If you are a business owner who wants to offer your employees a health insurance package, you have some decisions to make. While cost is always a factor, since you will be addressing the needs of a group instead of just yourself, you also need to consider their wants and needs. When making this choice, one of the most important factors is the type of plan that you choose. There are many different plan types, all of which have different benefits and drawbacks to consider, and if you’re not well versed, you could make a decision that costs you money or disappoints your workforce.
To help you educate yourself and make a responsible decision, we’re going to delve into the most common health insurance plans. Including Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), Point of Service (POS) plans, Exclusive Provider Organizations (EPO), and High-Deductible Health Plans (HDHP). By being diligent and observing each type’s features, pros, cons and differences, you will be able to make an informed decision for your company.
Health Maintenance Organization (HMO)
HMO healthcare plans tend to focus on primary care physicians. And usually require referrals in the case that a specialist is needed. In general, HMOs have lower premiums and out-of-pocket costs when compared to other plan types. On the flip side, they require patients to stay inside of their network of healthcare providers.
- Lower in Cost: Premiums and out-of-pocket expenses are usually lower with HMOs when comparing against other types. For businesses and individuals that are on a budget, this can be a great option.
- Emphasis on Primary Care: HMOs are all about primary care which includes things like regular checkups, and preventative measures to reduce or detect illness or injury. Some preventative care measures include vaccines, scans, and other tests.
- Fixed Costs: Another benefit is the predictability of cost with HMOs. Copayments and prices for prescriptions will be fixed. Allowing members that have an accurate picture of what they’ll have to pay ahead of time.
- Referrals and Limited Providers: A downfall of HMOs is the fact that you will need to receive a referral from a primary care doctor if you seek specialized care. Additionally, members of HMO plans are limited to seeing only the doctors within their plans network. If someone wishes to receive out-of-network care, it will not be covered, which can be costly.
- Territorial Limits: Generally, HMOs will only cover certain areas or regions. If you have employees who live far outside of the network’s area, this could cause inconveniences down the road.
Preferred Provider Organizations (PPO)
PPO plans focus more on flexibility and choice. Unlike HMOs they provide members with a larger network and provide more options when it comes to specialists.
- Freedom to Choose: With a PPO plan, members will have the ability to see any healthcare provider that they would like. This includes both in-network and out-of-network doctors. Additionally, if they need to see a specialist, they do not need to get a referral.
- Don’t Need a Primary Care Physician: Since patients do not need referrals in order to seek specialized care, it is not necessary to have a primary care physician if you don’t want one. This cuts out the middle-man so to speak, and reduces the number of appointments one needs to attend.
- Broad Geographical Coverage: PPO plans usually have a broad network that oftentimes includes the entire nation. This makes it a great choice for individuals who travel or live in a different area than your company.
- Higher Costs: Since PPOs come with more flexibility, they in turn have higher monthly premiums and deductibles. This makes things more expensive for both your company and the individual employee.
- Out-of-Network Fees: While these plans provide the options to seek medical attention from out-of-network physicians, there will be significantly higher costs associated with coinsurance and out-of-pocket maximums.
- Claim Complexity: Administrative tasks associated with the plan like claims handling and managing bills can be more complex since you have so much flexibility in who you receive care from.
Point of Service (POS)
POS plans can be thought of as a combination of HMOs and PPOs, taking qualities from each. In general, they provide flexibility, but have slightly more restrictions than your standard PPO. They are truly the best of both worlds.
- Lower Costs: POS plans usually have lower associated premiums when compared to PPO plans, yet offer most of the same flexibility.
- Out-of-Network Flexibility: Similar to PPOs, POS plans also allow members to seek out-of-network providers if they wish.
- Primary Care is #1: Similar to HMOs, these plans emphasize the importance of primary care physicians, helping members manage and detect disease before it gets too serious.
- Specialist Referrals: While members can go to doctors no matter if they are in-network or not, they will still have to receive a primary care referral in order to see a specialist.
- Higher Out-of-Network Costs: While flexibility is great, it usually always comes with a catch and that’s no exception for POS plans. When seeking out-of-network care, members will have to pay higher costs for out-of-pocket maximums and coinsurance.
- Complexity: Like PPOs, the flip side of being able to access both in-network and out-of-network doctors makes the billing and other administrative work more complicated.
Exclusive Provider Organization (EPO)
EPO plans are similar to PPOs in the flexibility of care that they offer, but they have some exceptions. Luckily, the exceptions are made up for with lower costs.
- Lower Overall Cost: EPOs have lower premiums on average than PPOs making them a great choice for individuals or businesses who want flexibility at a fair price.
- Choice of Provider: Members are able to select from a wide range of network providers in comparison to HMOs.
- No Referrals for Specialized Care: When EPO members need to see a specialist, they will not need to get a referral beforehand.
- No Out-of-Network Options: Unless there is an emergency, EPO plans do not cover any out-of-network care. Limiting the providers that you can choose from.
- Limited Service Area: For individuals who travel a lot or live outside of an EPOs service area, things get a bit tricky as the geographical coverage zones are usually limited.
High Deductible Health Plans (HDHP)
High Deductible Health Plans, as the name states- have high deductibles. To even things out though, they have other associated costs that are lower than many plan types. In general, these plans are preferred by people and companies that value low costs. When paired up with Health Savings Accounts, they can provide certain tax incentives.
- Low Premiums: While HDHPs have high deductibles, they are balanced out with their generally low monthly premiums. This can reduce the financial stress on employers and their employees.
- Tax Advantages: With HSAs, employer contributions are tax deductible. Additionally, withdrawals for qualified medical expenses are not taxed at all. These incentives can be a great upside to take advantage of for business owners looking for ways to cut back on costs.
- Encourages Healthy Habits: Since individuals are responsible for a higher amount of their healthcare costs until their deductible is met, it encourages people to live healthier lifestyles and be more cost-conscious. This is positive for both you and your employees. They will hopefully make more healthy choices, and your premiums will eventually decrease since less medical services will be used.
- Higher Deductibles: As briefly touched on, hence the name, deductibles will be higher which can be difficult for many employees. Especially for individuals who seek a significant amount of care on a yearly basis, costs can be very high. Until an individual is able to meet the deductible amount, their coverage will be limited, which can sometimes cause people to ignore serious medical problems.
- Tax Complexity: While tax advantages are great, they require sufficient knowledge about finances and specific rules. Without the proper guidance this may be an issue for employees.
Running and managing a successful business can be difficult and that can also be said when it comes to selecting a health plan that everyone is satisfied with. Since there are so many minute differences and details from plan type to plan type, going into the conversation with no background knowledge can be a disaster. With that said, it is crucial to yourself and your employees that you have a firm understanding of HMOs, PPOs, POSs, EPOs, and HDPHs. Only then, will you be able to make an informed decision.
When making considerations, it pays off to think about your employees’ main concerns and needs. Some employers actually find it useful to issue a survey to gauge their workforce’s most pressing concerns. Once you have a sense of their preferences, you should take each plan type and compare them side-by-side, paying close attention to the benefits, drawbacks and major distinctions. Affordability, network size, referral policies, and complexity are all important to keep in mind, but at the end of the day, it’s up to you. So, take your time, do extra research if necessary and make a choice that best suits your employees and your company’s interests.
Are you a business owner in need of a comprehensive group health plan for your company? Well, you’re in the right place! For years, Group Health Quotes has been leading the industry in helping people like you find affordable coverage that fits your employees’ specific needs. Our simple and easy process allows you to view competitive local quotes in just minutes. And our licensed agents are there to guide you every step of the way. To get a quote today or to learn more, fill out a form or give us a call at 888-571-0291.