Fully Insured Vs. Self-Funded

If you choose a fully insured Affordable Care Act (ACA) compliant plan, it must provide coverage for 10 “Essential Health Benefits” (EHBs):

1. Ambulatory patient services (outpatient care you can get without being admitted to a hospital)
2. Emergency services
3. Hospitalization (including surgery and overnight stays)
4. Pregnancy, maternity, and newborn services
5. Mental health and substance use disorder services (including behavioral health treatment, counseling, and psychotherapy)
6. Prescription drugs
7. Rehabilitative and habilitative services and devices
8. Laboratory services
9. Preventive and wellness services and chronic disease management
10. Pediatric services, including oral and vision care (Adult Dental and Vision coverage are not EHBs)

Where you get coverage or what type of plan you and your employees select isn’t a factor. All ACA-compliant plans must include these benefits.

With a fully insured health plan, the risks fall primarily on the insurer, since it’s responsible for the payment of all claims.

Typically, in a group health plan, the employer and participating employees share the annual premium cost. Some businesses may pay more toward their employee premiums, but usually, employers pay at least half of the cost. The 2021 benchmark study by the Kaiser Family Foundation (KFF) found, “On average, covered workers contribute 17% of the premium for single coverage and 28% of the premium for family coverage.”

An insurer or other organization may be responsible for the administration of a health plan that is self-funded. The risks are on the employer in the event of a catastrophic claim. This can sometimes work well for larger employers but may not be the best choice for smaller businesses. Of course, an employer can choose to partially self-fund employees’ health coverage, while limiting the risk with stop-loss insurance.

A third option is a Level-Funded Health Plan, which can be a more affordable alternative. The Society for Human Resource Management (SHRM) published an article on level funding in 2021; it may be helpful if you’re unsure of whether self-funding is something you want to consider for your business.

Plan Options

Depending on the source for your group’s health coverage, employees may have access to different kinds of plans, including:

• HMO (Health Maintenance Organization) plans: An HMO is a health plan where the insured selects a Primary Care Physician (PCP) to help manage a patient’s care in the HMO’s network of doctors, hospitals, and specialists. Patients are required to get approval from the PCP to visit a specialist. Treatment is generally not available outside of the HMO network, except in emergency cases. Premiums for an HMO are typically lower than for other plans.
• PPO (Preferred Provider Organization) plans: A PPO offers its members more flexibility, although at a higher premium. A patient is, generally, able to go directly to an in-network doctor, specialist, or hospital without a referral, and care within the network is offered at pre-negotiated, discount rates. PPO members also have the freedom to go to providers outside of the PPO network, although with higher out-of-pocket costs.
• EPO (Exclusive Provider Organization) plans: An EPO is often described as a sort of a hybrid plan that offers both HMO and PPO benefits. Like an HMO, you need to get your health care through a doctor, specialist, or hospital that is part of the EPO network. Like with a PPO, you are likely able to go to a specialist (without a referral) as long as the provider is in-network. EPO premiums are greater than HMO premiums; however, they typically are less than PPO premiums.

A High Deductible Health Plan (HDHP), which can be an HMO, EPO, or PPO, may offer a lower monthly premium; however, the insured has to pay more health care costs upfront before the plan begins to pay its share. An HDHP can often be combined with a Health Savings Account (HSA), which gives insured persons the ability to pay for qualified medical expenses with funds free of federal taxes.

The limits established by the Internal Revenue Service (IRS) for 2022 define an HDHP as one with a deductible of at least $1,400 for an individual or $2,800 for a family. Total annual out-of-pocket costs (deductibles, copayments, and coinsurance) cannot exceed $7,050 for an individual or $14,100 for a family. These limits do not apply to out-of-network services.

Employees Value Benefits

According to multiple surveys, including MetLife’s 19^th Annual U.S. Employee Benefits Trends Study 2021, workers value employee benefits. MetLife found 85% of employees see health insurance as a “must have” benefit – and another 10% view it as “nice to have.” Just four percent view health insurance as not needed. Employees in other surveys have expressed similar views in the past several years. And, of course, the COVID-19 pandemic has prompted some employers to reevaluate benefits as part of their talent attraction and retention strategy.

Depending on the programs you’re considering for your employees, you might want to look beyond health insurance benefits. Many insurers and exchanges, like the CaliforniaChoice multi-carrier, employee-choice exchange, offer value-added benefits that could tip the scale in their favor. For example, in addition to increased cost control, CaliforniaChoice gives you the opportunity to add optional benefits for Dental, Vision, Chiropractic, and Life. You and your employees also get no-extra-cost benefits through the Business Solutions Suite and the Member Value Suite.

Shop and Compare with Help from a Broker

If you want to know more about the employee benefits available to you, your business, and your employees, a great place to start is to talk with your broker. If you do not currently have an employee benefits broker, we can help you find one who can provide a custom quote for your business. Contrary to what you might think, broker services are available at no cost to you.