Let’s dive into the world of group health insurance premiums, shall we? You know, those monthly payments that both bosses and workers usually chip in for to cover healthcare costs. If you’re scratching your head over what they really are or how they’re worked out, don’t sweat it. Whether you’re the one signing the checks or the one clocking in every day, we’ve got you covered and here to break it all down for you.
What are group health insurance premiums?
Group health insurance premiums are the amount you and your employees pay for health insurance every month. In many cases, the cost is split between the employer and the employee, and it’s usually deducted from an employee’s paycheck. The amount of these premiums can vary depending on a number of factors, such as the size of your workforce, the type of plan you select, the overall health of your employees, and the level of coverage you choose to offer. It’s important to remember that these premiums are typically a pre-tax deduction, which means they can lower your taxable income and potentially save you money.
What goes into determining premiums?
There are several things that come into play when insurance companies set premiums for a Group Health Insurance plan.
- Who is being insured? Full-time employees only? Employees and eligible dependents? Will benefits be offered to part-time employees?
- What are the proposed insureds’ ages and genders?
- What is your metropolitan statistical area (MSA), county, or ZIP Code? California Geographic Ratings Areas are listed on the Centers for Medicare & Medicaid Services (CMS) website.
- What Affordable Care Act metal tier do you want to offer? Bronze, Silver, Gold, or Platinum – or some combination of tiers?
- What type of coverage do you want to make available? HMO? PPO? EPO? HSA? Other?
Does your group include tobacco users? Some states allow insurance companies to charge more for smokers; however, California and a half-dozen other jurisdictions do not.
The amount you contribute to employees’ premiums is up to you, although most insurance companies require at least a 50% contribution for employer-sponsored insurance. Talk with your broker about your options and what makes sense for your business.
For insured employees, it goes beyond premium
Even if your employees only pay a portion of the premium for their Group Health Insurance coverage, their costs aren’t limited to their premium contributions. Depending on the plans employees select, they may also face out-of-pocket costs for:
- Deductible(s): Both in-network and out-of-network deductibles may apply before the selected plan begins to pay benefits (except for free preventive services under ACA-qualified plans). A separate deductible may also apply to prescription drug benefits.
- Copayments and coinsurance: Insureds may face payments each time they receive care, such as a doctor visit copay, or coinsurance for certain services, such as 30% of hospital charges.
The most an insured person has to spend for covered services in a plan year is referred to as the “Out-of-pocket maximum (OOPM).” A plan may have an OOPM for in-network services and a separate OOPM for out-of-network services. After reaching the OOPM, the insurance company pays 100% for covered services. (Premiums paid for coverage are not included in calculating an insured’s out-of-pocket costs.)
Employees and dependents could also face additional copays or deductibles for prescription drugs they might need. Giving them the information they need to make informed decisions when selecting a plan is a must.
What affect do Metal Tiers have on plan costs?
The Affordable Care Act divides plans into four metal tier categories: Bronze, Silver, Gold, and Platinum. Each tier offers a different split on how health care costs are shared, as shown below:
|Plan Category/Metal Tier
|Insurance Company Pays
So how do you know which health plan category is right for you or your employees? What do you get for your premium dollars? Here are some tips from HealthCare.gov:
• Lowest monthly premium
• Highest costs when you need care
• Bronze plan deductibles can be thousands of dollars a year. They include the medical costs you pay yourself before your insurance plan starts to pay.
• A Bronze plan is a good choice if you want a low-cost way to protect yourself from worst-case medical scenarios, like serious sickness or injury. Your monthly premium will be low, but you’ll have to pay for most routine care yourself.
• Moderate monthly premium
• Moderate costs when you need care
• Silver deductibles are usually lower than those for Bronze plans. These are the costs you pay yourself before your plan pays anything.
• A Silver plan is a good choice if you can afford a slightly higher premium and are looking for somewhat lower deductibles and copays.
• Higher monthly premium
• Low costs when you need care
• Gold deductibles are usually low. These are amounts you pay for medical care before your plan pays.
• A Gold plan is a good choice if you’re willing to pay more each month to have more costs covered when you get medical treatment. If you use a lot of care, a Gold plan could be a good value.
• Highest monthly premium
• Lowest costs when you get care
• Deductibles are very low. That means your plan starts paying its share earlier than for other metal tier categories.
• A Platinum plan is a good choice if you are willing to pay a higher monthly premium knowing nearly all other costs will be covered.
When you make your plan choice, remember that plans in all categories provide free preventive care, and some offer selected free or discounted services before your deductible.
Compare Plans With Help from a Broker
If health insurance costs are concerning you, talk with a broker. If you’re not yet offering CaliforniaChoice to your employees, your broker can show you how CaliforniaChoice can help you save. You and your employees can choose from eight health plans and dozens of coverage options. Plus, you have greater access to doctors, specialists, and hospitals with CaliforniaChoice. That’s because it includes more health care providers than any single other health insurance program in the state. Using a broker to shop plans won’t cost you anything. In fact, it could save you time and money.
If you don’t have a broker, you can easily search for one online.