A Simple Comparison of Traditional and Modern Group Health Plans

Flexible hours, exciting work, and family atmosphere are among the many positives of working at a small business. However, the recruiting and retention game-changer continues to be the ability to offer health benefits.

Companies of every shape and size continue to find that offering health benefits makes all the difference.

Health Benefits More Valued Than Ever

Recent research suggests health insurance is perhaps a bigger carrot in the workforce than ever before. According to the SHRM 2015 Strategic Benefits Survey:

• More than 38 percent of respondents said their organization leveraged benefits to recruit employees (up from 26 percent in 2013 and 29 percent in 2012).
• More than 50 percent of respondents said their organizations had difficulty recruiting highly skilled employees.
• 40 percent of respondents said their organizations used benefits to lure highly skilled employees (up 10 percentage points from 2013).

Given this data, and what most small business owners are observing on a regular basis, group health plans are becoming a significant difference-maker for talented job-seekers who have multiple offers to consider.

A Choice of Methods for Covering Your Group

Thanks to recent health insurance reform, the phrase “group health plan” is starting to evolve in its meaning. On a core level, a group health plan refers to a benefit offered by an employer to help cover medical care costs for participants and dependents. But there are traditional, evolving and modern ways for group health plans to be structured and administered. Here are three methods worth comparing:

Group Health Insurance: Because the majority of small business employers who offer health benefits use group health insurance policies, this has become the more traditional method of creating a group health plan. This type of  plan involves working through a health insurance carrier or broker to purchase a health insurance policy designed for the coverage of all employees.

A common criticism of this approach is the lack of customization. Employers have the annual task of structuring a one-size-fits-all solution, in hopes of meeting the needs of the collective group. This can be an especially challenging task for companies who employ a spectrum of employees with varied marital and family status. 

Self-Insured Health Plan: Usually used by larger companies, a self-insured health plan allows employers to operate their own plan instead of purchasing an insurance policy from a carrier or broker.  As a result, there are opportunities for significant cost savings. However, employers who choose to operate self-insured plans also take on compliance risks and extra administrative requirements. These plans also typically carry the same challenges of a traditional group health plan, in structuring a one-size-fits-all solution for the collective group.

Defined Contribution Health Plan: A defined contribution health plan practices the concept of employer-funded, but employee owned benefits. Under this type of plan, employees shop for and purchase their own individual health insurance policy. Employers then provide an allowance, or defined contribution, toward reimbursing the employee for the cost of their policy. 

In order to qualify as a group health plan, these plans must also meet specific compliance requirements. But, when administered correctly, defined contribution health plans can provide a high degree of customization and flexibility for the needs of each employee in the group. This modern option provides significant cost control for employers. The flexibility and customization afforded by these plans also translate into greater employee satisfaction and overall cost savings. 

Conclusion

When it comes to attracting and retaining employees, other perks and incentives pale in comparison to health benefits. With this in mind, there is more than one way to provide a health benefit to your group. Depending on group size and dynamic needs, it may be worth considering a modern solution.