Health Insurance Literacy for Small Businesses 101

By Sally Poblete

We all know that small business owners like you are looking out for the best interests of their employees. Now that you’ve decided to offer health insurance, all of the options can seem overwhelming. You’re not alone — more than half of Americans struggle to understand health insurance terms.

Even though you may be the decision maker for your business, you do not have to go through this process by yourself. Keep reading to learn which factors to consider in deciding what health insurance coverage is best for your organization and how to get started.

What does all of it mean?

All of the different terms involved in plan benefits are complicated, but we broke down some of the most important ones for you.

Premium: The amount of money paid monthly to an insurance company for coverage.  Premiums are determined by a combination of factors including geography, age, smoking status, and who is covered (single employee, employee and spouse, or family), and the type of plan. (Don’t worry, the premium is the same for a given plan regardless of where you buy it from).

Employer contribution: The percentage of employees’ premiums that you would cover as the employer (many employers contribute between 70%-80%; the national average is about 72%).

Deductible: The amount of money a beneficiary must pay before the insurance company begins paying claims (if a deductible is $1000, the beneficiary has to spend that much towards medical costs before the insurer pays)

Co-pay: A fixed fee the beneficiary has to pay for doctor’s visits, prescription drugs, or other services (a $20 co-pay for doctor’s visits means the beneficiary $20 each time they go to the doctor)

Coinsurance: The percentage of the total cost of a medical service that the beneficiary has to pay (if the coinsurance rate is 20% and a doctor’s visit costs $150, the beneficiary will pay $30)

Out-of-pocket maximum: The most money an individual can pay for covered providers and services during a policy period (usually one year) before the insurance company begins to pay for covered costs (if the out-of-pocket maximum is $5000, that’s the most a beneficiary will have to pay for care that’s covered)

Essential health benefits: Health insurance plans under the Affordable Care Act (ACA) have to cover these ten essential health benefits: preventive care, ambulatory services, emergency services, hospitalization, mental health services, maternity care, prescription drugs, rehabilitation, laboratory services, and pediatric care.

Network: The providers (including physicians, hospitals, and other healthcare organizations) that are covered by a health insurance plan; some plans may also provide plans for “out-of-network” providers.

Then there are all of the metallic designations you may have heard about for health insurance plans — bronze, silver, gold, and platinum. All of these plans will meet the minimum standards, but a bronze plan will cost your employees less money on their premiums and more money when they need to use medical services. Platinum plans will cost significantly more in premiums but will have lower out-of-pocket costs at the doctor’s office.

Preferred Provider Organization (PPO):  A type of health insurance plan that typically has a broader list of participating providers and hospitals for which you pay less. In a PPO, you can also visit out-of-network doctors at a higher cost.

Health Maintenance Organization (HMO): A type of health insurance plan that limits coverage to in-network doctors and the hospitals that work with those doctors. HMO’s typically won’t cover out-of-network care unless it’s an emergency and requires a referral from the primary care physician to see a specialist.

Exclusive Provider Organizations (EPO): A type of health insurance plan that allows individuals to use the doctors and hospitals within the EPO network, but won’t cover care that goes outside of the network. In EPOs, there are no out-of-network benefits or requirements to get a referral to see a specialist.

Association Health Plan (AHP): A type of health insurance plan in which multiple small businesses (and now sole proprietors) can band together to purchase insurance together; costs may be lower, but benefits are not equivalent to traditional health plans (they are not required to cover the ACA ten essential benefits outlined above).

Finally, small group employers should also think about whether they want to offer any other benefits in addition to health insurance. These can include dental, vision, life, disability, and other ancillary offerings. While there are additional costs for these types of benefits, they are typically much lower than medical coverage and can serve as appealing incentives for employees.

For additional health insurance terms you may not be familiar with, visit https://www.healthcare.gov/glossary/.

How to get started

Now that you’re armed with this knowledge, it’s time to start comparing options. You can view the benefits and costs of different plans side-by-side. You’ll need to enter some basic information, including the name and address of your business, your industry SIC code, and details about your employees (name, age, number of dependents, and zip code).  

 

Visit wellthie.com/smallbusiness today to see what plans are offered in your area.