Employer-Based Health Insurance

In today’s mobile, knowledge-based economy, employers are deeply motivated to find ways to identify, attract and keep the best workers in their industries.

One of the most powerful tools that companies use to draw in and maintain a strong workforce is employer-based group health insurance. The structure of employer-based group health insurance is straightforward, as employers partner with an insurance company. In return for the promise of direct and exclusive access to a large pool of customers, the insurance company makes a variety of insurance plans available to the company and its employees at highly competitive rates. Employees have the opportunity to select health insurance at those lower-than-average price points. In many cases, the company pays a portion of employee’s premiums, further reducing the costs of care.

Employer-based health insurance plans are embedded in employee’s positions with their current employer. The understanding that leaving the company will cost them their convenient and affordable health insurance can strongly motivate employees to remain with their existing employer.

The Benefits of Employer-Based Health Insurance

Employer-based health insurance typically provides many benefits. It is cost effective and may be quicker and easier to sign up for than plans that require using the federal Health Insurance Marketplace. Companies usually have dedicated representatives available to assist employees in interpreting, understanding and navigating their plan options, as well.

Employer-based group health insurance plans often cost less than comparable health insurance plans sold individually. Insurance companies provide discounted rates for group insurance because the large number of enrollees paying regular premiums significantly offsets the insurer’s risk of losing money. For example, if a consumer buys an individual health care plan, the only income his insurance company has to balance the costs associated with his medical care are the premiums he personally has paid. It may take a long time for those premiums to outweigh the costs. In the meantime, the insurance company loses money.

If an individual, Consumer A, buys into a group plan along with 500 other employees from their company, on the other hand, the insurance company has a pool of income from 500 monthly insurance premiums that it can use to pay for the costs of Consumer A’s care. In this case, the insurer has a much more comfortable financial position.

This makes it worthwhile for insurers to offer lower-cost group policies to reduce their risks. This works in employee’s favor, as well, as it makes higher-benefit policies available for less money. When employers pay a portion of employees’ premiums, the cost-to-benefit ratio for policyholders gets even better.

Employer-based health insurance plans can often be easier to select and sign up for than independent plans, too. The wide array of health insurance options can confuse and overwhelm policy buyers by the sheer number of choices and decisions they face. Employer-based plans generally offer only a set (and much smaller) number of plans to employees. With fewer plans to choose from and less overlap between the available plans, employees can often determine which plans are right for them much more quickly and easily. In addition, most employees have access to company representatives who can assist them in understanding their options and selecting plans. That further reduces the time and stress involved in making the important decisions between plans.

How to Sign up for Employer-Based Health Insurance

Some employees may qualify for employer-based group health insurance immediately upon hiring. In other cases, employees may be required to work a certain number of hours per week or to work for the company for a certain period of time in order to become eligible for health insurance benefits.

Employees who qualify immediately upon hiring can expect to review their health insurance options with their manager or a Human Resources representative as part of their on-boarding process. Employees who do not qualify until later are generally contacted by appropriate Human Resources or Payroll representatives from their companies when they become eligible to enroll in coverage.

At that time, employees are usually provided with an enrollment package. Enrollment packages may be hard copy or entirely digital. Information on all of the proffered plans will be laid out in the package for employees to review. This information may include:

  • Standard cost information, such as deductibles, copays and monthly premiums.
  • Lists of prescription medications, both brand name and generic, included in coverage.
  • Lists of in-network providers, where applicable, or links to full network lists or maps online.
  • Detailed accountings of any limits, special clauses or other restrictions and exemptions that apply.
  • Educational materials on health savings accounts (HSAs) and flexible spending accounts (FSAs), including how to qualify for or open them in conjunction with the company’s health insurance plan offerings.

Employees should review all of this information carefully to determine which of the offered plans are most appropriate to their needs. They can then complete the enrollment paperwork as instructed by their HR representative or following the directions in the enrollment package.

Changing Employer-Based Health Insurance Plans

Employer-based health insurance plans are subject to some of the same restraints as individual plans purchased on the federal Health Insurance Marketplace. For example, most employees cannot purchase or change their plans outside of standard annual open enrollment periods unless they experience a qualifying life event.

Qualifying life events include things like getting married, getting divorced and the birth or adoption of a child. When an individual or family holding an employer-based group health insurance plan experiences one of these changes, a window opens in which they are allowed to make changes to their plans. Typically, these windows last between 60 and 90 days depending on the plan and the insurer.

Employees who lose their jobs or cease to regularly work an adequate number of hours will generally lose their access to their health insurance plans, although they may be eligible for COBRA health insurance coverage plans. This includes any balances in their flexible savings accounts. Individuals who received group health insurance benefits through a spouse will lose access to their benefits if the spouse holding the policy dies or if their legal relationship ends. Employer-based group health insurance plans cannot be rolled forward from one employer to another. Health savings account balances, however, can potentially go with an account holder under the right conditions.

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