The majority of insured Americans get their health insurance coverage through their employers. Group health plans that employers provide to their workers are also known as employer-sponsored health insurance (ESI). Selection of the plans offered to employees and their specific coverage details are determined by the employer. Health insurance premiums are usually split between employers and employees, with employers generally bearing the larger share of the insurance premium. Employer-sponsored coverage includes not only insurance for current employees and their families but can also include retired employees. Also, investment in ESI has tax benefits for both the employer and the employees.
Types of plans and coverage
The Affordable Care Act (ACA) employer mandate which was passed in 2015 makes it mandatory for ‘large firm employers’ (employers with 50 or more full-time workers) to offer ESI to their employees. Certain provisions under the ACA encourage small firms to offer ESI but it is not mandatory. The most common types of employer-sponsored health insurance plans include Preferred Provider Organizations (PPOs), Health Maintenance Organizations (HMOs), Point of Service (POS) Plans, High Deductible Health Plans (HDHPs), and Medicare Advantage Plans. Each plan differs in premiums according to coverage tier, copays, deductible limits and has its own set of benefits. PPO plans continue to dominate the ESI market as they lower the out-of- pocket costs and are preferred by low wage workers. However, HDHPs are growing in popularity as it allows employees to qualify for health savings account (HSA).
ESI cost concerns
Healthcare costs have been rising for years, current economic conditions and inflation are making it difficult for companies to provide quality healthcare coverage to their employees. Health coverage premium growth has outpaced income growth. After wages, health insurance benefit forms the largest component of employer costs for employee compensation. In order to reduce costs and improve efficiency effective cost reduction strategies are essential to remain competitive. Large firm owners due to their ability to take high financial risks are more likely to cover their employees under self-funded plans, while small and mid-size employers usually prefer level funded plans that are a type of self-funded plan incorporated with stop-loss coverage.
Importance of health benefits
Various surveys indicated that American workers place high importance on health coverage in choosing and staying at their job. Employees highly value employers that provide good health coverage, as it ensures access to quality medical care, improved physical health, better mental well-being, and greater financial protection. For employers, all this translates to increased productivity at the workplace, lower recruitment costs, stronger retention, and prosperous business. In addition to ESI, employers can also provide various supplemental benefits and other wellness assistance for specific health needs.
