As an employer, of course you want your employees to take advantage of and appreciate the value of the benefits your company provides and pays for. However, it can be difficult to appreciate things we don't fully understand. Health insurance is usually one of the most involved and confusing benefits topics to explain. Given the significant expense of providing employees with health coverage, it's in your company's best interest to help employees understand the value of their health benefits.
To help employees understand health insurance and what costs they should expect, first you must know the information yourself! Here is a primer on the out-of-pocket health care costs your employees can expect, regardless of their specific health insurance plan.
A deductible is the amount employees must pay before their health insurance begins to pay bills on their behalf.
By law, deductibles do not apply to certain specific medical services, such as immunizations and other preventive services.
As an example of how a deductible works, if your company offers a health insurance plan with a deductible of $2,500, each employee must pay the first $2,500 in covered medical services before the insurance plan starts paying.
A copay is a dollar amount employees pay for a medical service, such as a physician office visit or prescription, at the time of service. If your insurance plan includes a $35 copay for a doctor visit, employees will pay $35 out of pocket when seeing a physician. The insurance plan takes care of the rest of the service's covered costs, assuming the deductible has been met. Note: not all plans include a copay.
Coinsurance is the percentage of covered medical service fees that employees pay, after satisfying the deductible. For example, if an employee has met the plan deductible, receives a medical service that costs $500, and must pay 80/20 plan coinsurance, the employee is responsible for paying 20% of $500, or $100. It's important to note that coinsurance only applies up to a specific out-of-pocket maximum amount.
A plan out-of-pocket maximum is a cap on employees' out-of-pocket spending—the maximum amount a policyholder could pay toward covered medical expenses in a calendar year. The federal government determines the out-of-pocket maximum for all qualified plans every year. For 2017, the highest out-of-pocket maximums allowed by law are $7,150 for individual health insurance plans and $14,300 for family health insurance plans.
The reasoning behind out-of-pocket expenses
Aside from the obvious fact that cost sharing helps your company defray some of the costs involved in providing employee health insurance benefits, asking employees to cover some out-of-pocket costs is a good way to avoid unnecessary health plan utilization and prevent waste. When employees must pay expenses toward their deductible or are responsible for a portion of costs through coinsurance, they're more likely to choose cost saving options when possible, such as seeking non-critical care at an urgent care clinic in place of an emergency room.
You pay a lot to protect your employees with health insurance and other voluntary benefits. With the above information, we hope you better understand the workings of your insurance plan and the out-of-pocket expenses your employees can expect, so you can better explain the benefits you offer to employees.
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