Employers have options when it comes to providing group health benefits for their employees, but some are better than others. Here’s what you need to know.
If there is one thing that 2020 has taught us, it’s that accessible healthcare is more important than ever.
The unfortunate truth for many Americans, however, is that healthcare can be darned expensive. Unaffordable, even. That’s why so many Americans look to their employer-sponsored group health insurance.
Now, you might be of the opinion that you pay good money for good work from your employees. You might think that what your employees choose to do with their paycheck is up to them. But the truth is that offering group health benefits will end up benefiting your business in the long run.
Not only does a good healthcare plan offer your employees security and peace of mind, it can also have a huge impact on employee satisfaction. Satisfied employees are far more loyal to their company because they feel valued and cared for.
What’s more, when employees are physically healthy, it is evident in their mental frame of mind and their work improves. In the long run, the business benefits from offering health benefits.
But, with insurance premiums so high and so many options to consider, choosing the right group health benefits for your employees can be daunting. Its almost impossible because every employee’s situation is very different too. And when everyone’s health needs and financial situation are different, group health benefits are seldom one-size-fits-all.
As an employer searching for better group health benefits, what options do you have?
Let’s start by defining what we all want from group health benefits. Ideally, the employer health plan is one that makes healthcare easy and accessible for employees. It would be ideal if employees liked and appreciated the health benefits. Most of all employee health benefits need to be affordable for both the employer, and the employee.
Employers Can Sign up With a PEO (Professional Employer Organization) and Get on Their Master Policy and Group Health Benefits
A PEO (Professional Employer Organization) offers an outsourcing solution-based business model. PEOs offer:
- HR services
- Payroll services
- Worker compensation, and
- Benefits such as group health benefits, but buyer beware, some PEOs have a master group health policy and others simply source your group health plan in the open market.
PEOs can be highly useful but be wary that not all PEO’s are right for every business. If you’re a small or medium-sized business owner, you might not have the time, expertise or resources to cope with all of these administrative duties. By outsourcing these services can allow you and your employees to focus on growing your business and servicing your clients. Your employment matters can be effectively managed, leaving them to focus their day-to-day business responsibilities.
PEOs can streamline employee management while access to traditional group health insurance benefits. This can reduce employee turnover and improve employee satisfaction if the benefits are affordable. But, be sure to choose a PEO with a solid reputation and values that align with your own business’s values. Many times this is overlooked and you end up unhappy and looking for a replacement for a bad PEO selection.
Some PEOs offer group health benefits to multiple companies through a large master policy. By putting as many employees as they can on the same group health benefits options, they intend to diversify risk across a larger pool and get lower premiums. But this is not always an effective approach. Since many employers with excess claims and rising health premiums try to use this PEO approach to hide and get better rates than they can get on their own. So most PEOs will ask for historical rate information to avoid being just a dumping ground for sick employees.
Likewise, PEOs have little motivation for finding a health insurance plan package that is tailored to your particular workforce. It is in their interest to have a health insurance policy that is more generally appealing and that has a little something to offer everyone.
The problem with this is that an individual employee’s healthcare needs and financial picture can vary widely and everyone’s situation is unique too… Offering group health benefits can improve employee satisfaction, but it can also do the opposite. In fact for employees making low wages, high deductible health insurance is more of an insult than a benefit. Plus employees who have specialized health needs don’t find generalized health insurance as useful for their medical needs. A generalized group health benefit can leave these employees feeling overlooked and frustrated. Meaning any money you spent on their group health benefits goes unused and essentially wasted.
Get Your Own Group Health Insurance
If joining a PEO isn’t right for you and your company, it could be simpler to just secure your own group health insurance through an insurance broker. That is, if traditional health insurance is right for you and your employees. You will still need to put all of your employees onto the same group health insurance plan. While you may have more plan designs to choose from, you still won’t be able to meet everyone’s specific needs and budget.
Group health insurance packages are pretty complicated and restrictive, and there are many to choose from. It would be easiest to work with a health insurance broker to help you weigh up your options. However, bear in mind that brokers earn a commission off of whatever they sell you. This simply means that it is in their best interest to sell you more expensive group health benefits, regardless of your employee needs. Not all insurance brokers will take advantage of this, but there is no motivation for an insurance broker to look for better solutions to your health benefits needs. You know how the expression goes, ‘to a carpenter with a hammer, every problem looks like a nail. If you do decide to go with traditional health insurance, be sure to find a broker with integrity. They should explain all your options to you, even the cheaper ones.
Start a Self-Funded Insurance Plan
If you’re looking for a group health benefits option that is more flexible, consider getting into a self-funded insurance plan. Self-funded plans are a popular choice for larger employers who are looking to lower the cost of group health benefits. But Self Funded Insurance can come back to bite an employer if more than one or two employees get really sick. Also, it’s not easy to get out of a self-funded health insurance arrangement like it is with health insurance. Even after you end the self-funded health plan you could be responsible for any lingering claims exposure for many months to come.
It might be worthwhile to pay for your employee’s healthcare yourself. This can be risky though. Health care expenses can be unpredictable, and extraordinary claims can end up costing your business a lot of money.
In this type of plan, the employer takes on the financial responsibility of the employees’ healthcare needs. Then they purchase a stop-loss policy to shelter against a worst-case. So the employer pays a TPS who then pays for employees’ medical claims as they are incurred, as opposed to a monthly premium to an insurance company. A third-party administrator will handle the processing of the claims and the bills.
The employer would set up a trust, and each month allocate contributions into the trust. If there is any money left over at the end of the year, it can be reallocated back into the business for other employee needs.
The self-funded option for group health benefits can be very complicated and involves significant high risk. Done properly it can yield substantial cost savings but the downside is also A very real potential. Health Insurance brokers will sometimes push these plans on smaller employers to earn a nice commission.
But truthfully only large employers with resources to do the due diligence, take the financial risk, and properly manage a self-funded health plan should consider this as a viable option. If you are not in the insurance business then you might consider if self-funded health insurance is right for you.
Many business owners and CFO’s get lured in by the potential savings of having a self-funded health insurance plan. But it’s not until an employer actually gets into one that the full realization that it takes time and attention to manage a self-funded health insurance plan. That is time and attention away from the real business of the business to focus on being in the health insurance business. Oh sure you will have an insurance broker to help you figure out the stop-loss coverage but he gets paid on commission. Of course, you will have a TPA to gather employees’ claims and spend your money to pay them. But you as the employer need to pay close attention and really know what’s going on with your self-funded health insurance plan. I mean, somebody you trust needs to keep a close eye on those foxes in your hen house.
Avoid Health Insurance and Give Your Employees the gift of an ICHRA Instead
Healthcare Reimbursement Arrangements (HRAs) have been around for a long time. But the original HRA was very limited in what it could be used for. After a recent facelift, HRA is back and totally worth investigating as the alternative to traditional health insurance employers have been begging for. How many times have you thought, ‘can’t I just give my employees some money to pay for their own health insurance’? So now you can do just that. The new Individual Coverage HRA, (ICHRA) just recently became available at the start of 2020. It’s much more flexible and usable than any HRA ever before.
ICHRA stands for Individual Coverage Healthcare Reimbursement Arrangement. It’s meant to give employees something better than traditional health insurance. Instead of a one size fits all solution like group health insurance, employees get an allowance to spend on any health plan they want. And ICHRA stops forcing employers to be in the health insurance business. No more ugly insurance renewals, never ever again.
How Do ICHRAs Work?
Businesses give employees an allowance to spend on health benefits. They can use this money to pay for ‘qualified healthcare benefits’ like individual health insurance of their own choosing. This HRA is funded by the employer with tax-free funds in an amount to satisfy the ACA mandate to offer ‘Affordable’ and Minimum essential coverage.
This means that, with an ICHRA, each employee can pick the health benefits and services they really need. They will be able to find a health plan that suits their individual health as well as their financial situation. ICHRA allows an employer to provide a real health benefit that is tailored to the individual employee.
ICHRA stabilizes an employer’s monthly cost for employee benefits. The benefits are more appreciated by employees like a ‘benefit’ should be.
Offer to Reimburse Medical Cost Sharing as an Affordable Alternative to Health Insurance.
With this new innovation called ICHRA, employees are free to evaluate and consider non-traditional health options. One such option is medical cost-sharing and another one is direct primary care. These allow employees to have real-time access to everyday health care at no cost and remove barriers to care like huge deductibles and coinsurance.
Some companies already using this ICHRA strategy, see 80% of employees choosing the more affordable medical cost-sharing option instead of health insurance. This can reduce the cost-to-company for employee group health benefits by 30% or more. This means that employers can use that money to grow their businesses instead of paying for health insurance.
Scoop Health: The Ultimate ICHRA Partner
ICHRA is new and every business owner needs to do the comparison. If you want to find out what ICHRA would look like in your business Scoop Health can help you crunch the numbers and answer your questions. Start by checking out Scoop’s ICHRA strategy page to get started.
We can help structure your ICHRA plan and calculate the projected savings.
Instead of paying a huge annual deductible on health insurance, members of our medical cost sharing community pay an Initial Unshared Amount as low as $500.After that IUA, 100%of the medical bills for that incident are fully shared by the community. It is immensely affordable per month too. Most times it is 30-60% less than high deductible health insurance.
If you’re looking for an effective way to reward your people, reduce employee turnover, and improve your employee’s wellbeing, you have to consider using an ICHRA strategy with medical cost-sharing options.
In fact, our experience shows that most employers who implement this ICHRA strategy end up paying about 30%-60% less than they would if they had offered traditional health insurance. So, contact us and schedule a consultation about group health benefits today.