Health insurance benefits are a large factor that employees consider when looking for employment. Employers are looking to provide insurance that is cost effective for the employer. Choosing what type of insurance to provide can have different effects on the profitability of the employer. Here is a comparison of the cost effectiveness of employer-sponsored health care and self-funded health plans. In employer-sponsored health plans the employer buys health insurance from an insurance company. The human resources department manages the group health plan (GHP) and they negotiate costs and different coverage plans with the insurance company and then select what is offered to the employees. This helps the employer save money by negotiating for deals and choosing what will be offered to employees. The employer can carve out specific items during negotiations, like prescription drug coverage in order to save money. GHP’s also include riders. These are certain options that the employer doesn’t pay for. Riders are purchased by the employee directly from the insurance company to cover things like vision and dental services. GHP’s have open enrollment periods in which employees choose the coverage options they desire. This is the only time coverage changes can be made.
Thus, the employer saves money during the year because insurances coverage isn’t constantly changing. Self-insured health plans are ones where they employer covers the cost of health benefits. This saves an employer money because they can set the premium rate on their claims history. Any money not used towards benefits can be saved and invested. If claims are above projected figures, stop-loss insurance will cover the difference not the company. Self-insured employers, many times will use third-party claims administrators. They are hired to collect premiums and to process and make claims. This saves the company from the cost of performing these tasks themselves. Provider networks are doctors, health care workers and hospitals that accept the employer health plans. Most are contracted with the employer or insurance company to perform specific services at reduced rates. This saves the company money. Many times, if employees use out of network providers the cost difference is an out of pocket expense for the employee saving the company money. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) limits the ability of insurance companies and employers to deny benefits to employees (and their family members if applicable) because of preexisting conditions.
This actually costs the company more money because they cannot deny benefits in most circumstances. Other state laws require employers to have a minimum standard of benefits for employees. This is called creditable coverage. This can also cost the employer more money because they have to adhere to a minimum standard of benefits for employees. Employer sponsored and fully funded insurance are two choices companies have to offer health insurance to employees. There are ways for employers to save money by what they allow to be offered to employees. State and Federal laws also demand certain coverage for employees. This leaves employees with many options to take into account when choosing an employer to work for.