The Basics of Health Insurance: What Your Employees Need to Know
It’s important to educate your employees about health insurance, especially during open enrollment season. Once you’ve selected your employee health plans for the new year, you should educate your team about any plan changes and walk them through their options.
A big part of helping employees understand their health insurance options is knowing how coverage works, and having the right words to talk about it. These health insurance basics can help employees choose the insurance coverage that best meets their needs, and manage their family's health care expense with better accuracy.
But if they're confused about what a deductible is, they're not alone. A 2016 survey found that only 50% of people could define “deductible,” and just 36% correctly identified a single health insurance term.
Don’t worry: explaining health insurance is easier than you think—plus we're here to help.
In this article, we’ll explain some of the lingo, and cover the basic points you and your employees need to know.
Who's eligible for health insurance?
The federal government requires employers to provide health insurance for some employees, but Hawaii’s laws go even further. Under the Hawaii Prepaid Health Care Act, employees who work at least 20 hours per week for four consecutive week are eligible for health insurance coverage by their employer.
However, a few groups are excluded from that requirement. This includes insurance and real estate salespeople paid on commission, seasonal agricultural workers, and people working for family members. Once employees become eligible for coverage, benefits kick in on the first day of the following month.
If employees want to opt-out of their employer’s health insurance (e.g. if their insurance is already being covered by a spouse), they need to fill out an HC-5 form every year.
When can employees sign-up?
Employees can sign up for, or make a change to their health insurance benefits after they complete the initial eligibility period, or during their employer’s annual open enrollment period.
Outside of those eligibility windows, they can change or sign up for a plan within 30 days of a significant life event, like marriage, divorce, the birth or adoption of a child, the death of a covered family member, or a change in a spouse’s work status that affects benefits coverage.
What goes into the cost of health insurance?
One of employees’ biggest concerns is how much their health insurance is going to cost. In general, employees share the cost of health care services with their employer and the plan they select. But it’s not always a simple equation. There are several different costs that go into the total expense of health care.
Let’s break them down:
- Monthly Premium. This is the monthly fee for your health insurance plan. In Hawaii, the employer must pay at least half of the premium, as long as the employee's share of the cost is no more than 1.5% of their wages.
- Deductible. This is the amount you must pay out-of-pocket before your insurance plan kicks in and starts to cover the cost of your medical services.
- Copay. A copay, or copayment, is the predetermined fee you have to pay for certain services or medical visits. Copays do not count toward your deductible, but they do count toward your out-of-pocket maximum.
- Out-of-Pocket Maximum. The out-of-pocket maximum is a cap on the total amount you will have to pay on medical bills in a calendar year. Once you reach the cap, your insurance provider will cover 100% of your medical costs from then on.
- Coinsurance. This is the insurance company’s share of your medical bill (after your deductible has been met). If your plan provides for 80% coinsurance, that means your insurance provider will pay for 80% of the cost, and you’ll be responsible for the remaining 20%.
- Care not covered by insurance. If a test, procedure or medication is not covered by your insurance plan, you may need to pay for it yourself.
What plan should they choose?
There is no one type of plan that is best for everybody. The key is to select a health insurance plan that meets their specific needs.
In most cases, they'll be choosing between and HMO and a PPO.
- What’s an HMO? A Health Maintenance Organization, or HMO, is a one-stop-shop that provides all the coverage you need through a single network of doctors and hospitals. HMOs often require members to select a primary care physician (PCP) who acts as a “gatekeeper” to direct access to medical services. Except in medical emergency situations, patients need a referral from the PCP in order to see a specialist or other doctors.
- What’s a PPO? A PPO , or Preferred Provider Organization, is an organization of medical doctors, hospitals, and other health care providers who have agreed to provide health care at reduced rates to an insurer's or administrator's clients. With a PPO, you have the flexibility to select your own physicians and health care providers both in-network and out-of-network, based on your individual preferences.
How can ProService Hawaii help?
By working with an HR partner like ProService Hawaii, employers can access better health insurance plans at lower cost, resulting in a savings for both themselves and their employees. With access to a wide variety of modern voluntary benefits, you'll be able to offer your team benefits they love and value that helps retain your best talent. And if you're getting questions about copays, deductibles or monthly premiums, you can always forward them this blog post!
Want to learn more? Download our free ebook: The Benefits of HR Partnerships in Hawaii.