More and more, small and medium-sized businesses are canceling group health insurance and setting up formal Premium Reimbursement Programs to reimburse employees for individual health insurance premiums. This strategy saves the business 20% to 60% on healthcare costs, and is a health benefit that helps recruit and retain key employees.
Here is a quick overview of premium reimbursement, and the top five employee benefits of receiving reimbursement for individual health insurance.
What is Premium Reimbursement?
With a Premium Reimbursement Program the business offers employees a monthly healthcare allowance to use on individual health insurance – instead of contributing to a group health insurance plan.
Employees purchase their own health plan, and are reimbursed up to the amount available in their balance.
5 Reasons Employees Love Premium Reimbursement
Here are the top five employee benefits of receiving reimbursement for individual health insurance.#1: Access to the Best Health Care
Because employees choose which individual health insurance policy to purchase, they can pick the health coverage that best meets their needs.
With their healthcare allowances, employees select:
- Any type of plan, from any insurance carrier
- The network of providers and doctors they want to see
- The coverage level they want (the deductibles, co-pays, co-insurance, etc.)
#2: Coverage for All Employees
All employees (regardless of health conditions) are now able to purchase an individual health insurance policy that is equal or better for them than existing group health insurance options.
#3: Access to Health Insurance Tax Credits
Employees can use their health insurance allowance to purchase policies from the new health insurance marketplaces. This gives employees access to federal health insurance tax credits to lower the cost of their premium.
Eligibility for the tax credits is based on income and household size. Households with income up to 400% above the federal poverty line (FPL) are eligible (up to $46,680 for an individual in 2014, or $95,400 for a family of four in 2014). See: How to Qualify for Premium Tax Credits.
#4: Predictable Costs for Employees
Employees have a clear budget to spend on health insurance. Individual plans are, on average, 20-60% less expensive than the same group coverage and rates cannot change each year because of a medical condition. See: State by State Comparison of Health Insurance Rates.
#5: Easy to Understand & Use
Lastly, employees value health benefits that are easy to understand, and easy to use. Similar to the transition from pensions to 401(k) retirement plans, premium reimbursement requires employees to take more control of their health benefits.
Reimbursement Software (i.e. Defined Contribution Software) provides employees easy 24/7 access through an online portal where they can see benefit information and submit reimbursement requests.
What questions do you have?