In 2015, three-quarters of eligible employees aged 26–39 opted for employer-subsidized health plans in 2015.
What does this mean to you? When it comes to onboarding new employees — especially millennial employees who might be choosing a health care plan for the very first time — there’s often a lot of ground to cover. From copays and deductibles to a bunch of confounding abbreviations like HMO, PPO, and FSA, health care these days is bloated with information. Frustratingly, most of it is scattered across dozens of dense pages in boring information booklets that you frankly don’t have time to read and your employees will likely gloss over. How can you help your employees navigate some complicated choices? Here’s everything you — and they — need to know.
How to choose a health benefits plan
HMO or PPO: The eternal question when choosing health insurance, and one you’ve probably heard a million times over the course of your career. Each plan has advantages and drawbacks that are important to take into account when choosing between the two. Let’s break it down.
An HMO (Health Maintenance Organization) typically has a lower monthly premium than a PPO, which may be a better option for a younger employee who might not be able to afford a more expensive plan –or need the additional benefits (employees who earn $15–20K a year spent 9.5% of their annual income on premiums.) Choosing this route means designating a primary care physician within the plan network so a specialist visit demands a primary care physician’s referral.
Best for:An employee who’s in good health and won’t require numerous specialist visits.
Pros/ cons: Less expensive than a PPO but requires the participant to choose an in-network primary care physician.
A PPO (Preferred Provider Organization) doesn’t require them to pick a primary care physician, but still offers a network of providers that they have to choose from in order to get cheaper copays and deductibles. A PPO also lets them visit out-of-network providers, with a higher deductible. One big advantage of the PPO is they’re free to see specialists in their network without a referral first, but again, they’re going to pay a lot more if those specialists are not part of the PPO plan.
Best for: Anyone who anticipates seeing more specialists.
Pros/cons: A PPO is more expensive than an HMO, but offers more flexibility.
If they think that it would make a lot more sense to just combine the benefits of HMOs and PPOs into one super-plan, they’re not alone. Point of Service (POS) Plans typically cost more than HMOs, but also tend to be cheaper than PPOs. As with an HMO plan, they’re required to designate a primary care physician with a POS plan, but if they need to see a specialist, they can go outside of their network. One thing to remember with this type of plan is the deductible for going outside of their network with a POS plan can be significant.
Best for: Someone who isn’t too picky about their providers, but may occasionally need to see a specialist.
Pros/cons: A POS plan is more expensive than an HMO, but cheaper than a PPO.
In certain states, EPOs are an option too. They’re a lot like HMOs in that they almost always have to use providers in the insurer’s network (except when they need emergency care, all out-of-network care comes out of pocket). But unlike with an HMO, EPOs don’t require them to choose a primary care physician, or go through one for referrals to specialists. Employees will have to do their own leg work as to whether the specialists they want are inside the insurer’s network.
Best for: Someone who’s happy to stay in one network and doesn’t feel the need for a primary care physician.
Pros/cons: Low premiums, but not widely available nationwide yet, and in-network care is all but mandatory.
Saving money with an FSA or an HSA
Regardless of which plan they pick, they can expect to incur additional expenses like copays, deductibles, and coinsurance fees. That’s where either an FSA or an HSA come in. Both of these are tax-advantaged medical savings accounts, which can be especially useful for millennial employees who are likely just beginning to save. Here’s how they work:
Each pay period, you set money aside—tax free—to later put toward a deductible or copayment (but never an insurance premium).
A flexible spending account (FSA) maxes out at $2,550 per employee per year. Anything contributed to an FSA must be spent within a given year, though employers can also opt to roll over $500 for the following year’s health care costs.
A Health Savings Account (HSA) has a current annual contribution limit of $3,350 for single employees, and $6,750 for married couples, with the added benefit that contributions roll over from year-to-year.
Best for: anyone with an extremely high deductible they’re worried about hitting.
Pros/cons: Both FSAs and HSAs are tax-free, but if they plan to contribute a lot, choosing these options will impact how much money they’ll take home with each paycheck. FSAs don’t roll over from year to year.
Out of Pocket Costs And How to Shrink Them
What your employees pay toward their health insurance every month is called the premium. This covers some of their health insurance expenses, but not all of them. Every time they see a doctor, they’ll have to pay part of the fee, which is usually an average of $24 for primary care and an average of $37 for specialty care. This is called a copay. Insurance covers the rest.
The deductible is what they have to pay each year before their health insurance covers all of their medical expenses. The average deductible for single coverage is about $1,300 or more, and varies based on a lot of factors.
For example: If they have a deductible of $3,000 and only use $1,000 worth of health services in a year, they’ll pay for everything out of pocket. But if they have a major illness and rack up $20,000 worth of medical bills, they’ll only have to pay the $3,000 deductible, and their health insurance provider will cover the other $17,000.
There are two other concepts that millennials should familiarize themselves with: coinsurance and the out-of-pocket-max.
With the vast majority of plans, coinsurance doesn’t kick in until after they’ve paid the full deductible. After that, the employee pays for a set percentage of their medical bills: this is called their coinsurance.
Coinsurance can get very expensive on out-of-network care, especially if insurers refuse to contribute more than they would for the same treatment had the employee stayed in network. The deductible, copays, and coinsurance are all out of pocket costs that an employee would have to pay. The maximum amount that this can be in a given year is called the out of pocket maximum. Once they’re surpassed that number, the insurance company will start to pay for everything.
Helping your employees choose a plan not only saves you time, but saves them money and puts their mind at ease when it comes to selecting a plan that suits their needs.