When starting a business, one of the items to cross off your checklist is finding the right health insurance plan. As your business grows, you’ll have more employees, and that will only increase the need for health insurance. Given how health insurance is a big part of your company’s financial reality, you’ll need to give it some thought.
As a business owner, you want to make sure that your employees health and well-being are taken care of so that you gain their loyalty and improve employee retention, and one of the best ways to achieve that is by offering health insurance benefits. The question is: How do you know which health insurance plan is right for your business? To help you out, we’re listing common types of health insurance plans so you can find the most suitable one.
Health reimbursement arrangement (HRA)
The first on our list is a type of health insurance plan that is particularly beneficial for new business owners. An employer-funded plan, HRA works by reimbursing employees for their expenses tax-free. There are three types of HRA – Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), Individual Coverage HRA (ICHRA), and Excepted Benefit HRAs (EBHRA). They all reimburse employees for different expenses. These can range from qualified medical expenses to health insurance premiums to vision and dental insurance premiums.
Some of the advantages of reimbursing for health insurance include greater budget control and tax efficiency. Given the rising healthcare costs, opting for health reimbursement arrangements can be an affordable alternative to traditional health insurance.
Self-funded health plans
Another type of health insurance plans that can be effective means to save on costs are self-funded health plans. Also referred to as self-insured plans, this type of healthcare plans makes it possible for employers to customize health insurance to their workforce. There is no predetermined premium they pay. Instead, employers pay out the claims when they arise.
Although it’s often used by large enterprises, self-funding is also a viable option when it comes to health care for small business owners since it’s more affordable compared to a traditional plan. What’s more, employers are in control of health plan reserves. This means they can increase interest and control their healthcare spending more efficiently.
Health maintenance organization (HMO)
Another plan that involves out-of-pocket costs, HMO or Health maintenance organization relies on a network of physicians to provide coverage. This insurance structure involves paying a monthly or annual fee to receive medical care from providers in the HMO network. While this health plan is affordable, there are also certain restrictions that come with it.
For starters, HMO subscribers must select a PCP or Primary care physician. Also, the medical care they receive has to be from in-network doctors and health providers. In case HMO subscribers receive non-emergency care that’s out of network, they’ll need to pay for care and services out-of-pocket.
Preferred provider organization (PPO)
If you want a more flexible alternative to HMO, PPO may be the healthcare plan you’re looking for. PPO or Preferred provider organization is an arrangement that offers medical services at reduced rates after paying a fee. Compared to HMO, PPO comes with a wider network of healthcare providers. While it does involve higher premiums, subscribed clients do have access to providers from larger networks.
Unlike HMO, PPO doesn’t require members to choose an assigned provider or PCP, and out-of-network services are available. While PPO offers greater flexibility to participants, it does cost more to manage and administer, hence the higher premiums.
Point of service plan (POS)
Last but not least, POS is a type of health insurance plan that’s a hybrid between HMO and PPO. POS or point of service plan is similar to HMO in a sense that client subscribers need to have an in-network primary care physician or PCP. POS also makes it possible for subscribers to use out-of-network services – a feature it has in common with PPO.
POS plans come with lower costs, but it’s important to note that they also have a limited list of providers. Their premiums are somewhere between PPO’s higher premiums and HMO’s lower premiums. That said, POS policies can be confusing, so it’s important that you pay special attention when reading plan documents.
As you can see, there are multiple types of health insurance plans, with each of them having advantages and drawbacks. It’s important to remember that there’s no one-size-fits-all approach here, and different health insurance plans will work for different companies. It’s up to you choose the plan that will be the most beneficial for your employees and your business.