Companies have many ways of distributing health insurance premiums.
Health insurance matters to many employees and employment candidates. To attract the best talent and remain a competitive employer, companies usually try to offer the best health plan possible. However, a number of factors affect the types of plan a company can get and the costs associated with it. Higher levels of coverage and flexibility can be costly. As a general rule, companies with more employees get better premiums -- which means that small and medium-sized businesses often struggle to get substantial coverage at affordable prices. As a result, companies pay very different amounts for employee health care and use a variety of cost distribution models.
Rules
Although companies commonly subsidize the cost of health insurance as an employee benefit, they are not legally bound to do so. Employers can simply make a group health insurance plan available to workers at their own cost. Some employers choose not to contribute at all, while most select a percentage or dollar amount with which they are comfortable and some pick up the entire cost.
Premiums
Premiums vary widely and depend entirely on the kind of health insurance plan a company offers. Level of coverage is one of the biggest determiners of cost, although the number of employees and format of plan also matter. According to the Henry J. Kaiser Family Foundation's 2010 Employer Health Benefits Survey, the average individual employee health plan cost $5,049 per year while the average family plan cost $13,770. The average Health maintenance organization (HMO) cost was $5,130 annually for a single employee with employers typically paying $4,102 of that premium. Family HMO coverage cost an average of $14,125 per year with employers covering $9,768. PPOs on average cost $5,124 per year for individuals and $14,033 for families with employers covering $4,219 and $10,210 of those costs respectively.
Choices
Companies that want to offer their employees choice in selecting an insurance plan type -- HMO, PPO or high deductible plan -- often choose to contribute a predetermined sum toward employee premiums rather than a percentage of cost. Because PPOs typically cost 13 percent more than high deductible plans, employers find it more fair and predictable to come up a standard per employee contribution they can afford. The result is that employees who elect a premium plan pay more for their insurance. This approach helps businesses manage costs while giving employees the opportunity to choose insurance that fits their needs and budgets.
Insurance Brokers
Many companies find it challenging to get well-priced insurance plans. Insurance brokers help companies find as broad a selection as possible and negotiate premium prices. Organizations that want to provide more than they can necessarily afford may find brokers get them better deals than they can find on their own. Additionally, insurance plans usually come up for renewal every year or two. Checking for better plans and premiums at each opportunity can sometimes lead to options that are better priced or offer more coverage for the money or both.
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