Understanding your employee insurance rates

Tuesday, January 3, 2023 17:13 Posted by Admin

As an employer, one thing you need to consider is offering your employee group health insurance coverage, this will benefit not only the employee but you too as you will be able to attract the best workforce

Health insurance is the most common employee benefit and it covers medical expenses. In some states, is it a legal requirement and to you, as a business owner, it is a good business practice.

Many companies have different policies regarding when employees qualify for health insurance but generally, eligible employees are usually full-time workers who qualify.

That being said, not all employees are ready to offer employee health insurance plans. However, before making any decisions, it is advised to understand the factors determining the value of the premium you need to pay for group health insurance.

This guide will prepare you for taking the first step in offering insurance to employees, you can try to work around the factors listed below to try and get a premium that fits your overall budget.

How are group health insurance rates calculated?

How are group health insurance rates calculated?

For better understanding of how much employers contribute to health insurance plans, the annual Kaiser Family Foundation (KFF) Health Benefits Survey provides a detailed explanation. According to the foundation, employee benefits are just an added type of compensation offered to employees by employers.

Basically, there are about six factors that will affect your group’s health insurance rates. For your understanding, we will take a look at each factor in detail below:

The average age of your workforce

The average age of your employees helps the insurance company to decide the premium amount. You should note that the number of claims for a younger workforce is less when compared to the older group. The reason behind this is that younger employees tend to be healthier, have fewer health issues, and have a relatively stronger immune system.

Therefore, if your employees are between the ages of 19 to 35, the premium or insurance rates would be much lesser when compared to a group with an average age between 36 to 45.

The type of group health insurance

When most individuals think of group insurance, they usually think of big companies that can offer a lot of employee benefits and pay the full premium amounts for every employee. However, some healthcare plans are flexible for any business. Below we have listed the three main ones:

Large Employer Groups

This type is a common group health plan for larger companies. They allow the company to partner with the insurance company directly and requires the company to either pay all or part of each employee’s insurance monthly rates.

Health Maintenance Organization (HMOs)

An employee covered by an HMO plan is called an “enrollee.” This plan allows the employee in the group insurance to select a network of doctors and medical facilities.

When the employee wants to see any out-of-network specialists or primary care doctors. The insurance plan will not pay for any of the visits. The expenses will all be out-of-pocket costs.

Preferred Provider Organizations (PPOs)

This health coverage plan offers more employee benefits than HMOs. PPOs have preferred medical provider lists but also allow the employees to choose doctors and facilities outside the list without having to worry about paying the entire cost out of pocket. The healthcare costs are shared.

There are several other types we haven’t mentioned on this list, but depending on which plan you go for, your employee’s insurance rates are calculated. needless to say, the more you choose dependants, the higher the costs, this is because premiums and rates account for the total number of lives covered by the insurance company.

According to the list, the PPO plan will cost you the most.

group health insurance plans

Add-Ons To The Coverage

Most group health insurance plans cover hospitalization and ICU charges for employees. However, insurance companies also give employers the option of adding more health benefits for their employees, at a cost.

The most common add-ons are eye care, OPD consultations, and dental care. The premium costs will all vary depending on what the employer chooses

The total Sum Insured

This is the upper limit for a year that the insurance company can pay in case your employees are hospitalized. The higher the amount the higher the rates become. Most insurance companies advise deciding on the uninsured depending on the type of hospitals the employee visit and the family coverage provided.

Past-Claim Experience

If your company is new and you’re thinking of offering health insurance to your employees for the first time, this point is not for you. But if you have experience and are looking for a new group health insurance plan, your new plan will refer to your previous health insurance plan.

If the premium rates were high, chances are they’ll be slightly higher at the new insurance company. However, if they were low, the new insurance company may offer discounts, meaning they’ll be lower.

The Nature of your employee’s job

When calculating the insurance rates of your employees, their particular occupations are considered in the overall costs.

Most occupations receive the same treatment, but if your organisation is a high health risk factor, the premium rates may be higher when compared to other types of companies. For example. the premium offered to a mining or building company would be higher than a sales company.

Understanding your Employee's Benefits

How We Do It At Taylor Benefits

At Taylor Benefits, we’ve made the process of calculating insurance premium rates easy for companies. All you need to do is contact us, to speak to one of our agents. They’ll explain the process for clear understanding, and then you’ll be required to choose the type of group health insurance plan for your employees and we’d immediately send a customized quote for your organization.

Understanding your Employee’s Benefits

Companies offer different benefits to employees. Some employers are even good at making a lower-paying job with good benefits look so amazing when compared to high-paying jobs without benefits.

The most common benefits employers offer to their employees include health insurance, disability insurance, 401(k) match, paid time off, sick leave, and life insurance. The benefits can sometimes be reviewed yearly during an open enrollment period. We will take a look at these benefits in detail below:

Health Insurance

As mentioned above, this is the most common employee benefit, it covers the employees’ medical expenses and usually, it’s full-time workers who qualify for it.

Some companies choose to cover their employees fully, while others will have their employees pay a premium for themselves. Some companies also allow employees to cover their spouse and children in the same insurance plan.

Disability Insurance

Should your company offer disability insurance? Well, that’s a decision you have to make on your own.

When employees can’t work anymore due to an illness or disability, insurance replaces a portion of their income. in most situations, disability insurance provides wave replacement instead of replacing the entire employee income.

Disability insurance will cover up to 60% of the employee’s income. Although it’s not much, receiving up to 60% of wages is much better than nothing at all.

401(k) Employer Match

This is an employer-sponsored, tax-advantaged retirement account. Both the employee and employer are responsible for paying onto the accounts.

Sick Leave

Sick leave is when an employee benefit is given time off from work due to illness. In some companies, sick leave is also given to employees to attend to the needs of a sick child or another dependent. There are two types of sick leave which are paid sick leave and unpaid sick leave.

Life Insurance

Typically, employers will pay for the amount of one year’s salary while giving employees the option to purchase additional coverage. A life insurance benefit can help employees pay bills, debts, and burial expenses in the event of death.

Employees should be ready to name a beneficiary when filling out their initial paperwork, which requires the social security number of a beneficiary. Employees can also change the beneficiary by contacting the company’s human resources department.

Understanding employee insurance rates

Frequently Asked Questions

What are the major employee benefits?

Health insurance, disability insurance, paid time off, sick leave, and life insurance is the major employee benefits. As mentioned above, most employers will offer health insurance to employees.

What is considered good retirement employee benefits?

There are several retirement plans and employee benefits, those that are considered good include Medicare, Roth IRA, paid-off-home, pension, retirement savings, match and several others. It is up to the company to choose which retirement packages are best for their employee.

What is federal income tax?

These are taxes on income, both unearned (interests, dividends), and earned (salaries, wages, commissions and tips). Both individuals and businesses are required to pay federal income tax.

Final Thoughts

For most employers, group health insurance can be a tricky subject as finding the right plan that fits your business budget and employee’s needs can be a very challenging task. However, our insurance experts are here to make things easy for you.

Written by Todd Taylor

Todd Taylor

Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.

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