Healthcare for the workplace can be difficult for both employers and employees to fully understand. Understanding the difference between the options available is especially important when shopping for a plan. Similarly, some employers are required to offer health insurance to their employees, and understanding those regulations is equally as important.
The Affordable Care Act (ACA) requires any employer with 50 or more full-time equivalent (FTE) employees, to offer health insurance to its employees. For ACA reporting purposes, FTE is defined as working at least 30 hours per week on average.
It is important to monitor the number of employees you have working for your company and how many of those workers are considered full-time. Payroll and HR Software typically have employee census reports or a specific full-time (FTE) equivalent report that can be run to determine the actual number of FTE employees.
Additionally, the ACA states that all the applicable employers must offer health insurance plans that qualify as minimum essential coverage. As of 2021, the penalties incurred if an organization fails to comply are:
It is important to note that there is no best option when it comes to employer-sponsored healthcare. Everything varies depending on each organization and the needs of their workforce.
Organizations with a workforce that is mostly made up of recent college graduates may choose to go with a Health Savings Plan (HSA) or a High-Deductible Health Plan (HDHP) as younger people tend to use their health insurance less than their older counterparts. Whereas a workforce with more long-term employees may opt for a more traditional plan such as a Preferred Provider Organization plan (PPO). Ultimately, these three are the most common plans found in the workforce.
A preferred provider organization (PPO) is a health plan that offers its participants an extensive network of healthcare providers. Members of this type of plan have the option to use providers that are in-network at a discounted and pre-negotiated rate. Sometimes these rates are even covered entirely depending on the options set by the employer.
A health savings account (HSA) is a personal bank account that has significant tax advantages. An induvial can use this account to pay for medical expenses that aren’t covered by their medical insurance, which is typically a HDHP.
The IRS issues yearly contribution limits for HSA accounts, which represent the total amount of tax-advantaged dollars that participants can deposit into their health savings accounts. Often the limits increase as time goes on.
Not every PPO plan allows for HSAs however, many offer comprehensive coverage and are compatible with HSAs as long as the members are using in-network providers.
A health maintenance organization (HMO) is a health plan that provides people with all-in-one in-network care. This means that those that are covered by an HMO have a primary care physician (PCP) for appointments and do not have the option to receive covered care with out-of-network providers. This often lowers premiums and deductibles.
A high-deductible health insurance plan (HDHP) requires participants to spend more on up-front costs before the plan begins to contribute to cover those expenses. Because the individual is paying more up-front, they often spend less per month on overall premiums. HDHPs can be paired with HAS’s and different types of plans can fall under this category.
With a point of service plan (POS), individuals often pay less in fees and copays than they would with other plans, but often have some limitations including that users must receive a referral from their PCP before they can see a specialist of any kind.
With an exclusive provider organization (EPO), an individual’s expenses are only covered if they visit any type of provider that is only within the plan’s network. There are some exceptions in the case of emergencies.
Individuals can also opt to purchase federal health care through the ACA as an alternative to their employer-provided options- or if they do not have options through their employer. The costs and coverage through the ACA vary widely depending on the induvial and the coverages chosen.
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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.