As an employer providing health insurance, you’re faced with many plan options to choose from. One differentiator of plan benefits and health insurance costs is the size of the plan network. The more in-network options for a primary care physician, various specialists and hospitals, the more expensive the plan will be for both you and your employees. With all the options out there, it can be difficult to understand which plans provide the options that your employees want while still managing to stay affordable.
Types of Health Plans Determine What’s In-Network and What’s Not
In-network and out-of-network restrictions relate to health maintenance organization (HMO), preferred provider organization (PPO) and point of service (POS) plans. These types of health plans comprise the bulk of employer-provided health insurance policies.
- HMO plans typically restrict coverage to providers in their network. Patients generally need a referral from their primary care physician to see a specialist, and they must visit a specialist in the network. Patients may need prior approval from the insurance provider for certain services.
- PPO plans provide higher coverage for doctors in their network. Patients may go outside the network, but they will have to bear a higher cost for care. Patients do not need a referral from their primary care physician to see a specialist.
- POS plans are similar to PPO plans. Patients do not need a referral for in-network doctors, but they do need a referral to see an out-of-network doctor.
Employer Contributions Change Based on In-Network Coverage
Employers and employees share health insurance costs through premium contributions and time-of-service contributions.
- The premium contribution refers to the monthly (or annual) cost of the insurance plan. Generally, your portion of the premium is a fixed cost per employee, billed monthly or quarterly to account for any staffing changes. The cost per employee is driven by the size of the network and the options that the plan provides.
- Time-of-service contributions — co-payments, co-insurance, percentage of service costs, deductible reductions — are charged when the employee receives medical treatment from a provider, either in or out of network.
As the employer, you don’t participate in time-of-service costs, but these costs are driven by your choice of plan. For example, plans that have low time-of-service contributions generally have higher premiums. Staying in-network is one way for employees to manage their own costs by ensuring that they pay the lowest time-of-service costs possible.
Employees may still choose to go out of network for care. A plan may not cover every specialist, and some patients would rather pay a higher cost to visit a doctor who they know and trust. If an employee goes to an out-of-network provider, the employee will have additional costs to pay. Because the doctor is not contracted with the insurance company, the rate for service may be higher. Employees may face higher deductibles or higher co-insurance payments at an out-of-network provider. In some cases, the employee may be fully responsible for the costs of care.
Because you split only the cost of the premium, you will not see any additional cost when your employees visit an out-of-network provider, so you may be tempted to choose the least expensive plan with a small network of providers. The general health of your employees and their overall satisfaction with you as their employer is a critical aspect of productivity, however, and cheaper is not always better when it comes to selecting a health insurance plan for your staff. By analyzing workforce demographics and reviewing the cost-sharing options, you can find at least one health insurance plan to satisfy both your employees and your budget.
Dylan Murray has an MBA from San Diego State University and a bachelor’s degree in communication from Boston University. He is a licensed insurance agent in California, but he works as a professional researcher and writer reporting on business trends in estate law, insurance and private security. Dylan has worked as a script analyst with the Sundance Institute and the Scriptwriters Network in Los Angeles. He lives in San Diego, California, and Marseille, France.