Choosing a health care plan can be an onerous and confusing process for companies. Business leaders have to look at a wide array of plans, providers and coverage options, and navigating them can be difficult. To keep you focused while you make your decision, here are five key factors that will help illuminate what plan is right for your business.
1. Coverage Fundamentals
First and foremost, what kind of coverage does the plan offer? In order to qualify under the Affordable Care Act, the plan must offer minimum essential coverage (MEC). While almost all plans offered today meet MEC requirements, be sure to confirm this in no uncertain terms with your insurance broker or provider.
But while offering MEC will help you avoid the largest ACA penalties, the coverage must also provide minimum value in order to cover all the bases. This means your plan must cover at least 60 percent of the total allowed cost of benefits that are expected to be incurred.
One of the first things you’ll likely take a look at — and almost certainly the first thing your employees will notice — is the plan’s premium costs. These are traditionally shared by the employee and their employer, which makes a contribution to the plan on the staff member’s behalf.
In order to avoid certain penalties under the ACA, the coverage offered must be affordable — specifically, the cost to the employee can’t exceed 9.5 percent of their household income. According to a recent report by Kaiser Family Foundation, family premiums for employer-sponsored health insurance rose by an average of 4 percent in 2015. Employees are likely to be very sensitive to rises in premium costs, which have gotten a lot of attention in the news.
3. Deductibles and Out-of-Pocket Maximums
After the premium, two other numbers will likely grab employees’ attention: the deductible amount and the out-of-pocket maximum. While the premium contribution represents their up-front cost, deductibles and out-of-pocket maxes help them approximate their total costs.
Unfortunately, increases in deductible and out-of-pocket maximum amounts have been more drastic than premium hikes. The Kaiser report found that deductibles have increased by a whopping 67 percent since 2010. Meanwhile, both single and family plans saw large increases in out-of-pocket maximums in 2015, up by an average of $500 and $700, respectively.
4. Health Savings Accounts (paired with a High Deductible Health Plan)
As a result of the increases in deductibles and the advent of high-deductible health plans, many companies have begun to offer their employees the opportunity to fund their health care expenses via a health savings account (HSA). These are accounts with special tax treatments designed to help employees pay for health care. Companies can also contribute to their employees’ HSAs to help offset the costs. Any employer considering a high-deductible plan should also consider implementing a linked HSA.
5. Number of Plan Options
You may want to offer your employees more than one choice of plan. Assuming you’re equipped to handle the logistics of administering more than one plan, this shouldn’t present a problem. Since the inception of the ACA, the industry has divided plans into four categories with increasing benefits and cost: bronze, silver, gold and platinum.
Employers may offer multiple coverage options, some of which meet ACA requirements and some of which may not. As long as employees have the opportunity to enroll in a plan that’s considered affordable and provides minimum value, it doesn’t matter if the employee chooses a coverage option that doesn’t meet those standards. For example, a company can offer coverage under a bronze plan with premiums that cost less than 9.5 percent of employees’ household income and also offer them a silver or gold plan that exceeds that amount. The employee could have chosen the bronze plan, so she won’t be eligible for a subsidy, and the employer won’t be exposed to a penalty.
If you’re a business leader choosing a health care plan, keep this checklist handy. It’ll help you understand the key issues, know what questions to ask providers or brokers and turn an admittedly complicated process into a simpler one.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
Avi Sinensky is an attorney at Meltzer, Lippe, Goldstein & Breitstone LLP in New York, where his practice focuses on corporate and employee benefits law. He advises clients on strategies to overcome Affordable Care Act challenges and to capitalize on related opportunities.