Understanding Health Insurance Premiums
Health insurance premiums, the amount paid upfront in order to keep an insurance policy active, have been steadily increasing as the cost of healthcare has increased in the United States. Premiums can be thought of as the “maintenance fee” for a healthcare policy, not including other payments that consumers have to pay such as deductibles, co-pays, and other out-of-pocket costs.
When the Affordable Care Act was passed by President Barack Obama in 2010, it allowed certain families to access premium tax credits on their health insurance plans, relieving some of the burdens of skyrocketing health insurance premiums.
According to research by the Kaiser Family Foundation, a non-profit organization that focuses on healthcare issues in the U.S., roughly half of Americans receive health insurance through an employer-based plan.
If your medical premiums are deducted through a payroll deduction plan, it’s more than likely that youre covering your share of your insurance premium with pre-tax dollars. So, if you deducted your premiums at the end of the year, youd effectively be deducting that expense twice.
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Why Do Workers Want Employment
Workers want health insurance for themselves and their families in order to protect against the catastrophic costs of serious illnesses and to ensure access to medical care. For those without the time or income to save for it, insurance may be the only way to obtain medical care that would otherwise be unaffordable . Although it is possible for individuals to purchase insurance on their own, the high cost of private individual coverage, barriers to access to that coverage, and steep transactions costs help account for the value of group coverage to workers and thus explain why, in the absence of any viable alternative, workers demand coverage through their employers.
Employment-based coverage is far less expensive than individually purchased coverage, for several reasons. First, through pooling, employers can reduce adverse selection and administrative expenses. These cost advantages are significant, especially for large firms. Moreover, employers are able to offer relatively inexpensive health insurance because most people covered by employment-based plans are in good health. Those people who are most expensive to insurethe elderly and people with serious disabilities and chronic conditionsare typically covered by public programs such as Medicare and Medicaid, thereby reducing the cost of employment-based insurance .
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Health And Worker Productivity
The existing studies found little evidence that workers with health coverage are absent less often than are workers without coverage. For example, the Rand Health Insurance Experiment found that the effect of insurance coverage on work loss days was small and insignificant . Similarly, despite years of research outside mainstream economics , there is almost no direct evidence regarding the effect of health insurance coverage on morale and worker productivity and the firm’s performance. In those fields, although the link between employment practices and productivity is widely recognized, the linkages between productive behavior and psychosocial job structure have remained unclear in the eyes of many observers . However, there is compelling research demonstrating that health insurance has a powerful influence on access to health care, the timeliness of care, the amount and quality of care received, and fundamental health . People without health insurance are less likely to seek medical care, less likely to get it, and, as a result, more likely to be in worse health and have higher death rates than are people with insurance coverage . Uninsured persons have a much greater risk of health decline and death, with several studies showing them to be 1.2 to 1.5 times more likely to die than are insured persons .
If Your Employer Does Offer Health Insurance To Part
If youre offered health coverage by your employer, you can buy insurance through the Marketplace instead. But you may not qualify for a premium tax credit and other savings based on your income.
Youll be eligible for savings only if the insurance your employer offers isnt considered affordable or doesnt meet certain minimum standards. Learn how to find out if your job-based offer meets these standards.
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How Can I Lower My Companys Health Insurance Costs
If youre like most employers, the high cost of insurance premiums is a big concern. You may be wondering if theres anything you can do to help control your expenses. Fortunately, there are some strategies that can lead to lower costs:
- Encourage those 65 and older to enroll in Medicare. By having qualified workers secure Medicare coverage, it will lower the average age of your group.
- Increase deductibles. To lower your premiums, shifting more costs to employees by raising deductibles can lower the employer portion of health insurance costs.
What Percentage Of Health Insurance Do Employers Typically Pay
Most employees who are covered through employer-sponsored plan make some kind of contribution to the cost of their monthly premiums. Employees contributed an average of $104 per month to their employer-sponsored insurance in 2019, according to the Kaiser Family Foundation.
Employees at small businesses typically contribute a higher percentage of the premium for family coverage than employees at larger companies. And on average, employees who work for companies with a larger amount of lower-wage workers contribute more towards their monthly premiums for both single coverage and family coverage than employees do at companies with fewer low-wage workers.
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Medical Expense Deductions For The Self
There is an exception made to the 7.5% rule for individuals who run their own businesses. Among the many other tax deductions and benefits that self-employed individuals can claim, youre allowed to deduct the entirety of your premium payments from your adjusted gross income, regardless of if you itemize your deductions. However, you may be precluded from this deduction if you are:
- Eligible to participate in another employers plan and elect not to
- Self-employed, but you have another job that offers a health plan
- Eligible to receive coverage through a spouse’s employer-sponsored plan.
There are also limitations imposed on self-employed individuals based on the amount of their business income. In any given year, a self-employed person cannot deduct more than the amount of income they generate through their business operations.
Individuals who operate more than one business can designate only one of them as the health insurance plan sponsor you cannot add up the income generated by multiple companies in order to claim the maximum deduction. In the case of self-employed persons, it may be in their best interest to choose their most profitable business as the plan sponsor in order to increase their potential amount of tax relief.
Beware Of Unlicensed Health Plans
When choosing a health plan, it is important to consider the differences between your options. Some plans provide more generous coverage, while others could leave you responsible for high medical bills. Shopping for health insurance can be overwhelming, but remember, if the plan sounds too good to be true, it probably is.
Do not buy a discount plan as an alternative to health plan coverage. Discount plans charge a monthly fee in exchange for access to health care services at a reduced fee. These plans are not insurance and do not make any payments when you need health care services. Instead, they allow you to get a discount off of some of your medical charges. Discount plans may look like a cheap health plan, but they are not health insurance and they do not meet your Massachusetts “individual mandate” requirement for health coverage. You should check with your doctor or local pharmacist to ask whether you will receive any real savings before you give your money or your personal information to anyone offering health care discounts.
Health care sharing ministry plans.
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|Beware of high pressure sales tactics that tell you a low monthly price is a limited time offer and will expire in a day or two.There is no such thing as a limited time offer or “special” in health insurance.
|Beware of companies that will not provide any written information about the health plan unless you pay first.
Remember: Stop. Call. Confirm.
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Consumer Expectations Have Evolved
We no longer accept one-size-fits-all solutions in other areas of our lives, so why should healthcare be any different? Consumer needs and perspectives on health insurance coverage vary widely across many dimensions, including generational differences.
As a father of four, including a son who has newly entered the workforce, I have seen first-hand how differently younger generations think about their insurance plan options and experiences.
Younger generations have only lived a digital age and therefore have high expectations for flexibility, convenience, and personalization. They are generally in good health, so they are far less likely to be dealing with chronic conditions, specialized physicians and treatments, or high-cost prescriptions. Many are single and have not yet started families, which simplifies their considerations when choosing coverage. Younger generations are great adopters and proficient users of technology, and are therefore likely to be more receptive to change, and are at the forefront of adopting new technologies and experiences.
Its inevitable that demands for more personalization in healthcare will reach a tipping point and employer plans will either have to evolve to deliver these experiences, or consumers may take matters into their own hands, re-evaluating where they get their healthcare coverage.
Canada Pension Plan Disability Benefits
The Canada Pension Plan provides monthly payments to people who contribute to the plan during their working years.
You may be eligible for CPP disability benefits if:
- you contributed to the CPP for a certain number of years
- you’re under 65 years old
- you have a severe and prolonged mental or physical disability
- your disability prevents you from working on a regular basis
The benefits include payments to children of a person with a disability.
Apply as early as possible if you think you’re eligible for CPP disability benefits. Quebec residents may be eligible for a similar program called the Quebec Pension Plan . It may take several months to process your application.
If you applied for CPP or QPP disability benefits and were told that you’re not eligible, you can ask to have your application reviewed or considered again.
Once you reach age 65, your CPP disability benefit will automatically change to regular CPP payments. Your regular CPP payments may be less than the CPP disability payments you got before.
If so, consider:
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What Do I Have To Do To Sign Up For Cobra Continuation Coverage What Is My Employer Required To Do
Employers must furnish a written notice of COBRA rights when the employee enrolls in the group health plan. Also, you should check your policys Summary Plan Description for a notification of your COBRA rights. You should have received the SPD shortly after enrolling in the employers group plan.
When the qualifying event occurs, for example when the employee is terminated or quits, the employer must notify the COBRA administrator within 14 days, and the administrator then has 30 days to notify the worker of their eligibility. The employee, their spouse, or dependent children then has 60 days to elect continuation coverage and send in the first payment. The 60-day clock starts ticking on either the day of the qualifying event or the date that notice of eligibility is given by the COBRA administrator to the worker, whichever is later.
Because COBRA is so complicated, many employers hire COBRA administrators to manage their employees COBRA extensions.
Beyond Your Monthly Premium: Deductible And Out
- Deductible: How much you have to spend for covered health services before your insurance company pays anything
- Copayments and coinsurance: Payments you make each time you get a medical service after reaching your deductible
- Out-of-pocket maximum: The most you have to spend for covered services in a year. After you reach this amount, the insurance company pays 100% for covered services.
Who Needs Health Insurance In Belgium
Residents in Belgium generally sign up to state-sponsored schemes for health insurance. This allows them to claim partial reimbursements of medical costs in Belgium and other European countries.
To cover their personal share of medical care , some residents also sign up for supplementary private insurance in Belgium.
Other Ways To Lower Your Tax Bill
If youre not eligible to deduct your health insurance premiumseither because you dont meet the cost threshold or because you opt to take the standard deduction when you’re filing taxesthere are other ways to reduce your overall medical expenses.
You might consider electing a high-deductible health plan as a type of insurance coverage. HDHPs typically offer lower premiums than other plans. They also offer the unique feature of enabling plan subscribers to open up a Health Savings Account , a tax-advantaged savings account. Money that is contributed to an HSA account can be used to pay for out-of-pocket healthcare expenses. Your contributions to an HSA are tax-deductible and, when used for eligible expenses, your withdrawals are tax-free, too.
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Limitations Of An Hdhp
While an HDHP can offer some tax benefits, they arent necessarily an appropriate healthcare solution for everyone. If you have a pre-existing medical condition or expect to incur significant healthcare expenses in the year ahead, you may want to select a plan that offers more comprehensive coverage.
Because of the features of an HDHP, they are typically only recommended for individuals who dont expect to need healthcare coverage except in the face of a serious health emergency. You should carefully weigh your options during the open enrollment period in order to find the plan that best meets your needs.
How Does The Health Insurance Tax Credit Work
You can get the health care tax credits in two ways:
- Advance premium tax credit uses estimates to reduce how much you spend on health insurance each month.
- Federal tax refund allows you to receive your health insurance subsidy all at once at the end of the year or to reconcile any differences with your monthly tax credits.
The two methods would qualify you for the same number of credits, but they differ in when you would receive the subsidy and eligibility requirements. Here’s how advance premium tax credits can reduce your monthly bills.
You can apply for advance premium tax credits when you apply for health insurance through the marketplace. With this program, the government sends advance payments directly to the health insurance company every month. The insurer would then credit that money toward the cost of your health insurance premiums, decreasing your out-of-pocket costs each month.
Therefore, if you expect to have low disposable income, taking the advance premium tax credit could be more beneficial if you qualify.
Percentage Of Firms Offering Health Benefits
Not only do small employers have tighter budgets to begin with, the rising cost of health insurance makes it even harder to offer a benefit.
The average premium for family coverage has increased 22% over the last five years and 55% over the last ten years, significantly more than either workers wages or inflation. This steady increase in costs can make it difficult for small employers with tight budgets to continue to offer employees with a health benefit that will provide enough value.
Other Types Of Individual Supplemental Insurance
Accident insurance is just one of several supplemental forms of health insurance meant to work alongside your major medical policy to provide additional coverage. Accident coverage is also included in a number of these other supplemental insurance products.
Critical Illness insurance may be able to provide additional benefits in the event you are diagnosed with a covered illness like cancer, stroke and heart attack. Critical illness and accident insurance are often offered together in a combined policy.
Gap health insurance can include critical illness and accident coverage that provides a fixed, lump-sum benefit that can be used any way you want to, whether to pay down your major medical deductible or for household expenses.
Hospital indemnity insurance provides fixed indemnity benefits for covered medical services associated with being hospitalized . This includes things like hospital room and board, inpatient physicians visits and inpatient surgery.
Combination Coverage Customized For You
Missing coverage for some healthcare services or have high out-of-pocket costs on your major medical plan? Increase coverage or benefits with additional health insurance products and add-ons.
Speak to a licensed agent today to learn more.
We covered the basics of accident insurance, including:
- What it is and how it works
- What it covers
- Who its for
- How to get it
If you think an accident plan may be right for you, .
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Regulatory Changes Have Opened Up New Possibilities
Weve already seen the need for more flexibility in health benefits with the introduction of the Individual Coverage Health Reimbursement Arrangement . ICHRAs are designed to allow employers of all sizes to give employees pre-tax dollars to use to buy the insurance coverage that best fits their needs on an individual basis, instead of offering group coverage under the Affordable Care Act . By making a defined contribution toward coverage, employers can control rising healthcare costs and get out from under the administrative burden of administering health benefit programs while still giving employees greater flexibility, by allowing them to choose their coverage from a much wider array of options. This is very similar to the shift we saw in retirement benefits, from pension funds to 401ks.
The factors above have all led to increased discussion around the shift away from employer-sponsored health insurance. And consumers are showing theyre ready for the change, with data revealing that 41% of consumers say they think health insurance should be decoupled from employment. As business leaders look ahead to the next couple of years, with their employees as their guide, we have an opportunity to meet the moment and reimagine what health insurance looks like.