The plan type governs how much you (and your employees) pay for monthly premiums, and how much employees pay for care. Typically, plans with lower premiums require members to pay more for medical services before insurance kicks in (known as the deductible). The three most common plan types are:
High deductible health plans (HDHPs) have a higher deductible that must be met before insurance kicks in. Typically they have lower monthly premiums and may be attractive for groups interested in catastrophic coverage.
Copay only plans have no deductible for in-network services. Instead employees pay a fixed dollar amount (a copay) when they receive care. The copay amount is based on the services; for example, a doctor visit may be $35 whereas an ER visit may be $200. These plans may be attractive for people who want predictable costs for care.
Traditional plans use a combination of co-pays, deductibles and coinsurance. The deductible and co-pay amounts are generally lower than other plan types, so premiums are often higher.
Your plan's network determines which doctors you and your employees can see. The same plan with a different network type can make a big difference in monthly premium costs. The two most common networks are:
Preferred Provider Organizations (PPOs) consist of a larger number of healthcare providers and offer the flexibility to receive care from in- or out-of-network doctors, specialists or hospitals without a referral.
Narrow networks can reduce premium costs by offering a smaller group of medical providers. These networks are often local.
Premiums are typically shared by the employer and employees and how that's split is determined by the employer. Determining how much of the monthly premium you will pay is vital for small business owners to plan ahead for insurance expenses. Here are two common approaches to cost-sharing:
Fixed dollar amount: Employers can contribute the same dollar amount—such as $500 per month—toward each employee's premium. Employees then pay any remainder of the cost. This makes costs predictable.
Percentage: Employers can contribute the same percentage of cost—such as 80% of monthly premiums—for each employee, in which case the dollar amount will vary.
Depending on the insurance carrier or state, employers may be required to cover up to 50 percent of the premium for employee-only coverage. Ask the carrier or agent what rules apply in your area. Here's some guidance on how much a small business can expect to pay.
