Health Insurance 101:
For many small business owners, offering an employee benefit plan that includes health insurance is critical to attracting and retaining key talent. Here in Nevada, and particularly in the Reno/Sparks area where skilled employees are in high demand, employers who do not offer health insurance will find themselves at a distinct disadvantage in the marketplace. Forward-thinking business people are no longer viewing health insurance as an expenditure that doesn’t pay dividends, but instead as an investment in their employees and in their businesses that sets them apart as a “best place to work” employer. With that in mind, small business owners should be aware that there are ways to provide employees with high-quality health insurance coverage in a cost effective manner.
When it comes to health insurance, there are three key aspects that determine the cost of coverage – type of plan/provider network, plan design/metal tiers and employee contribution.
For most small employers with 50 employees or less, there are two basic types of health insurance plans to choose from; a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO). An HMO plan may help contain health care costs because these plans require members to select an in-network primary care provider (PCP), specialist visits require a referral from a PCP, and out-of-network health care costs are not covered.
In contrast, a PPO plan may ultimately cost more because they are much less restrictive in that members can choose to see an in-network provider or they can pay more and see an out-of-network provider. Selecting the right type of plan based on the provider network you intend to utilize is an important first step.
The Affordable Care Act (ACA) brought about the creation of Metal Tiers to help consumers understand the ratio of the cost split between the insurance company and the insured member. Here is a rough estimate of how these costs are split in each metal tier:
• Bronze – 40% consumer/60% insurer
• Silver – 30% consumer/70% insurer
• Gold – 20% consumer/80% insurer
• Platinum – 10% consumer/90% insurer
A Bronze plan is going to have a lower monthly premium than a Gold or Platinum plan, and may be the right fit for a business that has a lot of young, healthy employees who rarely utilize medical services. Conversely, paying the higher premium that comes with a Gold plan may make sense if a business employs older people who tend to utilize more medical services.
Most health plans require employers to pay at least 50 percent of the plan premium for covered employees. Requiring an employee to pay some portion of the premium is standard practice and good business. It encourages employees to take responsibility for their own health care while helping to offset the employer’s monthly premium expense. The amount of the employee contribution is up to the employer, but the percentage must be the same for all eligible employees.
Health insurance is complicated. The options can appear to be endless and the impact on a small business, from both a financial and employee recruitment/retention aspect cannot be overstated. Small business owners should consult with a reputable, licensed health insurance broker to ensure they understand the options available and have the information they need to make the best choice for their business.
Ty Windfeldt, MBA, is a Senior Vice President for Renown Health and Chief Executive Officer of Hometown Health. In this role, he oversees all aspects of Hometown Health, the region’s largest and most experienced not-for-profit health insurance company with more than 140,000 members.