Both large and small companies all across the nation know that health care coverage is becoming an increasingly more taxing strain on their finances. In order to be able to continue offering employees group health care coverage at a price both can afford, companies must continually calculate group health insurance costs. In so doing, they also are required to adjust coverage and employee contributions in order to keep their group plan viable.
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From the employer’s perspective, their calculations are going be based on:
- The number of employees
- The types and limits of coverage they’re after
- How much they’re willing to spend on behalf of their employees
As far as the insurance companies are concerned, they rely on a number of criteria for determining a group insurance rates. The National Association of Health Underwriters suggests they will look at:
- Company size
- History of claims from previous healthcare plans
- General health of the community where the company is located
- Type of work that company does
What types of things must employers consider?
Before even beginning to calculate the cost of group health insurance, employers must first consider what type of plan they would prefer to offer. Although there are literally dozens of different types of health insurance plans, they can all be categorized according to one of the following four options:
- Health maintenance organization plan (HMO)
- Major medical plan
- Preferred provider organization plan (PPO)
- Point of service plan (POS)
Major medical is the most costly and POS the least.
Once the type of plan is established, employers must then look at how much coverage they want to offer. They must consider things like co-pays, deductibles, coverage limits for major expenses, whether to include extra coverage (dental and vision), and several other factors.
All of these things must be weighed against the work environment and the types of people the company typically employs. They are put together and calculated to come up with a reasonably accurate number representing the cost of group health insurance.
This seems rather complicated, is there an easy way to calculate group insurance rates?
There are a number of online calculators, which enable employers to compare two or more policy side-by-side. Typically, these calculators will require a basic set of numbers in order to do the calculation. Keep in mind that the results are only estimates and in no way guarantee an accurate price. They are designed to give companies a ballpark figure, which then allows them to compare basic coverage between multiple providers. Ultimately, a company’s human resources department and insurance providers will have to sit down and work out final pricing.
Unfortunately, health insurance is an incredibly complex entity, which requires a lot of information to properly calculate. This complexity is one of the reasons why health insurance coverage is so volatile in the United States.
With all of the options available and all other government regulations surrounding health insurance, it is a virtual maze to be navigated by creative HR employees and insurance company representatives together. Those who manage to navigate successfully are able to provide group insurance plan participants with good coverage at a reasonable price.
What if my company can’t afford a group insurance?
Unfortunately, one of the realities of today’s health insurance landscape is that not all companies can afford group policies. This is indeed a shame when one considers that group policies are among the cheapest of all. If an employer cannot even afford to participate in a group plan, he probably cannot afford any health insurance of any kind. In such cases, workers will be required to purchase their own coverage or apply for a government-subsidized plan.
On the positive side, some companies cannot afford group insurance, but will still provide employees with a “stipend” of sorts. This stipend comes in the form of extra pay, up to the amount the company was willing to spend on health insurance. While that may not be enough to fully cover the cost of individual health insurance, the extra money can be used to offset the costs of obtaining private insurance. Employees who have neither option will unfortunately be left to fend for themselves.
What about companies that self-insure?
There are companies that get around the rising costs of group health insurance by self-insuring. You can see an examples provided by the Washington State Dept. of Labor and Industries. These types of employers will generally contract with an insurance company or reinsurance provider specializing in insurance captives. That insurance company will administer the plan, but it will be fully funded and directed by the employer.
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