Navigating company health benefits can feel like a whole job in itself.
You’re supposed to wade through premiums, deductibles, and wellness options, trying to figure out the best choice. After all, you want to pick a healthcare package that works for your team but won’t drain your bank account.
Health coverage keeps getting more expensive too. In 2022, the average employer contribution was $16,357, a rise of 39% over the past 10 years.
So how do you know you’re getting a good health insurance plan for that money?
Read on to learn why offering a solid health benefits plan matters, the requirements to follow, and the standards to hit to ensure you’re doing your best for your employees.
Let’s chat about how offering a comprehensive employee benefits plan helps you.
First, attracting and retaining valuable employees is easier when great health coverage is part of your compensation plan. In fact, finding better benefits was the second-most important reason employees gave for leaving a job, according to a 2021 survey by PwC.
Moreover, employees who believe their employer truly cares about their well-being are three times more likely to stay engaged, meaning they’re more productive. You can build that atmosphere by offering health insurance your employees appreciate, whether fertility benefits or dental coverage.
And it doesn’t stop there: a 2023 study found that workers are 22.8% less efficient when sick. If your employees have paid time off and can easily find a doctor, they’re more likely to care for themselves, minimizing the potential impact on your company’s productivity.
You can account for these and other perks with the indirect compensation you offer employees. And you can take it beyond basic medical care to offer a complete benefits package, including:
Above all, you need to make sure you’re meeting all legal requirements with your chosen plan. State-level requirements are specific, and you can find them online — but since federal laws are overarching, focus on them first.
Below are the most important federal health insurance laws to follow as an employer:
If you find yourself wondering whether you’re meeting all of the requirements, contact a health benefits broker who operates in your state. They’ll help ensure your chosen plan follows all local and national laws.
Not every legal health insurance plan is a good one. So you’ll have to take things a step further if you want to impress workers. The good news is, despite the many options out there, there are a few commonalities to a great company health benefits plan.
In general, you’ll want to get individual plans with balanced features, ensure comprehensive coverage, select a network that works for your whole team, and consider offering more than one plan.
Here’s how to select the elements that make a good employer health plan.
One of the first features you’ll want to dive into while browsing plans is the deductible — the amount of money an employee has to pay before health insurance kicks in.
Generally, a high deductible isn’t going to make you very popular because people who don’t use their care much will end up getting no benefit from their coverage.
Deductibles can range from zero to $8,000, with $3,000 being a typical deductible. However, note that most plans with lower deductibles generally have higher monthly premiums.
Speaking of health insurance premiums, you’ll also want to keep those within a reasonable amount. Premiums are the money amounts employees pay monthly to help cover the cost of healthcare — the higher the premiums, the higher the cost-sharing for employees. The Kaiser Family Foundation found that in 2022, the average premium for individuals was $7,911/year.
Another feature to consider is the out-of-pocket maximum. That’s the amount employees must pay to ensure their health insurance pays for 100% of the cost of the covered benefits for that year. That includes deductibles, premiums, and out-of-network coverage.
The maximum out-of-pocket fees for ACA marketplace plans is $9,100 for individuals and $18,200 for families.
Lastly, you can account for features like copays and coinsurance. They represent how much a person pays when they use certain services. You may be familiar with set amounts like $30 per doctor’s visit — that’s a copay.
On the other hand, coinsurance is a percentage of the care a patient pays. That could be 10% on a generous plan or 50% on a less generous one. Mid-range would be closer to 30%.
With all of these features in mind, an example of a typical balanced plan for a startup could have a $1,000 deductible, 20% coinsurance, and a $5,000 out-of-pocket maximum.
Next, determine how much of the plan you’ll pay for and how much the employee is responsible for. Companies are required to cover at least 50% of the plan for their employees, but many businesses offer employees more reimbursement as part of their company health benefits.
While covering dependents is not required, it’s a big issue for many workers, especially those with families. Typically, employers cover more of the cost for the employee and less for any dependents.
At Pebble, most of our clients cover 80-90% of their employees' costs and 50-75% for any dependents.
Next up is choosing a network. You may be familiar with the two main types, HMOs (health maintenance organizations) and PPOs (preferred provider organizations).
An HMO typically requires you to visit a doctor or hospital that’s in-network — in other words, on a pre-approved list. Comparatively, HMOs usually save money, but these plans typically work better for small businesses with employees in one city or state.
That’s because HMO networks cover a specific area; employees far away won’t find approved hospitals nearby.
If your team is remote or you want to expand out of state, you’ll probably find a PPO is better for your organization. These plans offer discounts when you use an in-network provider, but you can see out-of-network specialists and hospitals for an additional cost.
We’ve also found that PPOs work great for tech companies in general. Most of our clients use these plans since they often have a remote workforce. Plus, it offers more flexibility for an employee when looking for care and helps with retention.
Not sure which plan is right for you? You don’t have to limit your company to only one plan. In fact, having a few options works best for enrollment.
With multiple plans, you can meet the various needs of employees at different stages of life. For example, you could offer younger employees a slightly less generous plan that allows you to cover the full medical costs since they’re less likely to use their healthcare coverage (barring exceptions).
To take care of people who expect health insurance claims, you can have a very generous plan that comes with a larger payroll deduction in exchange. You can also consider having both an HMO and a PPO option available.
Our clients typically have a less generous plan that is 90-100% covered and a zero-deductible plan that is 70-80% covered.
At Pebble, we believe one to three plans with clear differences tends to work well. Too many options and things get complicated.
So there you have it. Offering thoughtful employee health insurance plans is crucial to making your staff happy.
Don’t overwhelm them with options; have one to three plans they can choose from, and make sure there are some differences in the deductibles and coverage.
We know setting up company health benefits can take a huge amount of time if you do it alone. But you don’t have to. Working with a benefits broker can help you find a plan. Once you’ve found some plans that work for everyone, you’ll have peace of mind that you’re offering the care your employees need at a price you can afford.
If you’re confused by all the options you’ve found, learn more about what to avoid by reading the health coverage mistakes that small businesses make, or contact us.
