Employees are the engine that keeps your business going. So it makes sense to keep them happy with the right group health insurance. A study of more than 700 employees revealed that happy employees are 12 percent more productive on average. More productive employees could mean better business performance, which could then lead to more revenue. With more revenue, you may be able to hire and retain more top talent. You can call it the “wheel of business.”
Offering group health coverage is just one spoke in the wheel that can make for a more satisfied workforce. There may be other perks your business provides that keep employees excited about coming to work. But with health insurance being the most valued employee benefit over a pay raise, according to a Glassdoor Employee Confidence Survey, a group health policy that meets your employees’ needs could have a positive impact that trickles down to the overall climate and productivity of your workplace.
Why Getting Health Benefits Right Matters
A 2016 benefits trends and attitudes study from a major supplemental health insurance provider reported that employees who are happy with their health insurance benefits are inclined to be 96 percent more satisfied with their jobs compared to employees who aren’t satisfied with their health benefits. Employee satisfaction is a result of “motivation factors,” while dissatisfaction is a result of “hygiene factors,” according to the Motivation-Hygiene Theory created by psychologist Fredrick Herzberg. By offering group health benefits, you help to create overall motivation among your staff.
The same 2016 benefits trends and attributes study also reported that employees are less likely to look for a new job in the next 12 months when they’re satisfied with their benefits, which may include group health coverage and supplemental benefits like dental and vision. This makes getting health benefits right an important factor in employee retention because turnover can be very costly. The cost to replace an employee is typically a percentage of that employee’s salary, which can vary greatly. For example, a study from the Center for American Progress revealed that the turnover cost for an employee who earned $30,000 a year or less was 16 percent of that employee’s salary, but the turnover cost could go up to 30 percent of an employee’s salary if that employee earned $75,000 a year or less. Based on these figures, it could cost between $4,800 and $22,500 to replace an employee.
When it comes to a company’s ability to attract the best talent by offering health insurance, larger firms with 200 or more employees may have an advantage because 98 percent of these firms offer health benefits compared to 56 of smaller firms with 3-199 employees. Small employers may be able to better compete with larger firms by including group supplemental health insurance in their health benefits package. Supplemental health insurance does not provide major medical coverage, so by itself, it probably wouldn’t provide an advantage over larger companies in recruiting top talent. You can think of group health insurance as the cake and supplemental health benefits as the icing—the goal is to make a great tasting cake (attractive health insurance plan) and then make it even better with icing (supplemental health coverage).
Statistics on Attracting and Retaining Employees
Small business owners often perform several roles, which may create a greater need to find and keep the right candidates to take on some of those roles. So it’s no surprise that 87 percent of small employers say offering health insurance is very important for recruiting and retention. Although health coverage isn’t the only employee benefit that can help attract and retain the best talent, a Global Benefit Attitudes Survey from Towers Watson revealed that employees chose health insurance over retirement benefits as the main reason why they joined and have stayed with their current company. This chart shows the percentage rate at which employees value these benefits throughout different years that the survey was conducted.
|Health Insurance Benefits||Retirement Benefits||Health Insurance Benefits||Retirement Benefits|
Source: Towers Watson 2013/2014 Global Benefit Attitudes Survey – U.S.
Types of Group Health Insurance Plans
Your employee benefit package could include just one group health plan or more than one option depending on your business needs and budget. You can offer a managed care insurance plan, a traditional health insurance plan, known as indemnity insurance, or a high deductible health plan. Each plan has pros and cons. But the positives could outweigh the negatives if it fits with how employees use their health insurance, and if it provides you with a cost-effective solution based on the needs of your group.
Managed Care Health Insurance Plans
Managed care health insurance—such as a PPO, HMO, or POS plan—is organized through a managed care plan administrator, known as a plan sponsor. A plan sponsor serves as a type of “middleman” between the health insurance company and plan enrollees. Plan sponsors perform several functions, such as working with providers to offer more outpatient services, making procedures like claims filing less complicated, and helping to reduce administrative costs. These functions can serve as an advantage to both business owners and employees. Business owners may have lower administrative fees for offering managed care group health insurance plans, and employees may be able to get access to a broader range of in-network care with more ease of use.
Preferred Provider Organization (PPO) Plan
A PPO plan is the most popular type of managed care insurance among employees at small companies with 3-199 workers—51 percent have PPO coverage. A PPO plan combines some elements of an indemnity and an HMO insurance plan. Like indemnity coverage, a PPO plan sponsor pays providers on a fee-for-service basis. Like an HMO, it has a network of providers. Some of the pros and cons of PPO coverage include:
|Members can visit both in-and out-of-network providers.||Members may have to pay out-of-network providers directly and then submit a reimbursement claim.|
|Members get services at a discounted rate for using in-network providers.||Less coverage is provided for out-of-network services.|
|Broader network of physicians and hospitals.||Employee premiums are usually higher than most other plan types.|
|No referral needed from a primary care physician.||Employer premium contributions are usually higher than they are for HMO or POS plan types.|
Health Maintenance Organization (HMO) Plan
Employees enrolled in an HMO plan must choose a primary care physician (PCP) who coordinates all medical care. One of the main differences between an HMO and a PPO plan is that HMO members usually don’t get coverage at out-of-network providers; unless they’re traveling or have an emergency. Other advantages and disadvantages of an HMO plan include:
|Having a PCP helps reduce unnecessary medical care and keep costs down.||Members must visit their PCP first for all medical care.*|
|Members don’t file claims because the plan pays providers directly.||Referral needed from PCP to see a specialist.*|
|Usually has lower out-of-pocket costs for premiums and copays than most other plans.||Providers, including pharmacies, are limited to a geographical area.|
* Except for routine care at an in-network gynecologist or obstetrician and emergency room visits.
Point of Service (POS) Plan
This type of coverage is a hybrid of an HMO and a PPO plan. Like HMO members, those with POS coverage must select a PCP. They usually also need a referral to see a specialist. Like those with a PPO plan, POS members can choose to go outside the plan’s network for care. Listed are some more pros of cons of having a POS plan.
|Plan pays more for out-of-network care if PCP gives a referral.||Members pay more if they choose to go out-of-network without a referral.|
|No deductibles for in-network care.||High deductibles for going out-of-network – some services may not be covered outside the plan’s network.|
|Nationwide coverage – an advantage for members who travel a lot.||Members may need to submit all claims paperwork themselves.|
Indemnity Health Insurance Plan
This type of plan is known as traditional health insurance or fee-for-service (FFS) insurance because this was the health coverage that was commonly available prior to managed care plans. Indemnity group health insurance has become less common among employers, as managed care plans have grown in popularity. With this type of plan, healthcare providers determine the fees to charge. Members pay a percentage of those fees (20 percent, for example), and the insurance company or self-insured employer pays the rest (80 percent for instance). Below are some of the pros and cons of an FFS plan:
|More flexible than other plan types because members can visit any provider they choose.||This flexibility typically makes out-of-pocket expenses higher.|
|Can include a PPO option that offers members lower out-of-pocket rates.||PPO availability depends on the plan’s service area.|
|PPO option typically covers more preventive services.||Less preventive services are covered without a PPO options.|
|With a PPO included, members have less paperwork and may not have to files claims.||Without a PPO option, members typically need to pay providers directly and file all claims themselves.|
High Deductible Health Plan (HDHP)
An HDHP is known as a consumer-directed health plan because it’s designed to give consumers some control over how they use healthcare dollars. Employers often offer an HDHP with a health savings account (HSA), which allows employees to use pretax dollars that are automatically deducted from their paychecks to fund their HSA. Employees decide how to use funds to pay for out-of-pocket healthcare costs. As long as HSA dollars are used to pay for eligible health-related expenses, no taxes are charged on those funds. Some other positives and negatives of an HDHP/HSA are:
|Can choose how much money from paycheck to fund an HSA.||The IRS has maximum limits on how much money can be in an HSA each year.|
|Monthly premium typically lower than other plans, which also makes employer premium contributions less.||Deductible usually higher than other types of plans.|
|No “use it or lose it” policy – unused funds can roll over to the next plan year.||Not typically the best plan for those who need frequent medical care because of high deductible.|
|Can withdraw funds for non-medical expenses with no penalty if over 65.||If under 65, a 20% tax penalty is charged for withdrawing funds for non-medical expenses.|
To see rates for average employee premiums and deductibles by plan type, check out this related article on small group health insurance.
Types of Supplemental Group Health Insurance Plans
Two of the most popular types of supplemental group health plans are dental and vision insurance. Other types of supplemental insurance, also called voluntary health benefits, available to small business groups include short-term and long-term disability insurance. Small businesses have a lot of room to stand out by offering these benefits. Among small employers with fewer than 50 employees:
- 26 percent offer dental benefits
- 14 percent offer vision insurance
- 26 percent offer short-term disability coverage
- 20 percent offer long-term disability benefits
Like major health insurance, dental coverage is also available as a managed care or indemnity fee-for-service plan. You can offer managed care dental insurance through a preferred provider organization (PPO) or dental maintenance organization (DMO).
- PPO Dental Plan: In terms of cost, a PPO dental plan is usually the middle ground between a DMO and an indemnity plan. A PPO plan usually covers 100 percent of the cost for routine exams and cleanings. Other advanced oral care like crowns and root canals are covered at a lower percentage. The plan provides coverage at both in- and out-of-network dentists, but members pay more out-of-pocket costs for using dentists outside the plan’s network.
- DMO Plan: Like an HMO, DMO plan enrollees must choose an in-network primary care provider (dentist). This type of plan is usually the most affordable dental insurance. In most cases, there is no annual deductible and no annual limit on how much the plan pays toward the costs of covered services. Some services have no out-of-pocket charge while others require a copay.
- Indemnity Fee-for-Service Dental Plan: This type of supplemental group health insurance plan is the most flexible because members have the freedom to visit any dentist. But having this plan usually costs more than the other types. Patients pay the full price of dental care directly to the provider at the time of service. After patients receive their receipt, they can then file a claim to get a reimbursement from the insurance company.
Supplemental vision insurance plans also work through provider networks with the option for members to get a lower percentage or dollar amount of coverage at out-of-network providers. Depending on the plan, members may pay a copay for certain services. Some plans may cover the full cost of in-network routine eye exams and standard eyeglass lenses without any special enhancements, such as scratch-resistant and UV coatings. Eyeglass frames and contact lenses are typically covered up to an allowance amount. Plans usually cover either eyeglass lenses and frames or contact lenses during a plan year. Vision insurance in a group health benefits package may offer a discount toward LASIK and PRK vision correction surgery.
With the exception of a few states that require employers to offer disability insurance as a mandatory employee benefit, disability coverage is usually offered as a supplemental benefit. A supplemental disability insurance plan pays cash benefits to employees directly if they’re unable to work due to a covered accident or illness. Benefits can last up to 2 years for a short-term disability and up to age 65 for a long-term disability. One of the biggest disability myths out there is that most employees get injured on the job. But nearly 90 percent of disabilities are not work-related and wouldn’t be covered under workers’ compensation.
Finding the Right Small Business Health Insurance Plan
Wouldn’t it be nice to have access to over 1,000 plans without having to spend hours online searching for the best deal? This is not just a nice thought—it’s a reality at HealthMarkets Insurance Agency. Our team of 3,000 agents nationwide helps business owners like you select group health insurance from a wide range of plans and health insurance companies. Don’t worry … you won’t be left to dig through tons of paperwork to research all of our plan options on your own. Your agent will assess the needs of your business and employees to narrow down the choices and find the best fit. Give us a call at (800) 976-5818 to discuss innovative cost-saving solutions for group health coverage for your small business.