Group health insurance enables companies to offer health coverage to their employees. In a recent study, the Kaiser Family Foundation discovered that approximately 49% of Americans receive some form of health insurance from their employers.
Do your employees count among those numbers?
If they don’t, you may be weighing up the benefits of group health insurance already. However, you may still be unclear about the importance of group insurance and how these policies benefit both your business and its employees.
This article aims to clear up any confusion you may have. Here, we examine the benefits of group health insurance plans for your company and the people you employ.
As an employer, you may believe that group health insurance offers few benefits to your business. After all, you’re committing to a policy that sees your company pay at least 50% of the insurance premiums for all of the employees who enroll. Depending on the size of your company, this outlay can have a substantial effect on your bottom line. Still, there are several benefits of group insurance that your company can reap.
Imagine that you’re creating a job advertisement. You outline the roles and responsibilities candidates are expected to fulfill. You also tell them about the hours they’ll work and the salary they can expect. But that advert provides no information about benefits or group health insurance.
Now, assume that your main competitor creates a similar advert. Only this time, the advert tells the candidate that they’ll receive health insurance as part of their benefits package.
Which of those job adverts will be more attractive to a potential employee?
Of course, it’s the one that offers health insurance as a benefit. The average cost of health insurance for an individual American is $7,739 per year. This increases to $22,221 for insurance that covers an entire family. If a business can offer full or partially paid health insurance, it demonstrates to candidates that it cares about their health and is willing to help with some of the cost of healthcare.
How does your business benefit from that?
The best talent will be attracted to your company if you’re able to offer a group insurance plan. By providing health insurance as part of your benefits package, you alleviate a large financial burden for candidates. As a result, the candidates you attract will usually be more talented and better able to fill the role you’re advertising.
A happy employee is a more motivated employee. And a more motivated employee is a more productive employee.
There is plenty of research to support this claim. One study conducted by the University of Warwick in the United Kingdom carried out several experiments to determine the effect that happiness has on productivity. It found that happier employees are 12% more productive, on average, than unhappy or neutral employees.
This may not seem like a lot at first.
But when that 12% productivity increase carries over to every employee in your company, it’s clear to see the benefits of group insurance. Policy holders create more productive businesses, leading to happier customers and more revenue generated.
When asking what is the main advantage of group insurance for businesses, most of the focus falls on the financial side of things. For example, more productive employees generate increased revenue for the company. However, the financial benefits carry over to tax season, in some cases.
For example, the Affordable Care Act (ACA) includes laws to help small businesses with a tax credit if they implement small business group health insurance. These credits cover up to 50% of the policy’s premiums and runs for two consecutive years. To qualify, your business must meet the following criteria:
Assuming you have a small business that meets these criteria, you pay less for your policy while benefitting from the increased revenue that comes from more productive employees.
But what if you don’t meet the criteria?
Even then, the premiums you pay for the policy are tax-deductible. That means you can lower your company’s tax bill, making group health cover part of a tax-effective strategy.
Let’s assume your business has already committed to providing health insurance to its employees. Why should you choose a group policy ahead of offering individual policies to selected employees?
One of the key group insurance benefits is that it comes with lower premium prices. As a result, you’ll pay less per employee per month than you’d pay if you create individual policies. Furthermore, you’ll likely be able to offer access to better insurance policies and more coverage for pre-existing conditions while paying these lower premiums.
You receive these lower premium prices because insurers consider group policies to be less risky than individual ones. With a group policy, the risk is spread out among all members of the group. The insurer gets to claim premiums on a large number of people while only paying out occasionally for individuals that need medical care. With an individual policy, the insurer stands to lose more money if the policyholder makes a claim, resulting in them charging higher premiums to compensate for the potential shortfall.
Employee turnover creates enormous costs for businesses. Some estimates state that you have to pay between one-and-a-half and two times a lost employee’s annual salary to replace them. Assuming the lost employee earned $50,000 per year, that means you’re paying between $75,000 and $100,000 to find a replacement.
Now, consider the fact that annual voluntary turnover in the United States was 25% in 2021. Assuming you have 40 employees, an average salary of $50,000, and your business meets that annual turnover rate, you could end up spending between $750,000 and $1 million per year on replacing employees.
Why do employees choose to voluntarily leave a company?
Usually, it’s because they’re either unhappy or have found a better opportunity elsewhere. We’ve already covered how group health insurance creates happier employees. When it comes to better opportunities, a perfect example is an employee leaving a company to go to a competitor who offers a similar salary but includes health insurance as a key benefit.
By being the company that offers group insurance, you can reduce turnover rates so you’re not forced to consistently absorb the cost of hiring new people.
Of course, employees benefit massively from having access to a group health plan that their employer offers. The benefits of group insurance include lower costs, less stress, and more protection. Let’s look at those advantages in more detail.
As mentioned earlier in the article, the average American pays $7,739 for health insurance per year. That’s a monthly outlay of about $645. Now, consider the fact that the average net monthly income in America is $2,730. Losing $645 from that net income is a huge blow, especially when that money could go toward paying bills or go into savings or investments.
Employees benefit from group health insurance because it alleviates this substantial cost burden. Even with partial-pay group policies, employers must pay at least 50% of the insurance premium. When you combine that with the fact that most group policies have lower premiums than individual policies, it’s easy to see how group health insurance benefits employees financially.
Some group health insurance policies allow employees to add dependents to their insurance. Again, this is a massive financial benefit, especially when considering the average cost of insuring an entire family is over $22,000 per year.
But you also need to consider the psychological benefit this has on employees. Somebody who doesn’t have health insurance for their family is always worried about their spouse or children getting hurt. Worse yet, they’re worried about somebody they care about getting hurt and not being able to get treatment. Furthermore, they may avoid seeking preventative treatment because of the cost, leading to the development of more severe health problems later on. All of these issues create stress that bleeds over into the employee’s professional and personal lives.
With a group policy that includes family members, employees receive more comprehensive cover. This leads to happier work and home lives, in addition to better health outcomes for every member of the employee’s immediate family.
It’s difficult for an individual to get health insurance. In addition to longwinded application processes, the individual must research insurers and undergo the underwriting and medical exam procedures insurers ask for.
All of that disappears with group health insurance provided by an employer.
One of the main benefits of group insurance is that employees are automatically enrolled in a policy as long as they meet the required employment conditions. These typically relate to the hours they work, meaning the employee does not have to go through a medical exam. Employees benefit because they don’t have to shop for plans. They also get their insurance either fully or partially paid because they work full-time.
This convenience extends to the claiming process. With individual policies, people have to produce an array of documentation to prove that they’re making an eligible claim. This is a complicated process and mistakes often happen, leading to false or erroneous claims that leave the person out of pocket. With group insurance, the employee only needs to submit their hospital bills to their employer. The rest is taken care of for them, meaning they don’t have to worry about complicated administrative work while they’re recovering.
Many insurers implement waiting periods before they allow people to raise claims for pre-existing conditions. This can be a big problem for those with chronic conditions because these waiting periods prevent affordable access to healthcare for up to three months.
Group insurance plans do not come with waiting periods for employees. The employee does not have to meet any health requirements to be accepted into the plan. As long as they work full-time, they should become part of the plan without dealing with waiting periods. This is particularly beneficial to those who require immediate or consistent medical care.
While the ideal situation is to have an employer cover the full premiums for employees in a group policy, that’s not always viable. In some cases, the employer pays part of the premium, with the employee paying the rest.
This is still a better alternative than seeking individual health coverage in most cases.
The employee pays a lower premium than they would for an individual policy. But perhaps as importantly, the premiums they pay come out of their pre-tax income rather than their net income. As a result, the employee gets access to health insurance while reducing their taxable income, leading to a net gain that they wouldn’t get if they had their own policy.
What are the advantages of group plans?
For employers, group plans are useful recruitment marketing tools. By offering health insurance as a key benefit, your company can attract better talent. Group plans help your business to retain its best people. The result is less disruption and fewer dollars spent on costly recruiting processes. Group health insurance also creates healthier and happier employees, leading to a more productive workplace culture.
For employees, the main group insurance benefits relate to paying less money to gain access to good health insurance. But other benefits include the increased convenience of having somebody else handle the policy and the ability to include family members, in some cases. Employees with pre-existing conditions also don’t have to deal with extensive waiting periods that could lead to them losing out on important medical treatment.
Simply put, group health insurance benefits everybody.
Now, you need to find the group policy that’s right for your company and its employees.
At Taylor Benefits Insurance, we work directly with business owners to help them secure the best group insurance policies possible. Our brokers have over 25 years of experience and work with all of the major American insurers, meaning we can find cost-effective and comprehensive policies for any business. If you’d like to find out more, contact us online or call 800-903-6066.
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