers to these questions and more.
What Are Health Insurance Benefits?
Health insurance benefits can be a great convenience to your company’s employees. They help protect and maintain the standard of living for your workforce.
88% of employees rate health-related benefits as very important
Compensation and Benefits StatisticsThere are several health insurance benefits that a company can choose to provide. When a company decides to offer benefits to their employees, they must be aware of the costs along with how to be legally compliant.
Should a Company Offer Health Insurance Benefits?
Health insurance benefits can play an important role in a company’s retention strategy. They can be a deciding factor for job candidates looking for a role within your company and can provide tax benefits depending on the size of your organization.
Pros of Offering Health Insurance Benefits
- Retention. Survey results indicate that “56 percent of U.S. adults with employer-sponsored health benefits said that whether or not they like their health coverage is a key factor in deciding to stay at their current job.” If employers can provide a comprehensive and affordable benefits package to their workforce, they obtain a leg up on the competition and will be more likely to retain employees.
- Recruiting. Whether or not a company offers health insurance benefits may be a deciding factor for job candidates. Consider whether or not the competition is offering health insurance benefits and what kind. This could determine the types of benefits you choose to offer to both attract and retain employees.
- Tax benefits. Depending on the size of your company, you may be eligible to receive a small business healthcare tax credit that could be “worth up to 50% of the costs you pay for your employees’ premiums (35% for non-profit employers).” There is also a tax advantage for employees who pay pre-taxed premiums because they reduce their taxable income. For employers, money paid towards premiums is generally considered tax deductible.
Cons of Offering Health Insurance Benefits
- Cost. Although there are certain tax advantages for offering health insurance benefits, it is one of the largest employee costs that employers face in the United States. Companies also have to consider that they’ll deal with coinsurance and copayments when deciding whether or not to offer health insurance. The cost of insurance tends to increase over time. Processing claims and administering the benefits may require you to hire additional help in your HR department to manage health insurance benefits.
- Limited coverage. The plan you choose to provide to employees could offer a limited network, which might be insufficient for their needs. Additionally, if there are certain benefits you decide to carve out of your plan, you may run the risk of overlooking benefits that your workforce considers essential.
- Administrative complications. Managing benefit plans can be very complicated, especially when it comes to the size of your company. Larger companies that operate on a national level may find it difficult to manage multiple healthcare plans. Even though consolidating plans is an option, this can take a lot of time and administrative costs to accomplish.
Types of Health Insurance Plans
There are several types of health insurance plans to choose from. A few examples include a Preferred Provider Organization plan, a Point of Service plan, and a Health Maintenance Organization plan.
Preferred Provider Organization (PPO)
PPO plans offer employees a great way to view health insurance providers that are both in network and out of network. Although some services are covered out of network, employees should be encouraged to go to providers that are within network so they can obtain the service rates that have already been negotiated for them. If employees go out of network, they are more likely to pay larger amounts.
Point of Service Plan (POS)
Similar to the PPO, the POS plan allows members to obtain services within network at a negotiated rate. Although members on a POS plan have limited coverage towards locations out of network, the copay is generally larger. If they need to go out of network (for example, to see a specialist), employees need to obtain a referral from their primary care physician.
Health Maintenance Organization (HMO)
SHRM defines an HMO plan as, “A health plan that provides care through contracted or employed physicians and hospitals located in particular geographic or service areas. HMOs emphasize prevention and early detection of illness.” Since an HMO typically has narrower coverage compared to other health insurance plans, there typically isn’t a deductible and premiums are lower.
How to Determine What Health Insurance Benefits to Offer
Determining what kind of health insurance benefits to offer can be accomplished by understanding your employees’ needs and evaluating benefits on quality rather than cost. Consider working with a broker to help navigate the complex world of health insurance benefits.
Step 1: Understand and Evaluate Employees’ Needs
Although most companies offer basic health insurance benefits (such as medical, dental and vision), determine the benefits your company offers based on your employees’ needs. For example, you might anticipate specific benefits that fit their budget and lifestyle, such as the distribution of health services through telecommunication (telehealth). It’s also important to ensure that benefits are easily accessible through a broad network. If providers aren’t located anywhere near your employees, they will be less likely to enroll in coverage. Since a company benefits package plays a large role in attracting and retaining talent, consider the health insurance benefits that are being offered by other companies in your industry and area.
Step 2: Cost vs Quality
Picking health insurance benefits based solely on the cost for your company and employees may result in sacrificing quality. As you review deductibles, copay and other factors, take into account network coverage, different plan types and how the benefits help your company achieve your strategy. Sometimes paying a bit more can help your company achieve its long-term goals by focusing on quality over cost.
Step 3: Consider Working With a Broker
Due to the complexities of health insurance, you may consider working with a broker who can help you determine what benefits are ideal for your organization. Sometimes benefits that are personalized for your workforce can be difficult to find, but a broker (or health insurance concierge service) may be able to help you with a more tailored approach.
Topics
James Barrett
James has worked in the HR field going on 5+ years and has held various positions of leadership. His areas of expertise are in benefits, recruiting, onboarding, HR analytics, engagement, employee relations, and workforce development. He has earned a masters degree in HR, along with a nationally recognized SHRM-SCP certification.
Frequently asked questions
Other Related Terms
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