Open enrollment for most health care plans is many months away. That makes now a good time for businesses to consider changing their employer-sponsored coverage for next year, or perhaps to think about launching a plan for the very first time.
If you’re going to do either, you’ll have many details to sort through. To simplify matters a bit, let’s look at a few “big picture” factors that can serve as good starting points for contemplating the size and shape of your plan.
Funding Approach
As you’re likely aware, there are two broad types of employer-sponsored health insurance plans: fully insured and self-funded (also known as self-insured). A fully insured plan is simply one you buy from an insurer. This is the most common approach for small to midsize businesses because it limits financial risk while offering the most predictable costs.
Under a self-funded plan, your company funds and administers the insurance, usually with the help of a third-party administrator. This approach may save money if your business can design its own plan and manage the claims process. However, you assume financial risk for the plan — costs can be unpredictable and potentially catastrophic.
Size of Network
The size of a plan’s network determines how many options employees have when picking providers and how much they’ll pay out of pocket. A smaller network of preferred providers often grants the most coverage with lower out-of-pocket costs for employees when they visit those providers. Participants can typically still pick out-of-network services, but they’ll usually pay more out of pocket. Rightsizing your network is critical to participant satisfaction.
Tax-advantaged Accounts
Although technically not insurance, widely used tax-advantaged accounts can be strong additions to a benefits package. These include Health Savings Accounts (HSAs), which must be offered in conjunction with high-deductible health plans, and Flexible Spending Accounts (FSAs).
HSAs and FSAs let employees set aside pretax dollars from their paychecks to use for eligible medical expenses. HSA funds remain in participants’ accounts until used, while FSA dollars typically must be spent within the year or lost (though a plan can provide for a grace period of up to 2½ months after the end of the plan year). A third option is a Health Reimbursement Arrangement (HRA). This is an employer-funded plan under which participants submit out-of-pocket medical expenses, such as deductibles and copays, for tax-free reimbursement.
Availability of Government Assistance
If your business happens to be considered a small business for health insurance purposes, you may want to check out the Small Business Health Options Program (SHOP). This federal marketplace is designed for small-business owners looking for health care plans. To qualify, a company typically must:
- Have one to 50 employees,
- Provide health benefits to all staffers working 30 or more hours per week,
- Reach plan enrollment of at least 70% of employees,
- Maintain an office or have an employee in the state of the SHOP used.
Every state runs its own SHOP marketplace, but they’re similar. Your state’s SHOP may be a good place to start if you’re ready to sponsor a plan but aren’t sure where to begin.
A Major Decision
Making changes to an existing health care plan or launching a new one is a major business decision, so be sure to go about it carefully. Hold honest discussions with your leadership team. Perhaps survey your employees to get a better idea of what plan features they value and whether there are any you should add. Consider engaging an insurance broker for assistance. For help identifying the costs and tax impact of health insurance, or any employer-sponsored benefit, contact us.
