Choice of health insurance options and providers

The legal landscape of employer-sponsored health coverage is rapidly changing. Choosing your health insurance plan coverage options and insurance providers can be a daunting task. Below are three important factors to consider when looking at options for the plan’s next year.

Financing. The two basic types of employer sponsored health plans are self-funded and fully insured. Small businesses generally choose fully insured plans where the employer pays a non-refundable premium
to a health insurance that assumes the risk of paying for the damage to health. Larger companies, typically with 200 or more employees, generally choose to self-finance. In a self-financing plan, the employer takes the risk of paying employee health claims and pays an administration fee to a health insurance company to handle the claims. Self-financed employers often purchase a stop-loss insurance policy to insure against large health care benefits in excess of a set dollar amount.

Focusing on financing, the type of plan and the provider
network, rewards and cost sharing, companies can fine-tune plans that fit their needs and budgets.

Employers with self-funded plans have greater flexibility in designing health coverage details, but also experience greater compliance risks and administrative complexity. Fully insured plans often limit or exclude coverage for some high-cost treatments for conditions such as autism and gender dysphoria. However, they are required to comply with state insurance requirements such as mandatory treatments for autism in children up to a certain age. Although self-funded employer plans are not subject to state insurance mandates and therefore have more freedom to rule out high-cost treatments, these coverage design choices still carry compliance risks because they are subject to federal laws such as Mental Health Parity and Addiction Equity Act of 2008. This year the Department of Labor’s Employee Benefits Safety Administration stepped up its investigative efforts into mental health equality and employers are ultimately responsible for any non-compliance.

Plan type and provider network. There are many basic types of plan design that employers can choose from. Most health insurance plans use the provider’s network agreements with the health insurer or administrator. Common types of provider network agreements are:

  • Health Maintenance Organization (HMO): An HMO provides assistance within the supplier’s network. Participants must select a primary care provider, and specialist visits often require a referral. Offline assistance is generally limited to emergency services.
  • Preferred Vendor Organization (PPO): A PPO offers a large network of providers for a higher monthly premium. Covered employees can choose internal or external assistance to the network. Specialist references are generally not required.
  • Exclusive Supplier Organization (EPO): With an EPO, employees have access to a smaller local provider network. Rewards are generally lower than PPO rewards and specialized referrals may or may not be required.
  • Point of Service Plans (POS): POS plans are a hybrid of HMO and PPO plans. Offline coverage is limited and often results in greater patient cost sharing. Specialist visits require a postponement of primary care.

Less common plan design offers marketed with an emphasis on cost savings for employers can carry greater compliance risks. Two of these models are reference or value-based plans and “lean” plans designed to cover the essential health benefits of the Affordable Care Act (ACA).

Referral-based health plans do not use supplier networks. They reimburse claims up to a certain allowable amount, which is often a percentage of the Medicare reimbursement amount. Some employers have a traditional network-based plan and limit the referral model to off-network emergencies and laboratory complaints. While these plans can reduce employer costs without reducing the number of services covered, they carry a higher degree of administrative risk due to uncertainties related to compliance with more recent legislation such as the No Surprises Act, which prohibits the billing of balance in certain situations.

“Lean” health plans are designed to cover the emergency and preventative care needed to meet the ACA’s “essential minimum coverage” requirement, but often exclude most or all inpatient and outpatient care. While these plans may be marketed as ACA compliant, they often fail to deliver the “minimum value” of ACA covering such a small selection of medical services. Employers with 50 or more full-time employees or full-time equivalent employees should not choose poor health plans due to the risk of penalty assessments of paying employer shared responsibility.

Premiums and cost sharing. One of the most important considerations for all companies when choosing health coverage is the cost to both the employees and the employer. Employee costs are split between premiums and cost-sharing features such as co-payments, coinsurance, deductibles, and living limits. Employers need to carefully compare all of these cost elements for each level of coverage (bronze, silver, etc.) and level (employee only, family, etc.) when looking into options to find a plan that strikes a balance between affordable. for the employer and competitive within the firm’s labor market.

Higher deductible plans typically have lower premiums and vice versa. Deductibles for family coverage may be incorporated, where an individual deductible applies to each family member in addition to the overall family deductible. With a total or non-incorporated deductible, only the family deductible applies before the plan begins paying claims. The deductibles for medical and prescription benefits can be combined or separate. Co-payment projects should also receive a lot of attention, especially when it comes to the benefits of prescription drugs. Copay Maximizers, Accumulators, or Optimizers programs seek and apply drug manufacturer coupons for high-cost specialty drugs to a participant’s cost-sharing amounts. These programs may have compliance issues with federal guidelines on ACA essential health benefits, highly deductible health plans and health savings accounts (HSAs), and mental health parity.

Selecting or renewing employer health coverage can be overwhelming, with many options and factors to consider. However, by focusing on financing, plan type and supplier network, rewards and cost sharing, companies can fine-tune plans that fit their needs and budgets. Additionally, insurance brokers and other third-party consultants can assist employers in selecting a health plan that meets their criteria. Some states also offer useful health insurance resources for small businesses.

Hillary Sizer is an attorney from Ogletree Deakins, Atlanta. The American Rental Association (ARA) has a partnership with Ogletree Deakins to provide HR help and guidance to ARA members. You find out more at ARArental.org/manage-business/HR.

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