Alongside compensation, health care coverage is often seen as one of the most important benefits a job can offer. And the larger the variety of options available to employees, the more likely they are to find an option that best suits their needs. This is good for employers because employees are more likely to stay at their organizations when they feel their needs are being met. However, depending on a company’s size, budget or other factors, offering only one type of plan that fits most employees’ needs may be more efficient than providing multiple plans that aren’t needed and that hurt the company’s budget.
The Kaiser Family Foundation’s 2022 Employer Health Benefits Survey found that 75% of firms offering health benefits offer only one type of health plan. Further, 70% of covered workers in large firms (200 or more employees) are offered more than one plan type, compared to 37% of those in small firms. Although offering several different plans may not be feasible for all organizations, employers should consider the benefits and risks when deciding what is best for them.
There are several components that are factored into the number and types of plans an employer may offer. This article will discuss these considerations and the plan types employers should take into account when deciding whether to offer multiple health plan options.
Factors to Consider
Several factors can contribute to an employer’s decision to offer multiple health plan options. Consider the following:
- Budget—If an employer has the means to offer multiple health plan options, then doing so is generally an effective way to keep employees happy with their benefits offerings. However, for employers with a smaller budget, scaling back health plan options may be the best choice after accounting for the company’s various other needs.
- Workforce composition—The average age and medical needs of an employer’s workforce will also play a significant role in the types of health plan options they should offer. If the workforce is comprised of people of a similar age and medical disposition, then having one offering may be sufficient. Alternatively, if there is a wide variety of ages and medical needs throughout an organization, the employer may consider having multiple offerings to help cover the needs of all employees.
- Range of coverage—Employers can determine whether to offer multiple plans by assessing the range of coverage most of their employees need. They can make this determination based on factors such as workforce composition. For some employers, a large range of coverage may be needed, and it may be best to have multiple plans. An option for employers who offer fewer options is to offer at least one choice with varying levels of coverage. By doing this, employees can pay for the amount of coverage that is most suitable to their needs, and these employers may not need to offer multiple health plan options because the one they do offer will be able to meet their employees’ needs.
Types of Plans
Ultimately, the health plan options an organization offers depend on the needs of the company and its employees.
Employers may choose one or more of the following plans:
- Health insurance organization (HMO) plans—An HMO plan often has low premiums and deductibles as well as fixed copays for doctor visits. While less expensive, HMO plans require employees to seek care from only in-network providers. When signing up for the plan, employees select a primary care physician (PCP) for routine checkups. The PCP will need to give a referral before patients can see a specialist, such as an allergist or dermatologist.
- Preferred provider organization (PPO) plans—PPO plans have pricier premiums than HMO plans, but they allow employees to see specialists and out-of-network providers without referrals. Out-of-network care typically comes with greater employee cost sharing, but in-network copays and coinsurance are generally low. More paperwork is typically involved with out-of-network providers.
- Exclusive provider organization (EPO) plans—An EPO plan offers moderate freedom to employees to choose their health care providers. Like HMO plans, EPO plans only cover in-network care; however, they typically don’t require specialist referrals from PCPs. Premiums are generally higher than those of HMO plans but lower than PPO plans’ premiums.
- High deductible health plans (HDHP)— These plans have low premiums but higher immediate out-of-pocket costs. An HDHP is often paired with a health savings account (HSA), a tax-advantaged account used to pay for qualified medical expenses. An advantage of an HSA is that the remaining funds at the end of the plan year can roll over into the account for the following year.
- Point-of-service (POS) plans—A POS plan is a hybrid of an HMO and PPO plan. Such a plan allows employees to choose whether to use HMO or PPO services each time they receive health care. For slightly higher premiums than an HMO plan, a POS plan can cover out-of-network doctors. As such, it’ll be more beneficial and cost-effective if an employee initially sees a PCP and seeks in-network care rather than not seeing a PCP for a referral first.
Health plan options are an important part of an employee’s benefits package, so employers should strive to offer plans their employees find beneficial. In deciding how many and what kinds of plans to offer, employers should consider factors such as their budget and the ages and medical needs of their employees. For more information about health plan options, contact CMR Risk & Insurance Services, Inc. today.
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