If you're reading this, it's probably because your health insurance rates are going up, you feel like you're out of options, and you're considering pushing more costs onto your employees. Don't do it. Why? For starters, let us remember why you offer benefits in the first place — to attract and retain talent, right? That said, pushing additional costs onto your employees will undermine your efforts to attract and retain talent, and according to Employee Benefits News, employee health insurance costs can be as much as 33% (indirect costs, alone!) of an employee's annual salary to replace them.
Second, we need to understand why your rates are going up in the first place. Has your broker explained the underlying factors and provided you with proven risk management strategies to address them? If your health care rates are going up, it's most likely because you don't have the right pieces in place. With the right strategies in place, there is no need to push more expenses onto employees. Many companies can reduce costs without reducing provider choice or raising deductibles or copays. Contact us if you'd like to learn how our high-performance health plans bend the cost curve.
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Is your plan now, or are you revamping your benefits program? The first step is to identify your purpose: what is the goal of our program? Why do we offer benefits? Most companies offer benefits because it's the most economical way to attract and retain talent. If talent acquisition and retention is your goal, then you'll want to understand what your competitors are doing and make a calculated decision about what your contribution should be. To help us get a general idea of how much employers contribute to health plans, we turn to the annual Kaiser Family Foundation (KFF) Health Benefits Survey for insight. How much do benefits cost per employee?
Learn How to Reduce Healthcare Costs Now.
Employer vs. Employee Contributions to Health Insurance
In 2019, employers contributed an average of:
- $5,946 for single coverage. Employees contributed $1,242.
- $14,461 for family coverage. Employees contributed $6,015.
The numbers above reflect all plan types, but there's a fair amount of variety between each plan type:
- For HMOs, the average employer contributed $6,180 for single coverage, while employees contributed $1,058. For family coverage, the split was $14,668 and $6,009, respectively.
- For PPOs, the average employer contributed $6,222 for single coverage, while employees contributed $1,454. For family coverage, the split was $15,045 and $6,945, respectively.
- For POSs, the average employer contribution was $6,112 for single coverage, while the employee contribution was $1,072. For family coverage, the split was $12,894 and $6,945, respectively.
- For an HDHP with a savings option, the average employer health insurance cost was $5,341 for single coverage, while the employee contribution was $1,071. For family coverage, the split was $14,114 and $4,866, respectively.
Affordability Standards
When determining how much you'll contribute to your employee's health insurance coverage premiums, remember that the Affordable Care Act (ACA) sets specific affordability standards. The law says that, for health coverage to be deemed “affordable,” the lowest-priced individual plan offered by the employer must cost “9.78 [percent] or less of the employee's household income.” Note that this figure not only includes the employee's income, but also the total income for those contributing to the household.
This standard does not include employee plus spouse, employee plus children, or family coverage, nor any other out-of-pocket expenses, like deductibles, coinsurance, or copays. Of course, this is referring to the employee-paid portion of the premium — not the entire premium.
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If your health coverage is deemed “affordable” and also meets the minimum value standard, employees who choose to purchase a plan on the ACA marketplace instead of enrolling in your employer-sponsored plan, would not qualify for any tax subsidies.
Your employer-sponsored plan meets the minimum value standard if both of the following requirements are met:
- The plan covers at least 60 percent of the total cost of healthcare services
- The plan includes “substantial coverage of physician and inpatient hospital services”
What Can You Contribute to Health Insurance Premiums?
These numbers are averages because there will be many employers who pay less than this, but plenty who pay more. But, according to a survey that was done by Kaiser Family Foundation, the bare minimum employers pay for health care insurance is at least 83% for an individual while 73% premium for family coverage.
When making these decisions, be sure to check the average contribution your local peers are making to their employees' health insurance premiums. Because you'll be competing for the same talent pool, you'll want to be sure your benefits are on par with other companies in your geographic area.
You do not want to lose out on the right employees because you do not want to contribute to employer provided health insurance. Valor Health Plans were created to maximize your benefits to gain a strategic advantage in the war for talent.
Taxes
One important benefit of employer sponsored health coverage is that it can be deductible from tax at the state and federal levels. So, when employers pay the average annual premium cost for their employees' health coverage, it is classified as business expenses.
Your taxable revenue is decreased by tax deductions, which can also lower your tax bracket as an employer. Your tax classification determines how much you can save. Contrarily, tax credits immediately and proportionately reduce your tax liability. This is exactly what you need if you want to give employer sponsored health insurance and help reduce out of pocket costs of medical expenses for your employees.
Must You Provide Health Insurance for Employees?
Health insurance premiums cost a lot. So, many employers wonder if it is a legal obligation for employees to provide employee health insurance. Though, technically, the law does not place any requirement for employer provided health insurance, the fines imposed by the Affordable Care Act (ACA) on firms who do not provide employees health coverage is huge. So, employers pay for health coverage which is lesser than the fine.
According to the law, it is a requirement that firms offer health benefits if both part and full-time employees are more than 50. There is a group health plan that can be used to reduce health costs.
Employers at large firms have to ensure that they offer group health insurance for their workers. Full-time employees at both large and small firms are regarded as people that work for not less than 30 hours every week. So. there must be family coverage as well as employer sponsored coverage for the workers.
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For small firms, employers there do not need to worry about contacting an insurance company to provide health insurance for employees. Even when an employer has less than 50 employees and is not legally obligated like in large firms, the employer should still consider getting a health insurance plan for workers. The reason for doing so is that they will be able to get the right employees to work with.
Documents an Employer Need to Get a Group Health Insurance Plan
Getting employer sponsored health insurance is one of the proactive health initiatives for employers. To be eligible for this, the average cost of employer paying for these health benefits must be considered. The employer must also show necessary copies of important tax, accounting, and legal information while applying for group health coverage to help employee health insurance cost. The documents usually required during application are:
Proof of business location
Proof of business type
Payroll documentation
This information is accessible through the business tax filings of the previous year. The reason that the insurance company asks for this is to ensure that the business or company is legitimate. So, based on the content of this document the average cost of employer health insurance for employees can be lesser. Rules for offering health insurance to employees.
How to Spend Affordably on Employees' Health Insurance
The average health insurance cost for a company can be so much especially when it is in large firms. But, employers have constantly sought ways to reduce costs by looking for group health insurance. Below are some of the ways they have used to lower health insurance costs:Look for the Best Plan
Not all employees need the same health coverage because they all differ. One employee may need a premium for family coverage while another may need only their healthcare costs to be taken care of in addition to a health savings account. So, it is easier for both big and small employers to spend on group health insurance by looking for the best plan.
To find the best health insurance for employees, an employer should first know the health care costs that their employees are looking for. This helps you to cut down the cost of health insurance while giving out health insurance to eligible employees.
Another thing is to look at the total healthcare costs for all employees. This is advisable for both big and small employers because it will help you know the health care costs.
Depending on the amount, you can work with your insurance company to give you affordable monthly premiums which will help you reduce your employees' pay on health insurance. Some of these insurance companies work directly with health maintenance organizations which makes it easier to reduce medical expenses.
Divide the Costs with Your Employees
Most employees are aware that getting employer sponsored health insurance will reduce their out of pocket maximum when medical costs come up. It is one of the employee benefits that is important especially if the employee cannot take care of their health insurance costs.
We know that insurance companies offer health premiums for those seeking it and who can afford it. They also make it possible for employers to lower health insurance costs by allowing employers to share the premium cost with their employees. Here, through the employers contribution, it is easier for the employee to pay lower, which makes health insurance costs affordable.
Talk to Employees About Their Health
Adults spend most of their time working. This means that as an employer, you can tell your workers that their employee benefits include health insurance benefits. But, to help the bottom line of your firm it is better the inculcate healthy habits, go for checkups regularly, and live healthily.
This will help reduce the cost of health insurance especially when certain health challenges are discovered early and treated. Both the employee's and employer's health are important, so, everyone has to work towards living a healthy life.
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Through Health Insurance Group
Some people are wary of insurance companies that offer health insurance. This means that some of your employees will be averse to the risk of getting health insurance. So, for those willing, you can create a health insurance group. Here, you all pool resources together into the health saving account. Eligible employees will now benefit from it to take care of medical expenses.
Additionally, when you talk to your health insurance company, it is easy to reduce the cost of health insurance for the group you are paying. This helps you to reduce out of pocket costs and health reimbursement arrangements for your employees.
Health Insurance Terminologies You Should Be Aware Of
Premium: The recurring payment due to the health insurance company, which is frequently split between the employee and the workplace. Here, copays and fees are usually excluded.
Deductible: The least sum an insured person must pay before their health care coverage kicks in is known as the deductible. Depending on the plan, the cost can range from a few hundred to several thousand dollars. Every year, the amount is recalculated.
Copay: The majority of health insurance policies require the insured person to pay a copay of $10 to $50 in addition to their affordable monthly premiums at each doctor's appointment. Usually, this copay is paid at the time of the visit. Copays may occasionally be applied to the average annual deductible.
Out-of-Pocket: The majority of insurance policies have a cap that specifies how much can be spent before all services, including copays, are fully covered. The annual high deductible health plans are usually much lower than this sum.
Primary care physician (PCP): some plans require that a beneficiary of a health insurance program names a PCP to see a specialist. So, the work of the primary care physician is to refer individuals to health specialists where the need arises.
Network: every health insurance works within a network which is better known as a chosen collection of insurance providers. Different coverage is usually offered by insurance plans depending on whether a provider is "in-network" or "out-of-network." If those services are more fully covered by the insurance, the insurance carrier has to make sure their doctors are in the network.
Benefits of Employer Sponsored Health Insurance
If you are an employer and you are still wondering why you should pay for the health insurance coverage of your employees, here are reasons why you should:
It Protects Employees
Employer sponsored insurance is good because affordable monthly premiums or average annual premiums for health insurance are high. So, when employees pay for their health insurance coverage out of their pocket, it can be a bit too much.
Some employees cannot afford health insurance costs which makes it impossible for them to enjoy health benefits from insurance. While some employees are too preoccupied to sign up for health insurance benefits. With employer sponsored health insurance, when an emergency comes up, the employee is safe and does not have to worry about their health care expenses.
Discover what competitors in your region are investing in benefits for their employees, so that you can compete for talent. Schedule a Benchmarking Call
With employer sponsored health insurance in place, it is a motivating factor for employees to work harder. They are aware that their employer contributions to their health care stem from the fact that they matter to the firm they work in. this stems from the knowledge that the cost of employer sponsored health insurance is high.
Ability to Recruit and Retain Employees
The cost of employer sponsored health insurance is high. An average employer contribution to the average annual premium cost for health insurance is around 83%. Some employees will decide to stay with a firm if the working environment is good and if their employer provided health insurance is available.While you can retain good employees, you are not suffering a loss because you may benefit from tax incentives offered at the state and federal levels.
Prevention-Based Medicine
Preventive healthcare initiatives are given priority by modern health providers. They can do more than just conduct physicals. Other initiatives include discounts on gym memberships, rewards for good behavior, and software for monitoring your fitness. Some of these are also protected by health insurance for employees. Such preventive measures can help the employee stay active and thus fruitful.
Conclusion
Giving employer sponsored health insurance is one of the important employee benefits that help companies retain employees. Employer provided health insurance is better for employees because most insurance companies give an average premium for group insurance. So, as an employer, you should give employer sponsored insurance to your employees today.