Group Health Insurance
for Kentucky and Indiana Employers
Among the most common ways to obtain insurance in Kentucky (and most states) is through employee benefits packages offered by employers: “Group Health Insurance”. Group plans often lower premiums as well as health care costs for the covered employees (and family members) because the financial risk (what you pay compared to your probability of needing medical treatment) is spread out over many people, most of whom are in good health. How you manage that risk is primarily a matter of the funding option you choose for an Employer Health Plan. The first and most important task of a quality agent is to understand your company and employees, and identify the payment model options which will deliver the optimal benefits with the lowest costs and best health outcomes.
Let’s take a look at the broader picture to understand the benefits and role of Group Health Insurance in context.
Health Insurance Basics and Terms
At its simplest definition, “health insurance” keeps someone from paying full-price for health care because he or she pays a monthly premium (like a subscription cost) to the health insurance carrier, and the employer (in cases of self-funding) or the insurance carrier pools all premium money to pay all or part of the actual health care costs for its members. “Group health insurance” (or “business health insurance”) allows a worker and family members to pay even less for health care, as the employer is contributing to part or all of the insurance premium.
Health insurance not only protects individuals from catastrophic medical expenses, but it also improves access to important routine, preventive and primary care services.
There are several different types of health insurance that provide a range of coverage for medical expenses. Expenses vary based on how much coverage someone wants, and the number of family members he or she decides to cover. Depending on the type of health insurance coverage, either the individual pays costs out of pocket and is then reimbursed, or the insurer makes payments directly to the provider. After every visit to a health care provider, you will get a document called an “explanation of benefits” (EOB) that shows what your insurance will pay and what your out-of-pocket expenses will be.
Health Insurance Marketplace
The ACA calls for the creation of Health Insurance Marketplaces–also known as Affordable Health Insurance Exchanges–for individuals and small businesses to purchase private health insurance. The Marketplace allows for direct comparisons of private health insurance options on the basis of price, quality, and other factors, and it coordinates eligibility for premium tax credits and other affordability programs. The Marketplace became operational in 2014. Uninsured people who want to comply with the individual mandate can use the Exchanges to fulfill their requirements.
Provider: A clinic, hospital, doctor, lab, health care practitioner, or pharmacy.
Insurer or carrier: The insurance company providing coverage to the policy holder.
Policy holder: The individual or business (“group”) that has entered into a contractual relationship with the insurance company.
Insured: The person with the health insurance coverage. For individual health insurance, you may be both the policy holder and the insured.
Premium: The amount of money charged by an insurance company for coverage. The cost of premiums may be determined by several factors, including age, geographic area, number of dependents and tobacco consumption. Policy holders pay these rates annually or in smaller payments over the course of the year, and the amount may change over time. When insurance premiums are not paid, the policy is typically considered void and companies will not honor claims against it. Self-employed persons may deduct the cost of their individual health insurance premiums from their taxes.
Copayment: A fixed amount you pay for a covered health care service, usually when you get the service. The amount can vary by the type of covered health care service.
Deductible: The amount you owe for health care services each year before the insurance company begins to pay. For example, if your annual deductible is $1,000, your plan won’t pay anything until you’ve met your $1,000 deductible for covered health care services that are subject to the deductible. The deductible may not apply to all services, such as preventive care services.
Deductibles are useful for keeping the cost of insurance low. The amount varies by plan, with lower deductibles generally associated with higher premiums. They are fairly standard on most types of health coverage.
Coinsurance: Your share of the costs of a covered health care service calculated as a percent (for example, 20 percent) of the allowed amount for the service. You pay coinsurance plus any deductibles you still owe for a covered health service.
Out-of-Pocket Maximum: The most you will be required to pay for your health care during a year, excluding the monthly premium. It protects you from very high medical expenses. After you reach the annual out-of-pocket maximum, your health insurance or plan begins to pay 100 percent of the allowed amount for covered health care services or items for the rest of the year. Copays, deductibles and coinsurance count towards the out of pocket maximum.
Preventive Care: Medical tests and checkups, immunizations, and counseling services used to prevent chronic illness from occurring.
Types of Health Insurance Plans
Fee-for-Service Plans: Straight-forward type of coverage in which insurers pay for health care services provided to plan participants. With this type of coverage, you can choose any doctor you wish and change doctors any time, or go to any hospital in any part of the country.
Health Maintenance Organizations (HMO): Usually limits coverage to care from doctors who work for or contract with the HMO. Premiums are paid monthly, and a small copay is due for each office visit and hospital stay. HMOs generally won’t cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage.
HMOs also require that you select a primary care physician who is responsible for managing and coordination all of your health care. Your primary care physician will provide all of your basic health care services and must give a referral in order for you to see a specialist. HMOs often provide integrated care and focus on prevention and wellness. HMO plans sometimes include dental and vision coverage.
Preferred Provider Organizations (PPO): PPOs are similar to HMOs in that health care providers enter into an agreement with the insurance companies to offer substantially discounted fees for covered health care services. Your copay and deductibles will also be lower if you choose a provider that is in the PPO network. The payment ration may be high for a PPO plan. You do not have to choose a primary care physician – you can choose doctors, hospitals and other providers from the PPO network or from out of network. If you want to stick with a particular doctor (not in the network) you are able to do so; however, the costs will be higher. PPOs include preventive care, wellness, immunizations, well-baby care, and mammograms, along with regular doctor visits. PPOs use membership cards instead of requiring medical insurance claim forms for payment processing.
Exclusive Provider Organization (EPO): An EPO is similar to a PPO in structure and operation, with the main difference being that services are covered only if you go to doctors, specialists or hospitals in the plan’s network, although there are exceptions for emergencies.
Point of Service Plan (POS): Combines elements of both HMO and PPO plans. Like HMO plans, you may be required to designate a primary care physician who will then make referrals to network specialists when needed. Depending on the plan, services rendered by your primary care physician are typically not subject to a deductible, and preventive care benefits are usually included. Like a PPO plan, you may receive care from non-network providers but with greater out-of-pocket costs.
High Deductible Health Plan (HDHP): HDHPs are health plans with high deductibles and low premiums, in which the insurer will not cover most medical expenses until the deductible is met. As an exception, preventive care services are typically covered before the deductible is met. The high deductible provides financial security for more severe illnesses. HDHPs are often designed to be compatible with Health Savings Accounts (HSAs). HSAs are tax-advantaged accounts that can be used for qualified out-of-pocket medical expenses before the HDHP’s deductible is met. These expenses can include copayments and coinsurance.
Tax-advantaged Health Accounts: These are a type of medical savings vehicle that helps individuals pay for qualified medical expenses and are often paired with HDHPs. There are specific rules for each type of account, such as how much can be contributed and what the account’s funds can be used for. Many of these accounts are employer-based, but people with individual insurance plans can take advantage of health savings accounts provided they meet eligibility criteria.
Health Savings Accounts (HSA): HSAs are available to people who are enrolled in an HSA-complaint HDHP. The account is individually owned, and money may be contributed by the owner of the account or a dependent.
The funds contributed to the account are pre-tax which means they aren’t subject to federal income tax at the time of deposit. Funds must be used to pay for qualified medical expenses; there is a heavy tax penalty for paying for non-qualified expenses. Funds roll over year to year if you don’t spend them and can accumulate a significant balance. There is a limit to how much money can be put into an HSA every year, but no cap on how much money can be in the account.
Other Types of Insurance
Dental: This coverage is for dental care and usually includes regular checkups, cleanings, x-rays and certain services required to promote general dental health. Some plans will provide broader coverage than others, and some will require a greater financial contribution from you when services are rendered. Some plans may also provide coverage for certain types of oral surgery, dental implants or orthodontia.
Vision: Vision Insurance entitles you to specific eye care benefits defined in the policy. This typically covers routine eye exams and other procedures, and provides specified dollar amounts or discounts for the purchase of eyeglasses and contact lenses. Some vision insurance policies also offer discounts on refractive surgery.
Life: Life Insurance protects against financial hardship after the death of the insured by paying out a lump sum to beneficiaries upon the insured’s death. Term life insurance offers policies that cover a set period of time, while permanent life insurance, such as whole and universal life, provides lifetime coverage. Death benefits from all types of life insurance are generally free from income tax.
Disability: Disability Insurance protects the insured against disability. You are awarded a disability benefit as a partial replacement of income lost due to illness or injury. Short-term Disability Insurance (STD) helps you remain financially stable if you become injured or ill and cannot work. Usually, STD coverage begins within one to 15 days of the event that caused your disability. The coverage allows you to continue to receive pay at a fixed weekly amount or a set percentage of your income. The benefits last up to 52 weeks, although the amount of time you receive STD benefits varies between specific plans. When STD coverage ends, long-term disability (LTD) coverage takes effect. LTD insurance protects workers if they become disabled for a prolonged period prior to retirement. The length of LTD plans varies: some may be limited to a period between two and 10 years, which other plans continue paying until the age of 65.