Small Business Health Insurance Costs: Out-of-Pocket Maximums

Small Business

Small Business Health Insurance Costs: Out-of-Pocket Maximums

Published on April 18, 2019

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Understanding all the costs associated with your small business health insurance plan is a great way to ensure you’re using your plan to its best abilities.
In addition to monthly premiums and annual health insurance deductibles, out-of-pocket maximums are a significant part of selecting a small business health insurance plan that works for you and your employees.

What are out-of-pocket maximums?

An out-of-pocket maximum is the annual limit on how much you are responsible for sharing medical costs with your insurance company under your health insurance plan. The out-of-pocket maximum limit does not apply to your monthly premiums, balance-billed charges from health providers outside of your network, or services that your plan does not cover.
As part of the cost-sharing required by a group health insurance plan, the health insurance deductible and copayments or coinsurance that your employees pay all go toward meeting their out-of-pocket maximums. After your employees have spent their group health plan’s out-of-pocket maximums, the insurance company will usually pay for the rest of the plan year’s cost of covered medical services.
It is important to remember that your employees will continue to pay their portion of monthly premiums, even after they have met their out-of-pocket maximums, in order to stay enrolled in your group health insurance plan. Also, in most small business health insurance plans, there is usually no copayment for covered medical services after employees have met their out-of-pocket maximums. However, all group plans are different, so be sure to review the full details of each plan.

Determining out-of-pocket maximums for small business health insurance plans

Your out-of-pocket maximums may vary depending on the type of small business health insurance plan you choose, and they can usually be understood based on how much you pay toward employee premiums and how often your employees visit the doctor.
Generally, small business health insurance plans with lower out-of-pocket maximums tend to have higher monthly premiums, and small business health insurance plans with higher out-of-pocket maximums will likely have lower monthly premiums.
The health care needs of your employees also play an important role in determining what their out-of-pocket maximums might be.

  • If your employees are relatively healthy and do not visit the doctor very often, they might choose plans with lower monthly premiums and a higher annual deductible. This is because they might not meet the out-of-pocket maximums to benefit from the resulting full coverage of covered medical costs from the insurance company for the rest of the plan year.
  • Conversely, employees who require doctor’s visits, treatments, and prescription medications might choose plans with higher monthly premiums and a lower annual deductible, allowing them to more easily meet out-of-pocket maximums and benefit from the resulting full coverage of covered medical expenses from the insurance company for the rest of the plan year.

As a small business owner, offering several group plans with different out-of-pocket maximums can give your employees the flexibility to choose the plan that best fits their individual health care needs.
Additionally, being enrolled in a small business health insurance plan can mean lower premiums per employee and lower annual deductibles than through an individual health insurance plan.

Out-of-pocket maximums in perspective

Out-of-pocket maximums are important considerations for your small business health insurance plan. It is useful to understand how out-of-pocket maximums relate to premiums and deductibles, especially when employees evaluate their anticipated annual medical expenses and coverage preferences.
To learn more about how you and your employees can potentially save money by enrolling in an affordable small business health insurance plan, visit eHealth today.
This article is for general information only and not intended to provide any tax or legal advice. Always consult your tax and legal advisors to understand your specific tax and compliance situation.

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