Choosing group health insurance for your small engineering firm can be stressful and confusing. If you are the owner or manager of an engineering firm, you know how important it is to have a group benefits program to retain and attract quality employees.
Many engineering firms offer health insurance to their employees as part of a complete benefits package which sometimes includes: group dental, group disability and group life insurance. Group benefit plans are beneficial to both the employer and the employees. As a group, employees are pooled together which reduces the risk to the insurance company and results in lower premiums.
The Value of Health Insurance For Engineering Firms
In order to make a smart health insurance buying decision, it’s important to understand the value of your health insurance plan and why your company needs it. It may seem obvious, but many people don’t understand the basic concept of health insurance.
A company health plan protects employees and small business owners in several ways:
- Health insurance encourages your employees to live a healthier lifestyle through preventative care and regular check ups
- Health insurance protects their finances. Most bankruptcies in the U.S. occur when people cannot afford or pay for their medical bills. Health insurance protects your employees from financial disaster
- Health insurance enables employees to receive medical care at discounted rates. Your health plan provider negotiates with doctors and hospitals to reduce out of pocket medical costs. Health care expenses must be reasonable and customary
- Health insurance gives access to quality care through a network of participating doctors and hospitals.
A group Health Plan protects your business too
- A health plan helps you retain and attract quality talent. Group health insurance is the number one requested benefit for people searching for employment.
- Offering the “right” health insurance plan is one of the most important decisions you can make as a small business owner. It keeps your employees happy and healthy which benefits the profits of your business in the long run.
- Keeping your health plan compliant helps your company avoid costly fines. This article explains how to avoid the most common 5 costly group health mistakes.
Group Health Insurance Options For Your Small Engineering Firm
Group health plans fall under the definition of managed care. Under a managed care plan, the health plan provider (insurance Company) pays doctors and hospitals directly for some or all of the medical expenses incurred by your employees.
Types of managed care plans come with different plan designs, benefits, costs and the plans are constantly changing. The most common managed care plans include: HMO’S, EPO’s, PPO’s, POS and HSA’s.
HMO Plan (Health Maintenance Organization)
HMOs are in network plans only. Which means, the employee must use the services of a medical facility or doctor that participates with the insurance provider. HMO’s require referrals and typically require patients to choose a “primary care physician” (PCP). The PCP can refer patients to specialists within the HMO’s network and the patient can be reimbursed for medical expenses.
HMOs won’t pay for out of network medical care or treatment that was not referred by the primary care physician. These plans also require pre-authorization before elective surgery or out-patient hospitalization.
EPO Plan (Exclusive provider organization)
EPO plans cover in network medical expenses only and any out of network medical expenses are not eligible for reimbursement. These plans are similar to HMO plans with the main exception being referrals are not required by the PCP to see a specialist.
PPO Plans (Preferred Provider Organizations)
PPO’s are not easy to find anymore since the implementation of the Affordable Care Act (ACA). Insurance companies want to control their health care costs by persuading patients to stay in network where rates and fees have been negotiated. PPO’s offer a wider choice of providers than HMOs but this freedom of choice comes in the form of much higher premiums.
PPO’s reimburse patients for medical expenses in and out of network. These plans do not require referrals and allow the insured to seek medical care from a provider of their choosing. Out of Network expenses are covered on a cost share basis per the plan design. For instance, the insurance company would cover 60% of the medical costs and the insured would pay 40% after any deductible if required.
POS Plans (Point-of-Service Plans)
POS plans are a combination of an HMO plan and a PPO plan. Like an HMO, the insured is required to designate a primary care physician within the provider network. And like a PPO, the insured can go out of network for medical care but must be referred by the PCP in order to receive reimbursement. POS plans work on the same cost share basis as PPO plans – a percentage is covered by the insurance company and the patient pays the remaining unpaid balance after any deductible that may be required.
HSA Plans (Health Savings Accounts)
Health Savings Accounts (HSAs) were established in 2003 as a means for Americans to take control of their own health care. An HSA combines an interest-bearing savings account with a high-deductible health plan.
Both employers and employees may contribute to their Health Savings Accounts. Contributions can be up to 100% of the annual health plan deductible amount and may be used to pay for qualified medical expenses tax free.
The savings account is controlled by the employee and funds that are not used within a given year can be rolled over each subsequent year. is intended to pay small and routine health care expenses.
Benefits of an HSA
- Lower monthly premiums
- Contributions are tax-deductible
- Money invested grows tax-deferred
- Withdrawals for qualified medical expenses are tax free
Annual Contribution levels for 2017 are: $3,400 per individual employee and $6,750 for employee and family.
HRA Plans (Healthcare Reimbursement Accounts)
A Health Reimbursement Account allows employers to offer a high deductible health plan (HDHP) and reimburse the employee for medical expenses up to a percentage of the deductible. This reimbursement can be any percentage agreed upon by the employer and the employees. 25%, 50%, 75% or even 100% of the deductible expenses can be reimbursed making the employees out of pocket expenses more affordable.
Billing and reimbursements are all handled behind the scenes by a 3rd party administrator. The employer or benefits manager monitors their HRA account each month to make sure it is well funded through a report submitted by the administrator.
The benefit to the employer is he or she is saving money each month on lower premiums and the monthly premium savings are utilized to fund the employee’s medical expenses or deductibles. Once the deductibles are met, the employer no longer pays anything. 100% of further medical expenses are paid by the insurance carrier.
SHOP Marketplace Plans (Small Business Health Options)
The SHOP program is a result of the Affordable Care Act (ACA) that offers group coverage to small businesses through the Government or state exchanges. Not every state has set up a SHOP exchange but here in New York there is a program available.
The program is designed for small businesses with less than 50 employees and the owner can purchase any group health plan(s) that is offered on the exchange. This program also offers the employer federal tax credits if the company qualifies. Before signing up for a SHOP plan, be sure to carefully read your state’s eligibility requirements and guidelines.
Choosing group health insurance for your engineering firm does not have to be complicated. You just need to know the needs of your employees and which health plan would be the best fit for your company. Our agency works with every major insurance company so we can address your needs and offer unbiased advice. Call 800-514-3513 with any questions of to receive a free consultation.