High deductible health plans or HDHPs have acquired such popularity in recent years and almost all business owners have enrolled in account-based high deductible consumer-directed health plans. We will be looking at what HDHPs are, and how high deductible health plans affect business owners.
What is an HDHP?
HDHP is an acronym for high deductible health plan. It is a health insurance plan which trades lower premiums for higher deductibles. High deductible health plans are aimed at covering fatal illnesses like stroke and heart attack. They are coupled with a health savings account (HSA) to help employees and their employers make donations which can be used to pay for medical expenses free of taxes.
What is a Deductible?
A deductible is the annual amount patients are required to pay before their insurance plan starts footing the bill. For instance, if their deductible is $1000, the patient is required to spend $1000 on medical services once every year and only then can their insurance plans start covering for the rest of their medical expenses.
Why You Should Seek Group Health Insurance As a Business Owner
Surveys conducted on employees show that health insurance sponsored by an employer is the most popular benefit for employees. Giving out a competitive health insurance plan will not only help you attract talented employees but also help you keep them. As the main benefit of your company’s employee package, group health insurance can help make your company an attractive place to work by showing concern for the well-being of your employees.
If you own a small business, your business can qualify for a business health care tax credit of up to 50% of premiums paid if you meet the following requirements:
· Your business covers nothing less than 50% of your employees premium costs.
· You have less than 25 full-time equivalent employees with an average annual salary less than $50,000.
· You purchase your own health insurance coverage from the same plan that your employees use.
How HDHPs Affect Business Owners
As an employer and business owner, when you offer high deductible health plans, you are in a better position to control healthcare expenses by moving financial responsibilities onto employees. A study conducted from the National Bureau of Economic Research showed that business owners who offered high deductible plans reduced company healthcare costs over three years.
Pros And Cons
Pros:
· HDHPs Premiums are lower than POS or PPO plans
· Networks are not narrowed, as with HMOs
· If your employees don't often use their health benefits, you save money
· If your employees are not on expensive medications, your monthly bills may be lower
· Out-of-pocket expenses are not the regular market rate, but the rate negotiated between the healthcare provider and insurance company
· Policyholders may open (HSAs), which will never “expire,” to help to cover out-of-pocket expenses
Cons:
· Employees suffering from chronic illnesses may find their out-of-pocket expenses high
· Office visits, Prescriptions, and diagnosis are completely out-of-pocket until your deductible is reached
· You may not take full advantage of your HSA
· Your deductible can be quite high
When choosing an HDHP, educate your employees on how to take a proactive role in picking their healthcare providers and how to best save.