What are the different types of insurance policies?
While the exact plan coverage and guidelines you provide can vary between insurance carriers, the following is a list of common types of insurance policies for employees:
- Health maintenance organizations (HMOs): HMOs establish a network of providers that employees are permitted to see with a low-cost copay. Employees who choose to see out-of-network providers pay a higher amount. HMOs also require patients to establish a primary care physician (PCP) who can refer them to specialists within their network as needed.
- Preferred provider organizations (PPOs): PPOs do not establish a network of providers or require a PCP referral to see a specialist, which gives employees greater flexibility in selecting their provider and accessing care. This flexibility sometimes results in higher premium costs or copay costs, especially for specialists.
- Exclusive provider organizations (EPOs): Like HMOs, EPOs require employees to see in-network providers, but do they not require them to establish a PCP or get a referral to see a specialist. EPOs are generally less expensive than HMOs and PPOs, unless individuals opt to see an out-of-network provider, which is not covered at all.
- Point-of-service plans (POSs): Like HMOs, a POS plan requires employees to identify a primary care physician and obtain referrals to see a specialist. However, they do contribute to out-of-network provider costs. This plan combines the lower costs of an HMO or EPO with the provider convenience of a PPO.
Why choosing the right insurance policy is important
Choosing an insurance policy that works for employees has a direct and substantial impact on their job satisfaction, rate of retention and, most importantly, health and well-being. Choosing an insurance policy that meets employees’ needs within your allocated budget ensures that both parties are happy with the arrangement. As an employer, you also benefit from a healthier and more engaged workforce when employee health needs are adequately met.
Related: How to Reduce Employee Turnover
Creating insurance policies for your employees
Here are some steps you can follow to choose the right insurance for your employees:
1. Estimate your employees’ health needs
Estimating the health care needs of your employees can inform the coverage you select. Factors such as employee age, physical ability and health conditions you’re aware of can help you predict the nature of coverage they may need and the policy that will suit them best. This is much easier to determine in small organizations where employers know their employees and are more likely to be aware of less apparent medical conditions, family planning decisions or other health factors.
2. Do thorough research
It is essential to compare plan types across multiple carriers to make an informed decision. In addition to information available online, insurance companies can prepare cost estimates for several different plan options to help inform your decision. Evaluate what each plan includes and how much it costs for each employee to further determine how each option may impact employee health and job satisfaction.
3. Consult your peers
In addition to online research and price comparisons, consider reaching out to others who have experience with this type of decision-making. Experienced business owners can share how they approached their insurance selection process, the pros and cons of their decision and additional factors to consider.
Three things to consider
The following three things are important to consider when choosing insurance policies for your employees:
- Cost: The total plan cost for both you and your employees is an important factor when selecting an insurance policy. The ideal option is one that keeps costs low for employees without exceeding your organization’s budget. Within plan cost is both the monthly premiums and copays or related service costs required of employees.
- Convenience: Convenient access to services and providers is just as important to many employees as the quality of care itself. This includes the ease with which employees can schedule appointments or procedures, select a provider, file claims or seek reimbursement.
- Context: Considering the prospective insurance coverage in context of other employee benefits can be a helpful consideration when determining the right policy for your employees. For example, if your organization does not provide vision, dental or life insurance coverage, you may want to consider a more comprehensive health insurance plan to maintain employee satisfaction.
Insurance for employees FAQs
Here are several frequently asked questions about choosing insurance policies for employees:
Who pays for health insurance policies?
Although exact payment structures vary between carriers and organizations, employers and employees typically share the cost of health insurance policies. Most insurance companies require the employer to pay at least half of the monthly plan cost. The exact cost to employees varies depending on factors such as family size.
What is the difference between self-funded and fully-insured benefits?
Self-funded refers to health benefits provided directly from the employer to the employee, as opposed to a plan that is purchased through an insurance carrier. Large organizations with many employees often select this option because it saves money. Fully-insured benefits are provided from an insurance carrier to employees, with the employer facilitating the coverage options. In this case, the employer pays all or part of the monthly premium for that coverage. This may be a preferable option for small business owners who only provide benefits to a few full-time employees.
Is health insurance mandatory?
It is not mandatory for employers to provide health insurance to employees, nor is it required for individuals to purchase health insurance if it is not provided by their employer. However, the Affordable Care Act (ACA) does impose financial penalties on organizations with 50 or more full-time employees that do not provide coverage to at least 95% of their full-time employees.