Health insurance covers the health care needs of you and your employees. simple?
Not really. Health insurance in the United States is a complicated morass of competing insurers, plans, and laws. Often, a business’s ability to provide affordable health care coverage is dictated by geography. State laws may affect health insurance decisions. But, to be competitive, your business must offer some level of health insurance at some point. According to the U.S. Department of Health and Human Services, citing a report done by Kaiser/HREET, 67% of U.S. employees are covered by some form of employer-sponsored health care. Put it in perspective: if a skilled employee has three job opportunities, on average, two will provide health insurance and one will not. Skilled employees will choose to work for the insured employer.
Health insurance, as a most basic description, comes in four types:
1. Traditional, or Indemnity, Insurance
This is the traditional health coverage offered by an insurer for a premium, allowing the insured to pick any health care provider and to have the costs reimbursed by the insurer. Twenty to thirty years ago, this was the most prevalent kind of health insurance. Today, it is practically non-existent, and if your business is not extremely large, this kind of coverage is not a realistic option.
2. Health Maintenance Organizations (or, HMOs)
HMOs are organisations of doctors, hospitals, and other care providers that have agreed with an insurer to provide medical care at a lower negotiated rate. The HMO model of coverage uses a primary care physician (PCP) to coordinate an insured’s care under the plan. The PCP must refer to a specialist if specialty care is needed and must pre-approve any care for the patient with the plan. The insured are limited in their choice of hospital, doctor, and other services to those that are in the HMO, but can be referred to a specialist outside of the HMO with the PCP’s referral. Because of economies of scale and the management of care, premiums are reduced.
3. Preferred Provider Organizations (or, PPOs)
PPOs are similar to HMOs in some respects, but often more restrictive. In an HMO, there may be two or three different hospitals within the HMO. In a PPO, an insurer typically has a dedicated network of specific hospitals and physicians. The insured will have a PCP, but all care, to be covered, must occur within the network. If care occurs “out-of-network”, then the insured will be responsible for most, if not all, payment for the services. Premiums are reduced under a PPO plan, but so are the health care options available. In some large metropolitan areas with excellent health care facilities, a local PPO plan can provide huge savings over more nationally based HMOs and traditional policies.
4. Medicare and Medicaid
Medicare is government insurance available to those over 65, disabled, or in late-stage renal failure. With an ageing workforce, your business may have employees over 65 looking for supplemental insurance coverage. Medicaid is government insurance for the very poor and some disabled people. States are becoming very strict with employers that rely on Medicaid to provide coverage for low-wage workers.
There are many variations of plans, but most will follow the four models set out above or a combination thereof.
