Retain Key Medical Employees with a Great Health Insurance Plan

The health insurance plans for doctors’ practices, plus advice on how to shop for the best products

by Jeff Witz, CFP, MEDIQUS Asset Advisors, Inc.

Whether you are a one physician medical practice with a small staff or part of a large medical group with dozens of employees, providing a comprehensive health insurance benefit is key to attracting and retaining talented employees.

More and more employees are looking beyond just compensation when deciding on an employment opportunity and health insurance is top of the list. Health insurance is often the number one priority for employees. With this high demand, what should you consider offering?

HMOs, PPOs & high deductible health plans

These are the three types of health insurance plans that we see most often.

Health maintenance organizations (HMOs)

HMOs typically require the employees to choose a primary care physician within the HMO’s network to coordinate their care. This physician will refer the employee to other healthcare providers in the network when necessary. This plan is often more restrictive in terms of where the employee can receive healthcare, but usually offers lower monthly premiums and out-of-pocket costs.

Preferred provider organizations (PPOs)

PPOs offer more flexibility. The employee can visit any doctor within the network at any time, and the plans do not require referrals to see specialists. Premiums and out-of-pocket costs tend to be higher. PPOs may be the right health insurance for your medical practice if offering employees more freedom to choose their own doctors is a greater priority than cost.

High deductible health plans (HDHP)

HDHPs work like PPOs in that there is flexibility to see almost any healthcare provider an employee desires. With HDHPs the premiums are often significantly lower than PPOs, but in exchange, the deductibles are much higher. HDHPs may appeal to employees if they don’t go to the doctor frequently and want lower monthly premiums. But they will have a higher annual deductible if they become ill or injured. HDHPs may be an effective health insurance plan for your medical practice if your employees are relatively young and healthy and prefer low costs.

Less frequently used healthcare options include exclusive provider organizations (EPOs) or point of service (POS) plans.

Cost-sharing cuts medical practice health insurance expenses

Providing health insurance can be an expensive endeavor. However, your medical practice does not have to foot the whole bill when paying premiums for medical coverage, in fact, that is very uncommon.

According to a 2019 Kaiser Family Foundation study, total premiums for a single covered employee reached $7,188 and reached $20,576 for a whole family. Cost-sharing is a good way to limit your cost while also providing this vital benefit.

How much should you pay towards your employee’s health insurance? According to a 2019 Bureau of Labor Statistics report, on average, employers are paying approximately 8% of employees’ compensation toward their healthcare.

The cost is not insignificant, however, there are some tax benefits for providing your employees health insurance.

• 100% of the monthly premiums you pay for your employees are a deductible business expense at both the state and federal levels. Deductions lower your taxable income and can potentially lower your tax bracket.
• Small medical practices may also be eligible for the Small Business Health Care Tax Credit if they purchase health insurance for their employees. A medical practice that has fewer than 25 employees, has an average employee salary of $50,000 or less, provides healthcare coverage for all full-time employees, and pays at least 50% of the employees’ premiums may be eligible to take a 50% tax credit for the amount paid toward employees’ healthcare coverage. Tax credits reduce the amount you owe for taxes on a 1:1 basis, meaning if you owe $20,000 in taxes and received a $5,000 tax credit for paying all or a portion of your employees’ healthcare premiums, you now only owe $15,000 in taxes.

Where to shop for good health insurance plans

Now that you have decided you want to provide coverage, where can you get a good plan?

Small Business Health Options Program (SHOP)

SHOP is a federal marketplace for small business owners looking to provide healthcare plans to their employees. While it is a federal marketplace, each state maintains its own SHOP marketplace. To qualify you must have:

• 1 to 50 employees.
• Offer healthcare to all employees who work over 30 hours a week.
• 70% of eligible employees must participate.
• You must have an office or employee in the state whose SHOP you want to use.

Private health insurance marketplaces

These are also good places to look for a plan. The four largest private insurance exchanges are Aon, Mercer, Via Benefits and Right Opt. Smaller exchanges also offer coverage. It is best to explore multiple exchanges and see which exchange offers a plan that best fits your practice’s needs and the needs of your employees.

Health insurance brokers

These professionals are good options for medical practice owners who don’t have the time to compare all the health insurance options available to them and their employees. A broker can take your desired specifications and find the best plans available to you. You choose the best option from the list that they provide.

Professional employer organizations (PEOs)

PEOs are companies that specialize in designing benefit packages for companies. PEOs often assist with payroll, benefits, HR, tax administration and regulatory compliance assistance. They are often able to provide competitive pricing based on economies of scale and may provide less expensive options than traditional healthcare providers.

Common terminology to know when shopping for health insurance coverage

Premium

The monthly amount to be paid to the health insurance provider that is often split between the employer and employee. This doesn’t include copays or deductibles.

Deductible

The minimum amount of money the insured individual must spend before the health insurance coverage activates. The deductible amount can vary from $0 to several hundred depending on the plan. The deductible resets on January 1 each year.

Copay

Most insurance plans will require the insured individual to pay a copay of $10-$50 on top of their monthly premiums at each doctor visit.

Coinsurance

Unlike copays, which are a flat fee owed at the time of service, coinsurance is a percentage split of the cost between the insurance provider and the insured. These are often expressed as 90/10, 80/20, or some other percentage split. What this means is that after the deductible has been met, the insurance provider will pay 90% or 80% of the cost of the coverage and the insured is responsible for the other 10% or 20%.

Out-of-pocket maximum:

Most insurance plans come with a ceiling of the maximum annual amount the insured individual will spend before the insurance plan covers 100% of services. The out-of-pocket maximum typically includes money paid toward the deductible, copays and coinsurance. The out-of-pocket maximum resets on January 1 each year.

Primary care physician (PCP)

HMOs and similar plans require the insured to select a PCP. The PCP then refers the insured to specialists when necessary.

Network

Almost every insurance plan will operate within a network or select group of providers called a network. Insurance plans will typically provide different coverage if the provider is “in-network” or “out of network.” It is the responsibility of the insured individual to ensure their doctors are in-network if those services are more comprehensively covered by the insurance.

With health insurance being the number one workplace benefit priority for employees, it is critically important to provide a competitive plan that attracts and retains your medical practice’s top employees.

With the wide range of options available, choosing the right plan can be confusing. We highly encourage you to speak with an expert who can help break down the benefits of each plan and how they can benefit your practice.

Jeff Witz, CFP, welcomes readers’ questions. He can be reached at 800-883-8555 or [email protected].