Group health insurance plans are a common and culturally-expected benefit that comes with full-time employment in the US. Our private healthcare system is expensive and health insurance is one way that citizens in the US manage the costs of healthcare. With a group plan, the employer pays a portion of the premium and the employee pays a portion of the premium through a payroll deduction.
A group health insurance plan provides coverage for typical medical costs like doctor’s visits, labwork, clinical procedures, hospitalizations, and surgeries. While it is not the only way to get private health insurance, it is a popular option. Approximately 49% of all Americans receive insurance benefits through a group plan.
What the plan covers and how much it costs can vary significantly depending on the size of the company and the quality of the benefits offered. With a growing talent shortage and other challenges to filling open positions like the trend to move towards remote and hybrid work models, it’s more important than ever before that employers understand the impact that their group health insurance plan has on their attractiveness as an employer.
Let’s talk about the ins and outs of a group health plan–what it includes and what is considered ‘average’ or ‘good’ in terms of coverage and costs.
The first thing that most employers and employees want to know is how much a group health insurance plan is going to cost. With these plans, the employer pays a portion of the premium and the employee pays a portion of the premium. But that’s not the only cost. Let’s take a look at what’s involved.
The amount of money that individuals and companies pay to an insurance company for coverage. Premiums are not directly applied to healthcare costs. In 2021, the average group health plan premium was $409 per month, per employee. According to the Society for Human Resource Management, employer-sponsored family programs cost about $22,221 for the year with employees paying an average of $5,969 towards that premium and employers picking up the tab for the balance.
A deductible is the amount of money that an individual or family has to pay towards medical expenses before the plan kicks in and begins to cover a percentage. Deductibles range from less than $1,000 to more than $10,000 spending on the policy and the number of people covered. In 2021, the average cost of a family deductible was $1,434. However many are opting for high-deductible plans that go up to $3,000-$5,000 in exchange for a lower premium.
A copay is a fixed amount that you pay for a covered health service like a primary care visit. Copays are an out-of-pocket expense and tend to vary based on the provider and whether or not the service is in-network or out-of-network. In 2021, the average copay for primary care was $25 per visit and for specialty care was $42 per visit.
Group health plans are tiered based on coverage. Most employers offer a range of options to their employees to help them manage their costs. For example, one way that coverage might be divided is by percentage. Other plans might waive the deductible for certain services like preventative care.
Legislation affecting health insurance coverage requirements changes often. However, most plans include preventative care as a non-deductible service covered at 100% with certain limitations. This means that individuals can see their doctor at least once per year for a health screening without paying out of pocket.
Once a deductible is met, the health insurance plan begins to pay for covered medical expenses at the rate determined by the policy. The most common arrangement is an 80/20 plan which means that the insurance company pays 80% after the deductible and the patient pays the balance of 20%. Other variations include a 77/23 or 90/10 split.
Group health insurance plans typically come with annual policy limit. Once you have met the limit with your deductible and co-insurance, the plan pays 100% of covered expenses for the remainder of the policy year. For example, if the out-of-pocket maximum is $10,000 and the deductible is $1,500 on an 80/20 plan, a $63,000 hospital bill looks like:
There are several pieces and parts to a group health insurance plan. While the cost of premiums are important, they are only one part of the total value of the plan. A slightly higher premium for a plan that covers more with less spent out of pocket is a better value than a lower premium with a high deductible and high out-of-pocket expenses. Choosing the right coverage for your group health plan can make the difference between an obligatory benefit and one that actually incentives candidates to consider your job offers.
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