Health insurance continues to top the “best employee benefits” lists year after year, and it’s hardly surprising why. Without the help of an employer, paying out of pocket for healthcare premiums can be expensive, especially when health conditions are chronic. So when an employer steps up and provides this benefit, it can be a huge relief.  

Of course, health insurance is often a significant challenge for employers, too. The healthcare market is famously difficult to navigate and knowing where to begin can feel overwhelming even to the most seasoned professional. 

Sound familiar? Don’t worry, we’ll walk you through the basics of group health insurance plans, helping you make the best choices for your business.  

What Is a Group Health Insurance Plan? 

A group health insurance plan is an insurance policy that offers coverage to the majority of your employees, their spouses, and their dependents. You’ll typically pay for a group plan through monthly premiums, with the cost depending on the number, age, health of your employees and your location. 

Group health insurance plans come in four main types: PPO, HMO, EPO and POS. Here’s a brief overview of each:  

  • Preferred Provider Organization (PPO). A PPO is one of the most flexible group plans out there. It’s also the most expensive. With a PPO, your employees can see in- and out-of-network doctors and specialists without the need for referrals. Additionally, the premiums on PPOs are usually higher than other group plans, though employees can reduce costs by choosing physicians in network. 

  • Health Maintenance Organization (HMO). An HMO is one of the cheapest group plans, but the downside is that it is far less flexible than the other options. With an HMO, employees must choose a primary care physician (PCP) who would tend to more basic medical issues. To see a specialist, however, the patient would need a referral from their PCP. Out-of-network care also isn’t typically covered, unless it’s an emergency.  

  • Exclusive Provider Organization (EPO). An EPO covers you if you see doctors or specialists from a list provided by your health insurance company. Much like a PPO, you don’t need a referral from a PCP to see a specialist, though—like an HMO—your employees won’t be covered for out-of-network care unless an emergency arises. Because of its increased flexibility, an EPO is usually less expensive than a PPO but more costly than an HMO.  

  • Point of Service (POS). A POS is essentially a combination of a PPO and an HMO. Like a PPO, patients can access in- and out-of-service care, though out-of-service care will typically be more expensive. And, depending on your group plan, your employees may need a referral to see specialists outside of a PCP.  

How Much Do Group Health Insurance Plans Cost? 

According to Mployer Advisor’s 2021 Benefits Report, employers pay an average of $5,760 per employee for single plans and $13,716 per employee for family plans. Of course, the average price may be different from what you ultimately pay. Other factors that influence the cost of group health insurance plans include: 

  • The insurance carrier you choose 

  • Whether you cover all or a portion of your employees’ insurance premiums  

Is Group Health Insurance Mandated by Law? 

If your business has more than 50 full-time equivalent employees, then you’re considered an Applicable Large Employer (ALE), and the IRS requires you to provide health insurance to your employees. In some states, such as California, Colorado, New York, and Vermont, you’re considered an ALE if you have more than 100 employees.  

Why Provide Group Health Insurance to Employees? 

Whether you’re required to or not, providing health insurance is a desirable benefit to employees that can also help you retain a competitive advantage over other businesses. Of course, there are several other viable advantages that can benefit your business, too. Other vital considerations include:  

1. Tax benefits. 

Although health insurance premiums can be expensive, the IRS offers employers several tax breaks that will ultimately affect your bottom line.  

For one, you won’t pay taxes on the cost of health insurance itself. In addition, employers can deduct premium contributions from your taxable income, which can help lower your tax bracket. Finally, if you set up a cafeteria plan, which lets employees pay health insurance premiums with pre-tax dollars, the IRS will deduct employee contributions from their payroll.  

For you, that means you could pay less in payroll taxes.  

If your business has less than 24 full-time equivalent employees, you could also benefit from a small business healthcare tax credit. Qualifying businesses can use up to 50% of their contributions as a tax credit, directly reducing how much in taxes they owe the IRS.  

2. Health insurance helps recruit employees. 

Health insurance is by far one of the most popular benefits out there. Given the cost of private health insurance, it’s unsurprising that top talent looks for companies that offer solid coverage to its team. If you opt to not offer at least some level of health insurance, you could be missing out on potential candidates. 

3. Health insurance can boost employee engagement.  

In addition to helping you recruit employees, health insurance can drive employees' productivity and engagement. Without health insurance, many employees often skip out on medical treatment due to the high costs. This results in two big problems for employers: presenteeism and absenteeism.  

Absenteeism occurs when a medical condition (whether physical pain or mental stress) prevents employees from performing their everyday job. Without proper medical treatment, employees will call out sick more frequently, affecting your day-to-day operation. Presenteeism, on the other hand, means your employees are showing up to work, but chronic health conditions prevent them from performing at their best.  

By providing health insurance to employees, you can incentivize them to take care of medical conditions before they turn into major problems.  

Should You Provide Health Insurance to Employees? 

Whether you’re a small business or an ALE looking for the best policy, offering health insurance to your employees can be crucial to their success and yours. If you need help picking out a policy, consider hiring an insurance broker. Brokers can assess your business’s needs, as well as those of your employees, and help you pick out the right coverage at the right price.  

Curious to see how your employee health insurance plan compares to companies like yours? Download Mployer Advisor’s free custom employee benefits benchmarking report to see how your benefits package compares.  

Craving more content? Head over to our blog for a comprehensive guide on small business insurance.