[Podcast] Key Concepts to Understand - Health Insurance Simplified
In This Episode
In this episode of Health Insurance Simplified, we hope to take the confusion out of the process and help you understand the key terms.
Alan Helgeson (Host): With all of the healthcare industry jargon out there, it's no wonder that purchasing health insurance for your employees can be confusing and can feel a bit overwhelming. Our listeners are in luck, however, since we're here to take the confusion out of the process and help you understand the key terms.
Making sure your health insurance offering is a good fit for your business and your employees can make a huge difference at the bottom line, so this is vital information. I'm Alan Helgeson, and this is Health Insurance Simplified. Joining me today are Hollie from Sanford Health Plan and Perry from Pernell Insurance Agency.
All right, let's start off right off the bat. All these different terms. There are so many things out there. Perry, let's start with you. What's the difference between group health insurance and individual health insurance?
Perry Bly: That's a good question, and we get asked that all the time. Group health plans are health plans that are sponsored and offered by the employer. They have to have a legitimate employee relationship in order to offer those plans. So there's IRS rules and regulations on who can offer a group health plan.
Individual plans are plans that are purchased individually, or outside of a group health plan. So non-group and individual or individuals non-group, I think a better way to put it is. So they, they don't have an employer relationship. They're an individual purchasing health insurance on their own.
Hollie Scott: So an individual coverage is going to be something that you purchase directly, either through an agent, direct with the health insurance company or healthcare.gov.
Perry Bly: I always tell people there's two ways to buy individual health insurance in South Dakota: directly or through the marketplace. What the marketplace is going to do best is help connect people to help, to help pay for that coverage, or an employer otherwise would be helping that individual pay for that coverage.
Hollie Scott: Right, and with group coverage, your employer is making that decision for you. They're deciding what plans to offer on the individual side. If you're buying direct and on your own, you're making that choice. You have to go through and decide which plan is best for you.
Perry Bly: Which plan, which benefits structure, which premium can I afford? What am I eligible for? There's a lot to it. That's where an agent becomes extremely valuable in helping people walk through that process. One of the advantages to offering employer benefits for employees is the tax advantages. So there are tax advantages for tax deductions for the employer, the pre-tax benefit for the employee that they wouldn't get otherwise outside in individuals markets.
Hollie Scott: Just to make a point: Employers who have more than 50 employees, they are required to offer health insurance per the Affordable Care Act. But those employers who are under 50, which is the market we're talking with today, you aren't required to offer insurance per the Affordable Care Act, but there are so many advantages, retaining employees, recruiting new employees, just making sure you're taking care of your employees.
Perry Bly: And offering benefits to the employee provides a good value to the community or a good stewardship overall over the community that are employers or employees, excuse me, are responsible. They have protection that they can seek care when they need it. They can get back to work faster if they do have an experience. Health insurance benefits provide a broader benefit for the communities.
Host: Perry, let's talk about abbreviations. When I start researching group health insurance, it looks like alphabet soup out there. How can employers know what kind of group health insurance is right for their business? For example, what's an HMO?
Perry Bly: The HMO stands for health maintenance organization, and they used to stand for a lot of other things. And, I think here locally, we, when we think about an HMO, we have a network contracted. And basically when you think of an HMO, you should think that you don't have insurance outside of that HMO.
Hollie Scott: Yeah, so at an HMO, we have direct contracts with providers. And if you go outside of that network, then you wouldn't have coverage with your health insurance.
Host: How about a PPO? What's a PPO?
Perry Bly: A PPO is a preferred provider organization. I think when I'm explaining PPOs to people in my office, I typically will tell them that you can go where you want with a PPO, but you're going to get the best deal with somebody who signed the contract. And so you want to take advantage of that network. You're more free with a PPO to move about and stay within the network and get the best deals with providers who have contract.
Hollie Scott: Just like what the PPO stands for: preferred provider organization. So again, we still have contracts with these providers at Sanford Health Plan, but it's a little bit broader. So if you go somewhere that doesn't have a contract, there's still some coverage. It's just not as good as if you were with one of our preferred providers.
Host: All right, let's talk about this one. I know has lots of confusion tied to it. What is an HSA eligible plan?
Perry Bly: There's a lot of confusion around it for a lot of reasons. For a long time, the industry used the wrong terminology. And so today, we are using an HSA eligible plan. An HSA eligible plan is a high-deductible health plan. So it meets criteria that the government sets for a high-deductible health plan. There's no first dollar coverage for office visits, for prescription drugs. So generally speaking, they're easy to describe, because I'll tell somebody that you have all the costs for services up to a certain amount. A lot of times, it's nice if that deductible is a max out-of-pocket. So deductible and max out-of-pocket can be the same number in certain circumstances, certain product — the $6,900 HSA qualified plan from Sanford is a great example. It's just easy to explain. It's all you to 6,900, Alan, and then you're covered 100%. Because you have the right kind of health insurance, you're allowed to set aside money in a health savings account.
A health savings account is separate and independent of your health insurance. Any banking institution or a lot of banking institutions offer them. You can go online to find a health savings account, but if you walk into a local bank and ask for a health savings account, in order to have one, you have to have the right kind of health insurance. They should ask that question. They may or may not. The IRS sets rules for how much we can contribute to a health savings account and every year that number changes.
I always describe high-deductible health plans or HSA eligible plans as a tax incentive to set aside money for your health care rainy day and is a great place to accumulate. It's a great plan for people who generally don't use much health care, and they have the tax advantages to set aside money for that health care rainy day. They, as they accumulate money in their health savings account, I think is a strategy that they can take higher deductibles. They can take on more risks because they're, they have the tax incentive to self-insure for a portion of that. They can use that money for anything health-related for any member of their household. So I, for example, just got hearing aids, not covered by health insurance, but I had the money in my health savings account. So I have tax-free money to use for my hearing aids. It's a terrific benefit. And so I'm a huge fan of high deductible health plans and the HSA combination.
Hollie Scott: I think when we're talking high-deductible health plans and HSA, people get the most confused because really they're, they're one in the same, but they're not. So high-deductible health plan is your health insurance. That's what you're going to use at the doctor's office to get your care, go to the hospital for your MRIs, those types of things, and your HSA money is what's going to help pay for that deductible. So I think that's where the confusion comes in, because everybody's like, well, I have an HSA, you know, that's my health insurance, but that's your bank account that helps pay for what your health insurance doesn't pay for. So I have that struggle in my house with my husband. He doesn't quite understand how that works. He thinks the HSA is our insurance and it's not. So we have our high-deductible health plan where we pay everything until our deductible is met. We use our HSA money to pay that deductible.
Perry Bly: Absolutely, great distinction because not all high deductible health plans are HSA-qualified health plans. And so the health plans generally will define that. And when you're looking through the description of the plans, they'll, they'll note that this plan is HSA-qualified, so you can open and have and contribute to HSA. And people ask me all the time, "do I have to have the HSA?" And you don't, you don't, it's completely optional for you, but I would highly recommend it. It's a great tax advantage tool for the future, for your health care. And when somebody comes to me and to talk about Medicare, and they've got a lot of money in their HSA, cause they've done this right over the years, they have more options and have more flexibility when it comes to looking at products at that time. That's a whole 'nother podcast right there, I'm sure. Big fan of HSA is myself and high-deductible health plans.
Hollie Scott: One other thing I do also want to mention is, you know, we were saying high-deductible health plan ... well, in today's world, that can be every plan, right? A lot of plans have higher deductibles. So if you know the insurance industry from even 10, 15 years ago, deductibles were like $250 at your employer, up to a thousand dollars was a lot. Well, now with insurance, you have a $5,000 or a $7,000 deductible. Even though those are high deductibles. They're not a high deductible health plan defined by the IRS.
That is where our agents come in, that Sanford Health Plan has contracted. They're a great value, because they can help you define, okay, this is what qualifies for an HSA eligible plan because of how the government defines high-deductible health plan HSA-eligible versus, "oh, it's a $7,000 deductible. It should be, it should qualify." And it doesn't. So I would strongly suggest working with an agent if you're considering well, any health insurance for as a small employer, but especially if you are interested in those high-deductible health plans that have the HSA eligible, because as an employer, there are so many tax advantages to offering those.
Perry Bly: The employer can even contribute to the employee's health savings account if they like them. And that can be an extra benefit when we're looking to attract and retain employees as well. So a lot of times too, if an employer has enough employees, they can, they can offer multiple plans from Sanford. And I always encourage them to consider putting it a health savings account-qualified type of plan as one of those options that I always encourage that, that we bring it to the table because of the tax advantages and how it encourages that self-insuring and good stewardship of dollars to people make better decisions when it's their dollars first. So back in the day, if you had a prepaid health plan, why we don't have them anymore is because they're abused. So if you have zero incentive not to go to the doctor, you're going to go to the doctor all the time. And so we have to take some of that aspect away too. So it does also encourage personal responsibility.
Host: Hollie and Perry, thanks for taking some of the confusion out of those types of networks and differences that are important when it comes to choosing the right plans for your employees.
To learn more about the options through Sanford Health Plan, visit SanfordHealthPlan.com/employers. You can also call (877) 305-5463, Monday through Friday 8:00 AM to 5:00 PM central time. This info is also in the show notes for this episode. For Health Insurance Simplified, I'm Alan Helgeson.