As you review the different types of group health insurance policies available, you will see that each has different rules, fees, and coverages. When you are choosing which plan or plans to offer employees, it is important that you understand the differences between the plans, as each as its advantages and disadvantages, both to your company and to your employees.
Fee for services: This type of policy allows employees to choose any doctor or hospital they want to use. In addition to the monthly premium, there is an annual deductible that the employee must meet before coverage begins. For a single person, the deductible might be $250 annually, while a family’s deductible might be $500 a year, which must be met by at least two family members. Once the deductible is met, the insurance company will pay a percentage of the costs, while the employee is responsible for the remainder. A typical arrangement is that the insurance company pays 80 percent and the employee pays 20 percent, which is referred to as their co-pay or co-insurance. Some services may be excluded from coverage.
Managed care: This type of insurance plan requires that the employee get pre-approved before visiting the doctor or hospital. If the patient does not get pre-approved, he will be responsible for the entire bill. (Plans waive this requirement for life-threatening emergencies, but what an employee views as life-threatening may not agree with the insurance company’s definition.) Another way that the insurance company can manage the employee’s care is to set a maximum number of doctor visits allowed in a year.
Health maintenance organizations (HMOs): These plans have their own pre-approved doctors, labs, hospitals, and surgery centers that they work with, and they contract with other doctors and hospitals. With this type of coverage, the co-pay is usually small, between $5 and $20 for a doctor’s visit, with hospital fees between $25 and $100. If the employee visits a doctor or hospital outside the plan’s pre-approved choices, coverage will either be denied or set at a much lower rate, such as only covering 40 percent of the expenses. Some plans require the employee to specify the doctor in advance, requiring notification if the employee chooses to switch doctors. Others allow the employee to visit any doctor in the network at any time.
Self-Funded ERISA: If you are running a large company, you have the option of contracting with third-party administrator or an insurance company to handle the claims paperwork. Your company will pay all costs associated with the plan, plus the added administrative costs.