The Basics of Health Insurance: What Your Employees Need to Know
This article aims to demystify health insurance terminology, empowering your employees to make informed decisions that suit their needs and manage their family's healthcare expenses efficiently.
Ensuring your team understands their health insurance options is crucial, especially during open enrollment. After selecting the right health plans for the upcoming year, it's essential to inform your employees about any changes and guide them through their choices. If you’re going through open enrollment, feel free to share this article with your employees!
Understanding Eligibility
Under Hawaii's Prepaid Health Care Act, employees working at least 20 hours per week for four consecutive weeks are eligible for employer-provided health insurance. However, there are exceptions for commission-based roles, seasonal agricultural workers, and family-employed individuals. Once eligible, coverage begins on the first day of the following month. If an employee wishes to opt out (e.g., due to spousal coverage), they should complete an HC-5 form annually.
Enrollment Periods
Employees can sign up for or modify their health insurance benefits after completing the initial eligibility period or during the annual open enrollment period. Outside of these windows, changes can be made within 30 days of significant life events, such as marriage or civil union, divorce, birth or adoption of a child, a family member's passing, or alterations in a spouse's employment affecting benefits.
Cost Components of Health Insurance
When it comes to selecting a health insurance plan, understanding the costs involved is paramount. While monthly premiums are a crucial factor, it's equally essential to grasp the nuances of deductibles, copays, coinsurance, and out-of-pocket maximums. This information can be found in plan summaries provided by each healthcare provider and made available to you by your employer or HR partner. In this section, we'll break down six common cost components, providing clarity on what each entails.
1. Monthly Premiums
Your premium is the monthly fee for your health insurance plan. The amount you pay depends on factors such as plan type and coverage (e.g., individual or family), as well as your employer's contribution.
Note: Typically, plans with low monthly premiums will have higher deductibles/out-of-pocket maximums, and plans with higher monthly premiums will have lower deductible/out-of-pocket maximum costs.
2. Deductible
This is the amount you must personally cover for healthcare before your insurance plan kicks in.
Example: If your plan has a $1,500 deductible, you'll cover 100% of eligible healthcare expenses until you reach this limit. Afterward, you share costs with your health plan through coinsurance.
3. Out-of-Pocket Maximum
The maximum amount you'll pay in a calendar year for covered healthcare services. Once this threshold is met, your insurance provider covers 100% of the costs.
Example: You have a medical emergency and spend two weeks in the hospital. Since your health plan has an out-of-pocket maximum of $4,000, even though the hospital bill is $20,000, you only pay $4,000 and your health plan pays the remaining $16,000.
4. Copay
A predetermined fee for specific services or medical visits, determined by your health plan. While copays contribute to your out-of-pocket maximum, they do not count towards your deductible. This means that once you reach your deductible, you will still have copays.
Example: You visit your doctor to discuss your flu symptoms. Your plan requires a $25 copay for the visit. It doesn’t matter if you’ve met your $1,500 deductible, you will still pay a $25 copay for your doctor visits. However, if you’ve hit your out-of-pocket maximum of $4,000, you don’t have to pay the $25 copay out-of-pocket – your health plan will cover the cost.
5. Coinsurance
The portion of your medical expenses covered by your insurance provider once you've met your deductible. Usually represented as a percentage, such as 80/20 (80% covered by the plan, 20% paid by you).
Example: Let’s look at how coinsurance works with high medical costs. Say you need an expensive medical procedure that will cost $12,000 to treat a serious condition.
Your deductible is $1,500.
Your coinsurance is 20%.
And your out-of-pocket maximum is $4,00.
How much will you pay and how? Based on these factors, you can expect to pay 100% of the first $1,500 (your deductible). You’d also pay 20% of the remaining $10,500, or $2,400 (your coinsurance). So your total out-of-pocket costs would be $3,900 – your $1,500 deductible plus your $2,400 coinsurance. Once your total out-of-pocket costs for the year reaches $4,000, your health plan will cover the remaining allowable expenses for the rest of the plan year.
6. Non-Covered Care
Services, tests, or medications not included in your health plan require personal payment. These costs do not factor into your deductible or out-of-pocket maximum.
Example: If you want to see a chiropractor but chiropractor services are not covered by your health plan, you will have to pay 100% of this cost yourself. This cost will not contribute to your deductible or out-of-pocket maximums since this service falls outside of your health plan offering.
Understanding these cost components empowers you to make informed decisions about your health insurance plan. By delving into plan summaries and comparing costs, you can tailor your choice to suit your unique healthcare needs and budget. Remember, the right plan strikes a balance between monthly premiums, deductibles, and out-of-pocket maximums, ensuring you're adequately covered without breaking the bank.
Choosing Between HMO or PPO
When it comes to choosing a health insurance plan, another key decision to make is between an HMO and a PPO plan. While they share similarities, there are crucial distinctions. To guide you in making the best choice for your needs, let’s delve into a concise overview of these two options.
HMO (Health Maintenance Organization)
An HMO plan offers extensive coverage within a single network, with a primary care physician overseeing specialist referrals. A prime example of an HMO is Kaiser Permanente. Typically, HMOs come with lower associated costs. However, it's worth noting that with an HMO plan, you must stick to in-network providers. For instance, if you have a Kaiser plan, your healthcare must be sought within the Kaiser network, including urgent care and hospital facilities.
PPO (Preferred Provider Organization)
Opting for a PPO plan grants you the utmost flexibility in selecting healthcare providers, both in-network and out-of-network, without the need for referrals. HMSA’s PPP plan is a prime example of a PPO plan. While PPOs usually entail higher associated costs compared to HMOs, they boast a broader network of providers. If you value the freedom to see any provider at your convenience, PPOs offer the most flexibility.
How Can ProService Hawaii Help?
ProService empowers employers to provide their dedicated employees with top-tier healthcare coverage. Our offerings, including HMSA and Kaiser health plans, often provide richer benefits and greater cost savings compared to other options on the market. In addition, we provide access to a diverse range of contemporary voluntary benefits, enhancing your ability to attract and retain top talent. Navigating healthcare can be complex, but with ProService, both our clients and their employees gain access to seasoned benefit experts, ensuring they make informed choices that align with their unique needs.
