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If you plan to offer health insurance to your employees, then you likely want to offer them a variety of options. Health maintenance organizations (HMOs) will give your employees in-network provider options, while preferred provider organizations (PPOs) will let them go out-of-network if they are willing to foot more of the bill.
This article will help you understand the most important benefits that HMOs and PPOs have to offer. You will also discover the common pitfalls that can be avoided when making your healthcare choices. Additionally, you will learn how all of this can affect your company’s bottom line.
Many employers currently provide all or part of an employee’s healthcare costs, giving the employees a measure of security and peace of mind. There are many different kinds of healthcare plans available, however, and employees should determine which plan offers the necessary benefits.
According to the Urban Institute, adults from low-income environments who have employer-sponsored insurance, but also have high health costs, spend 10 percent of their income on health costs. These costs are costs associated above and beyond the monthly insurance premiums. People who are not part of a group insurance policy, however, spend twice as much. This shows the importance of finding the right healthcare provider for an insurance policy.
Both HMOs and PPOs consist of networks of doctors, nurses, and other medical providers. The primary benefit to both of these programs is helping employees meet the financial responsibilities necessary to get adequate healthcare. While similar in theory, there are some differences found between the two kinds of healthcare providers.
One of the primary benefits found with using an HMO provider is the low cost factor. In many cases, office visits have some very attractive low co-payments, making HMO providers desirable for those employees on very limited incomes.
While HMO providers often offer lower co-payments, they also offer more restrictions. PPO providers, on the other hand, have greater flexibility in allowing a customer to choose which doctor to visit. The downside to this particular kind of provider, however, is the increased cost of co-payments.
When it comes to choosing between an HMO and a PPO, more individuals are enrolled in PPO programs. Although the actual out-of-pocket expenses might be higher than with HMOs, there is a greater flexibility found with PPO providers.
Whichever program an employee chooses, the benefit to having healthcare providers cannot be overemphasized. For most employees, the fear of facing financial hardships due to medical expenses is reduced when they have adequate healthcare assistance provided by their employers.
Providing healthcare for your employees is a good way to encourage loyalty and a way to promote trust, but some business owners make mistakes when choosing the right type of healthcare.
Not Knowing Your Options
It is all too common for a business owner to become focused on other matters while looking into healthcare options. Believe it or not, the type of healthcare that you choose affects not only you, but also all of your employees. HMOs and PPOs are not insurance plans by themselves, but managed networks that offer different layouts for receiving healthcare.
Lack of Choices in an HMO
HMOs are the cheaper alternative in network healthcare for a reason; such a network only allows visits to a select group of listed physicians. This is the HMO’s private network. Should you or an employee seek medical attention beyond the bounds of the private network, the fees will not be covered. Special permission is required for out-of-network physician visits. The limited options in an HMO can be infuriating, especially if the doctors available are found to be disagreeable.
The Primary Care Physician
HMOs require you to choose a primary care physician from within their limited private network. If you do not live within an urban area, this could severely limit you and your employees’ healthcare options. In addition to this, if you need to see a specialist of any kind, you must first visit your primary care physician. If you decide to see a specialist without your primary care physician’s approval, you will have to pay the full price of the visit. Always look into where the nearest primary care physicians are when considering enrolling your business in an HMO. If there aren’t any or only a few within a reasonable distance, then choosing that network is the wrong decision.
The High Cost of Options in a PPO
PPOs are more expensive than HMOs. Due to the less limited nature of PPOs, and the greater choice that they allow in both the type of doctors your employees visit and in picking a primary care physician, PPOs are more expensive for both the company and the employee. PPOs are usually more favorable if expense is not an issue, and most employees would welcome the selection and freedom that comes with such a network.
Consider the Prices of Medical Coverage Plans for Your Employees
If your business is in the market for a new healthcare plan for your employees, you have some options to consider. The price your company pays for the coverage, which you may pass on to your employees or pay as a benefit, depends on the type of coverage you choose, as well as the depth of coverage you choose.
Basic medical coverage is usually less expensive than a plan that includes riders for pregnancy, dental, vision, and prescriptions. Some insurance carriers allow you to choose a basic policy for all of your employees and then allow the employees to individually choose what riders, if any, they need. In this case, you can choose to pass the cost of only the riders on to your employees if you already cover the cost of the basic policy.
HMO versus PPO
Health management organization (HMO) premiums and out-of-pocket costs are usually less than a preferred provider organization (PPO) according to Consumer Reports. PPOs have deductibles and usually cost between $500 and $2,000, whereas HMOs don’t have deductibles. Co-pays are also more expensive with a PPO. While an HMO may seem like the more attractive options since it is less expensive, you have to consider the restrictions of an HMO. Generally, employees have more choices about what providers to use for care when a PPO is offered.
The lower cost of HMOs can be more attractive to employees who are on a limited budget, but the flexibility of PPOs can be more appealing to employees who have a larger healthcare budget. This is likely why more people are enrolled in PPOs than in HMOs. Additionally, your employees can have a hard time finding in-network providers offered by a PPO if they work in a smaller city.
If you choose to absorb the cost of health insurance as an employee benefit, then you may want to go with the cheaper HMO option to save the company money. However, if you pass the cost of insurance premiums on to your employees, you can give them more options without risking the company’s bottom line.
Healthcare concerns are typically a high priority for any business owner. Your small business may not possess the resources to provide healthcare for employees, but the welfare of your workers is likely paramount to your business' success. Even small business employers can make some accommodations to ensure an employee's health is not unduly jeopardized at their work site.
Safety concerns make up a large part of healthcare assurance at the workplace. All workstations should be as safe and uncluttered as possible. Dangerous locations should remain in compliance with the Occupational Safety and Health Administration's guidelines for businesses as well as any state or local requirements. You can help stop the spread of diseases and viruses by ensuring that workers have access to antibacterial soaps and hand cleansers while at the workplace.
Companies with the resources to provide healthcare may be required to do so in some states. Check with your Secretary of State for legal requirements regarding your business and other regulations in your industry. Employer-provided healthcare remains a hot topic in political circles and the legal situations regarding healthcare are constantly changing. Business.com remains a great source for the latest information on healthcare and other resources for your small business.
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