Understand your healthcare options

At this point you may well be wondering what type of coverage might work for your business. Healthcare plans are complicated and many plans can’t be neatly characterized—as an HMO, a PPO, and so on—but offer a mix of features, and what they cover may change frequently.

The following sections will help you understand the big picture for health coverage options. We’ll also shed some light on the specific characteristics of the common types of managed care plans and crucial features to consider in any plan.

It’s all about managed care

Today, just about all health coverage plans are some type of “managed care” plan. Gone are the days of traditional indemnity (also called “fee for service”) insurance, where patients chose their own doctors, paid for their care and were reimbursed by their insurance company for some or all of their doctor’s bills. These days, managed care is the norm.

Under managed care plans such as HMOs and PPOs, a health plan pays doctors or hospitals directly for some or all of the cost of the medical services its members receive. Insurers look for ways to align providers’ financial incentives with appropriate care management. For example, physicians may be paid a fixed annual per-member “capitation” rate, regardless of how many times the covered individual visits the physician. Health plans may also impose rules aimed at managing the care that their members receive, such as requiring members to obtain prior authorization before elective hospitalizations or requiring referrals from primary care physicians before seeing certain specialists.

Plans offered under the health insurance exchanges

The Affordable Care Act required that each state establish a health insurance exchange—an online marketplace where small business owners can purchase health insurance. All states have established a marketplace, although some are federally facilitated under Healthcare.gov, rather than state-run.

The marketplace offers employers a choice of four categories of insurance packages, each with essential minimum benefits. For state-based marketplaces that offer online enrollment, this allows small businesses to easily compare among plans. As an employer, you will decide what level of coverage to offer, and your employees may pick any plan offered within the exchange at your chosen coverage level.

The four coverage levels are based on the specified percentage of costs the plans will cover:

• Bronze = 60%
• Silver = 70%
• Gold = 80%
• Platinum = 90%

The Department of Health and Human Services has defined specific services that must be covered within these packages. This provision is designed to make sure everyone participating in the exchange has access to sufficient coverage. Individual and small group plans must include items and services within these 10 categories:

• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services, and behavioral health treatment
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including oral and vision care

Also, if an insurer offers a qualified health plan, they must also offer a child-only plan at the same level of coverage.