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Employers and Health Insurance: The Basics
There are some basic health insurance terminology and concepts you should understand when venturing into working with employers.
Premium--monthly fee paid to insurance company for health insurance coverage
Deductible--the amount the employee is responsible to pay before covered services are paid by the insurance company (average deductible for a family in 2018 was $2800)
Co-Pay--the amount of payment to be paid to health care provider by the employee at the time of service in a Fee for Service model (usually $20 to $40 in primary care)
Co-Insurance--the percentage of covered services employee is required to pay until max out of pocket is reached. In an 80-20 plan, after the deductible is met, you still pay 20% of covered services until the maximum out of pocket is reached.
Maximum Out-of-Pocket Costs--this is the maximum the employee is responsible for in a plan year
Claims--is a formal request from a policyholder to an insurance plan for payment of health care event
Third-Party Administrator (TPA)-- Organization that processes insurance/health coverage claims and manages other aspects of an employer’s benefit plan which can be structured as a self-funded or partially self-funded plan. TPAs can be involved in many aspects of the benefits plan, including but not limited to utilization review, membership enrollment, retirement plans processing, and HSA/FSA processing, in addition to claims processing.
Fully Funded insurance plan-- These are the most common plans employers use and are Fee For Service type plans. These can be PPO (Preferred Provider Organization) plans, HMO (Health Maintenance Organization), or even HSA (healthcare savings account) plans. These plans are mainly offered by large commercial insurance companies like Blue Cross Blue Shield, United, Aetna, or Cigna. In these plans, the employer (or individual or both) pays the monthly premium and the insurance company administers the health plan, pays all the claims, and assumes all the risk.
Self-Funded Plan-- Health insurance plans that are designed outside of traditional commercial insurance; they are designed with the help of benefits advisers/brokers and typically administered by a TPA. They are usually described as partially self-funded where the employer pays benefits up to a maximum amount. They then purchase Stop-Loss insurance to cover anything over the max amount, so claims over this amount are covered by the Stop Loss insurance company. The employer pays the small claims, the Stop-Loss premiums, and therefore, assume more risk than fully funded plans. Some really big employers form self-funded plans that pay the full amount of all claims and do not use Stop-Loss insurance. They control the entire health insurance spend. These self-funded plans allow employers more flexibility in designing their health care benefits but require specific rules for employers to follow. These types of plans are governed by a federal law called ERISA (amongst other regulations and state laws/regulations).
ERISA--The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.
Minimum Essential Coverage--MEC plans are used by some smaller employers just to meet the essential insurance requirements the government requires. They are often cheaper but cover fewer services and may have higher deductibles. Some brokers/advisors will use these with DPC services.
Health Sharing Plans-- These plans are NOT insurance at all but are organizations that pool patients’ money and share health care expenses. These are used more by individuals not employers but some small employers are starting to use some of these plans. Check out Medishare, Samaritan Ministries, Sedera, Zion.
Broker or Benefits Advisor-- these are the people that help set up health benefit plans for employers be it fully funded commercial plans or partially self-funded plans. Most advisors and brokers are paid directly by commercial insurance companies to provide employer policies. They should be working directly for employers but most are not. If you work with larger employers, then you will be dealing with brokers and/or advisors. If you meet a broker or adviser that charges the employer directly a consulting fee and doesn’t get a commission from selling plans, those are the types of brokers/advisors that you want to know. Since they don’t get paid on commission they typically are looking for what is BEST for their client. If they do a great job they keep getting paid.
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Employers and Health Insurance: The Basics
There are some basic health insurance terminology and concepts you should understand when venturing into working with employers.
Premium--monthly fee paid to insurance company for health insurance coverage
Deductible--the amount the employee is responsible to pay before covered services are paid by the insurance company (average deductible for a family in 2018 was $2800)
Co-Pay--the amount of payment to be paid to health care provider by the employee at the time of service in a Fee for Service model (usually $20 to $40 in primary care)
Co-Insurance--the percentage of covered services employee is required to pay until max out of pocket is reached. In an 80-20 plan, after the deductible is met, you still pay 20% of covered services until the maximum out of pocket is reached.
Maximum Out-of-Pocket Costs--this is the maximum the employee is responsible for in a plan year
Claims--is a formal request from a policyholder to an insurance plan for payment of health care event
Third-Party Administrator (TPA)-- Organization that processes insurance/health coverage claims and manages other aspects of an employer’s benefit plan which can be structured as a self-funded or partially self-funded plan. TPAs can be involved in many aspects of the benefits plan, including but not limited to utilization review, membership enrollment, retirement plans processing, and HSA/FSA processing, in addition to claims processing.
Fully Funded insurance plan-- These are the most common plans employers use and are Fee For Service type plans. These can be PPO (Preferred Provider Organization) plans, HMO (Health Maintenance Organization), or even HSA (healthcare savings account) plans. These plans are mainly offered by large commercial insurance companies like Blue Cross Blue Shield, United, Aetna, or Cigna. In these plans, the employer (or individual or both) pays the monthly premium and the insurance company administers the health plan, pays all the claims, and assumes all the risk.
Self-Funded Plan-- Health insurance plans that are designed outside of traditional commercial insurance; they are designed with the help of benefits advisers/brokers and typically administered by a TPA. They are usually described as partially self-funded where the employer pays benefits up to a maximum amount. They then purchase Stop-Loss insurance to cover anything over the max amount, so claims over this amount are covered by the Stop Loss insurance company. The employer pays the small claims, the Stop-Loss premiums, and therefore, assume more risk than fully funded plans. Some really big employers form self-funded plans that pay the full amount of all claims and do not use Stop-Loss insurance. They control the entire health insurance spend. These self-funded plans allow employers more flexibility in designing their health care benefits but require specific rules for employers to follow. These types of plans are governed by a federal law called ERISA (amongst other regulations and state laws/regulations).
ERISA--The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.
Minimum Essential Coverage--MEC plans are used by some smaller employers just to meet the essential insurance requirements the government requires. They are often cheaper but cover fewer services and may have higher deductibles. Some brokers/advisors will use these with DPC services.
Health Sharing Plans-- These plans are NOT insurance at all but are organizations that pool patients’ money and share health care expenses. These are used more by individuals not employers but some small employers are starting to use some of these plans. Check out Medishare, Samaritan Ministries, Sedera, Zion.
Broker or Benefits Advisor-- these are the people that help set up health benefit plans for employers be it fully funded commercial plans or partially self-funded plans. Most advisors and brokers are paid directly by commercial insurance companies to provide employer policies. They should be working directly for employers but most are not. If you work with larger employers, then you will be dealing with brokers and/or advisors. If you meet a broker or adviser that charges the employer directly a consulting fee and doesn’t get a commission from selling plans, those are the types of brokers/advisors that you want to know. Since they don’t get paid on commission they typically are looking for what is BEST for their client. If they do a great job they keep getting paid.