Terms to Know When Selecting a Group Health Insurance Plan
If you run a business that's going to offer group health insurance to its employees, you have to choose what plan to offer. Here are some terms to know as you compare different group health insurance plans, and select one.
Premium: The Amount Charged
A premium is an amount that's charged for an insurance policy. Health insurance premiums are primarily discussed as monthly rates, but you might come across a policy's annual premium. For example, you might hear that a policy that costs $100 per month has a $1,200 annual premium.
The premiums charged for a group health insurance plan can be paid for by the employer or by the employees. Most businesses share the cost of premiums with their employees, shouldering some of a plan's cost but not all of it.
What portion of a plan's premiums your business pays is ultimately up to you. Consider how much revenue can be diverted to a plan's cost, and how much most employees could afford to pay given their salaries.
Deductible: Initial Out-of-Pocket Expense
A deductible is an amount that employees must pay out of pocket before the group health insurance plan will begin making payments. Plans can have separate deductibles for medical expenses and prescription drugs, with the plan paying for each category once the respective deductible is met.
HDHP: A Common Plan Type
Many group health insurance plans are "high deductible health plans," commonly abbreviated as HDHP. These plans are characterized by their high deductibles and affordable premiums. These plans are also the only ones that can be used in conjunction with a health savings account, or HSA.
Businesses often choose to offer HDHPs since the plans are affordable and flexible. Most employees can afford the premiums, and employees can choose how much they want to contribute to their associated HSA. Employees with lots of medical expenses can divert much of their income to their account, and those that don't have many expenses can divert a little.
HSA: A Tax-Advantaged Account
A "health savings account," or HSA, is a tax-advantaged account that's intended for medical expenses. Employees aren't taxed on income that's put into the account, so long as the money is eventually used for qualified medical expenses.
HSAs are subject to maximum annual contributions, but no other account offers the same benefits when tax filing time comes. These accounts can only be set up if an employee has a group health insurance plan that's an HDHP.
Reach out to a company like Wilkinson Insurance Agency to find out more.