When the time comes to select your company’s group benefit plans, the options can seem overwhelming. Before you can choose the right health insurance plan for your employees, you’ll need to understand the differences between the various levels.
Marketplace health insurance plans are classified as bronze, silver, gold and platinum, depending on the average percentage of medical expenses the plan will pay. Platinum plans pay the highest percentage of medical costs, but also have the highest premiums. Bronze plans pay the lowest percentage and have the lowest premiums. This may seem simple, but there’s more to it than that. Here’s a closer look at the details.
Basic Health Insurance Benefits
First, it’s important to note that all plans will cover basic benefits. This includes emergency services, hospitalization, prescription drugs, pregnancy, maternity, and newborn care, chronic disease care, mental health care, addiction care, and more.
While these services are covered under all plans, the amount your employees will have to pay for them will depend on the plan you choose.
Types of Health Insurance Plans
When choosing your health insurance plan, you’ll have two primary decisions to make. The first is whether you’ll provide a network-only plan or one that allows employees to choose in- and out-of-network healthcare providers and facilities. The second is the level of plan you’ll offer. Here’s a deeper look at each option.
Network Only vs. In- and Out-of-Network
The two types of network-only plans are Exclusive Provider Organization (EPO) and Health Maintenance Organization (HMO). When you select these plans, your employees will only receive coverage if they choose healthcare providers and facilities that are within the specified network.
Employers often prefer these plans because they are less expensive. The narrower the network of providers, the lower you can expect the price to be.
If you want to give your employees more flexibility, consider a Preferred Provider Organization (PPO) or Point of Service (POS) plan. These plans offer in-network benefits while also allowing users to access out-of-network providers and facilities. In exchange for this flexibility, you can expect to pay more in premiums. In addition, the user’s medical bills are often higher when choosing to go outside of the network.
Bronze, Silver, Gold, and Platinum
Once you’ve decided on your network, you’ll need to determine which plan level makes the most sense for your business. Each type of plan offers different reimbursement levels and comes at a cost that reflects the coverage users receive.
On average, a bronze plan will pay 60% of healthcare expenses, which means your employees are responsible for the remaining 40%. For example, a bronze plan may have a $5,000 annual deductible and a 20% copay, which the employee would have to pay until they reached the annual out-of-pocket maximum of $7,800.
A silver plan will generally pay 70% of expenses, leaving the employee responsible for the remaining 30%. These plans are moderately priced. They sometimes have lower deductibles than the bronze plans or similar deductibles with lower copays.
Gold and Platinum Plans
If you want to provide your employees with the maximum amount of coverage with low out-of-pocket costs, consider a gold or platinum plan. Gold plans pay approximately 80% of medical expenses while platinum plans pay about 90%. While the plan design varies, these plans always have low deductibles and copays. However, they also have the most expensive premiums. While this requires a higher investment, it can help you become the employer of choice. This can be critical, especially in industries where there's high competition for experienced employees.
How to Choose the Right Plan
While bronze and silver plans have much higher deductibles, they’re also more likely to meet the IRS criteria that will allow your employees to use a tax-advantaged health savings account (HSA). This will allow them to use tax-free money to pay for their copays, deductibles and other out-of-pocket expenses.
If your company is able to reimburse some of the employee costs through an HSA, then a lower-level plan could be a good option for you. Before you choose your plan, though, consider the total premium cost and which option is most likely to help your company remain competitive.
Plan Stacking: How to Make a Bronze Plan Look Like a Gold or Platinum Plan
With their high deductibles and low premium expenses, Bronze plans may seem like the obvious choice for budget-conscious employers. However, it’s still important to provide your employees with sufficient coverage. One creative option is to use “plan stacking.”
This approach combines a Bronze plan with an employer-funded Health Savings Account (HSA) and a Health Reimbursement Account (HRA). HSAs work like a personal savings account, with the primary difference being that the money is used to pay for healthcare expenses. An HRA is an administered plan that an employer funds to cover a “promise” to pay claims over a certain amount, up to a stated maximum.
Sound confusing? The following example should clear things up.
Assume you’ve provided a Bronze plan with a $6,000 deductible and also contributed $1,200 to your employee’s HSA. This brings the employee’s out-of-pocket deductible down to $4,800. In addition, you fund the HRA to cover a “promise” to pay $2,300 of plan claims after the employee has incurred a total of $3,700 in allowable expenses.
In the worst-case scenario, you will end up paying $3,500 ($1,200 HSA + $2,300 from the HRA) and the employee would end up paying $2,500 ($6,000 deductible - $3,500 employer contribution).
Does Plan Stacking Make Sense for You?
A study by Peterson-KFFfound that most Americans aged 34 or younger who are in excellent health spend less than $3,000 per year on healthcare, including catastrophic expenses. If you have a young, healthy workforce and are willing to pass on some of your premium savings on to your employees, plan-stacking might be a good option for you. While you will take some risk for funding claims, in most cases, the numbers will still work out in your favor.
In addition, choosing a stacked plan will encourage your employees to add their own Health Savings Accounts. This allows them to make tax-deductible contributions while also accumulating savings that they can use to reduce their out-of-pocket costs when a large medical expense arises.
- All marketplace healthcare plans cover basic medical benefits, the difference lies in the percentage of the medical expenses they’ll pay.
- Bronze and silver plans pay a lower percentage of medical expenses and have lower premiums.
- Gold and platinum plans pay a higher percentage of medical expenses. They also cost more.
- Bronze and silver plans can be a good option if employers can supplement them with an HSA.
- Plan stacking is an affordable way to make a bronze plan work like a gold or platinum plan.
- Business owners need to choose a plan that is affordable while still allowing the company to remain competitive.
Consult with Our Corporate Advisory Team
The professionals at RMR Wealth Builders, Inc. are here to help you evaluate your options and choose the best benefits program for your company. We’ll help you clarify your intentions, evaluate your goals and select the optimal health plan for your employees.