When it comes to health care coverage, there are really only two options: individual and group health care plans. In this article, we're going to talk about the group coverage options that might be offered at large companies, and how small businesses can join together to offer group health care to their employees too.
Starting in October 2013, the Patient Protection and Affordable Care Act, also known as Obamacare, provides a new marketplace where individuals, families and small businesses can go to enjoy the benefits of group health care coverage. The protections offered under this law include:
The biggest advantage of group health insurance is lower cost. The savings are derived from the ability to spread the overhead expenses to administer a program over a larger number of participants.
Along with the insurance payments for medical services, there is back office work such as the processing of claims, collection of premiums, and telephone support. The more individuals covered in a plan, the easier it is to spread the cost of this support across participants. This is what makes group coverage so attractive to small businesses.
With larger groups, the total value of the account to the insurance carrier is greater. This means the plan is able to offer value-added benefits such as newsletters or specialized medical programs such as well care. This means larger groups can leverage their size to extract more value from their insurance providers.
There are two ways to view group plans. One way is through the lens of the business owner, the second is through the eyes of the participant. Small businesses are constantly balancing their ability to control costs and retain employees by offering competitive benefits. The plans available today provide individuals and small businesses with the opportunity to participate in group coverage in the following ways:
Within a given plan, there are often different types of health care coverage that can be offered to employees. Examples found in the marketplace today include indemnity plans, preferred provider organizations, and health maintenance organizations.
There are several variations of the above offerings, but most plans will contain the basic features described for the above three coverage types. For example, indemnity plans might have a cap on what they will pay a doctor based on a schedule of "usual and customary" fees.
It's important for policyholders and companies to understand the cost-sharing commitment within each plan. Typically, out of pocket costs are limited to:
Finally, there are several ways both individuals and small businesses can lower the cost of their health insurance premiums. The most important of which is to comparison shop.
Always seek quotations from more than one insurance company. When comparing quotes, it's important to understand both the coverage provided as well as the cost-sharing arrangements.
Business owners can help to control their cost of group health care insurance by transferring some of those expenses to employees. This is accomplished by increasing the employee's out-of-pocket costs through higher deductibles, copayments, and coinsurance. A second method is more direct, and involves sharing in the cost of the monthly health care premiums with employees.
Finally, there may be several income tax incentives, or benefits, that business owners may derive when providing health insurance to employees. Premiums paid are usually considered a business expense, and are fully deductible from federal income taxes.
Health Care Accounts or Health Savings Accounts provide employees with a way to set money aside using regular payroll deductions. This money is placed into an account on a before-tax basis, thereby providing employees with a way to pay for their out-of-pocket expenses on a before-tax basis. Unfortunately, this tax benefit comes at a cost. Participants are usually required to deplete this account or lose the money (use it, or lose it arrangement) each calendar year.
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