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Small Business Employee Benefits and HR Blog

The CEO's Guide to Evaluating Employee Health Insurance

CEOs at small and growing companies have various factors to consider with employee health insurance. Is cost your number one concern? Which benefits are most valuable to you and your employees? Which employee health insurance approach will you take? In this concise guide to employee health insurance, we provide CEOs a tool for quickly and effectively evaluating health insurance options.

CEO Guide To Employee Health Insurance

4 Questions to Ask When Evaluating Employee Health Insurance 

Here are the four questions CEOs should ask when evaluating employee health insurance needs.

1. Who will be covered under the plan?

2. How much is cost-sharing, and can you afford?

3. What type of coverage would employees prefer?

4. How much time do you have to administer health benefits, and who will take the lead?

Tip: CEOs may find it helpful to review these questions with a health insurance broker.

1. Who will be covered under the plan?

One of the first steps in evaluating health insurance options is determining who the company will offer benefits to. 

  • Will everyone be covered (owners, employees, and dependents)? Or just certain staff (CEO and top managers)? Full time and part time?

  • Do employees already have coverage through spouses or other family members? Would they keep their current coverage if you offered benefits?

  • Do employees already have coverage under an individual health plan? Are they eligible for, and receiving health insurance tax credits?

These types of questions will help you assess what type of health coverage would be best for your company, and how many people will participate.

For example, if you’re looking for a plan that will cover yourself and your family, as well as employees and their dependents, then with a group health insurance plan you'll want to evaluate coverage that is affordable for everyone participating and suits the diverse medical and financial needs of everyone.

Or, you may find that if employees already have coverage under individual health plans, that a defined contribution approach would be well-received and meet the company's goals.

2. How much is cost-sharing, and can you afford?

Cost sharing requirements (if any) will vary by the type of health benefits you decide to offer.

With a group health insurance plan, monthly premiums are generally paid for by both the employer and employees. In most states, employers are required to cover at least 50% of the monthly premium for their employees. Keep in mind what the company can afford, and also what employees can afford. Premium rates may also increase annually.

With a defined contribution approach (i.e. health insurance allowances) there is no minimum cost-sharing or minimum contribution amount. The plan could provide a flat $200/month to employees, and employees would cover any remaining amount of their premium. With a defined contribution health plan the company could also offer different amounts by class of employees. For example, the plan could provide $300/month to the CEO and managers and $150/month to part time clerical staff. As long as the classes are based on bone-fide job criteria, this is allowed.

3. What type of coverage would employees prefer?

Discuss coverage options question with your employees. Do they prefer full coverage at a higher cost? Do they prefer a high-deductible plan with an HSA? Would they prefer a health insurance allowance to use toward a plan of their choice?

Similarly, what types of benefits are most important? While federal privacy laws prevent you from asking employees for information about their personal medical histories, you may still ask them about which kinds of benefits they consider most valuable.

While you may not be able to meet all requests (set this expectation up-front), employees' input will be valuable to your decision-making. After all, benefits are offered to recruit and retain employees. 

4. How much time do you have to administer health benefits, and who will take the lead?

Lastly, how much time do you have to administer health benefits, and who will be managing health benefits? This may guide you in the type of benefits you offer.

For example, administering a group health insurance plan typically involves plan selection, employee enrollment and education, claim disputes, and annual renewals.

Administering a defined contribution health plan reduces health benefits administration and involves setting up the plan via defined contribution software, employee enrollment and education, and reimbursing employees on payroll.

 

The 3 Core Employee Health Insurance Options

Now that you have a solid understanding of your company's employee health insurance needs, what are the options? 

  1. Offer a traditional small business health insurance coverage (i.e. a small group plan)

  2. Offer employees a health insurance allowance to reimburse employees for individual health insurance coverage (i.e. a pure defined contribution health plan)

  3. Offering nothing

See: 2 Minute Guide to Small Business Health Insurance Options

Questions? Ideas? Leave a comment below.

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