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Medical Insurance As Part Of Your Benefits Package: What, Why, And How?

In business, employee benefits are a form of compensation given to workers in addition to their regular wages or salaries. Benefits can include healthcare insurance, retirement plans, and paid vacation…

September 3, 2022

Written by Nikki Grillo

In business, employee benefits are a form of compensation given to workers in addition to their regular wages or salaries. Benefits can include healthcare insurance, retirement plans, and paid vacation days. Many employers offer health insurance as part of their benefits package because it’s an excellent way to attract and retain employees, showing that they care about their well-being.


Offering medical insurance as part of your compensation package can have a lot of benefits for your employees and your business. However, it’s no secret that healthcare is expensive. Medical expenses are the number one cause of bankruptcy in the United States, which can be a huge burden for businesses. As a result, many business owners are unsure whether they should offer their employees medical insurance, but we’re here to help clear things up.


This blog post will discuss medical insurance, why it’s so popular as an employee benefit, and some things you must consider when choosing employer-sponsored medical insurance. We’ll also provide tips to start offering your employees health benefits. Keep reading to learn more and make the best decision for your business!

What Is Medical Insurance, And How Does It Work?

Medical insurance is a type of insurance that covers the cost of medical care, which may include hospital stays, doctor’s visits, prescription drugs, and more. There are different medical insurance plans, each with its own rules and guidelines. Some are provided by employers, while others must be purchased directly from an insurance company.


Most health insurance plans have some form of copayment or deductible that the insured person has to pay before the insurance company starts paying for covered expenses. While having medical insurance doesn’t guarantee that someone will never have to spend money on their medical care, it can help to reduce the overall cost.

Understanding Medical Insurance As Part Of A Benefits Package

Employer-sponsored medical insurance is health insurance offered by an employer to their employees. In many cases, employers will subsidize a portion of the premium so that employees have to pay less out-of-pocket. This medical insurance can be offered as part of a benefits package or as a standalone benefit.


Group health insurance plans are usually less expensive than individual health insurance plans because they distribute the risk over a broader pool of people. Therefore, they’re more affordable for businesses and often offered as part of a compensation package. According to the Society for Human Resource Management, about 96% of large and 83% of small businesses provide health insurance to their employees.

How Does Employer-Sponsored Insurance Work?

Employer-sponsored medical insurance typically works by the employer paying a portion of the employee’s premium, and the employee pays the remaining through payroll deductions. In some cases, employers will also cover part of the premiums for dependents, such as spouses or children.


The amount that each person pays can vary depending on the type of plan, but it’s usually a set percentage of the total premium. For example, if an employer offers a health insurance plan with a $400 monthly premium and the employee pays 20% of the cost, the employee would pay $80 per month for health insurance.

Types Of Employer-Sponsored Medical Insurance

There are different types of employer-sponsored medical insurance plans, which we’ll discuss in more detail below.

Small-Group Insurance

Small-group insurance plans are typically available through the Affordable Care Act’s Small Business Health Options Program (SHOP). These plans are only available to businesses with 50 or fewer full-time equivalent employees. They’re affordable, provide good coverage, and offer various plan options. It’s important to note that small-group insurance plans may not cover treatment for pre-existing conditions, so you should ensure your employees know this before enrolling.

Large-Group Insurance

Businesses with more than 50 full-time equivalent employees can buy a large-group insurance plan. In some states, the minimum number goes up to 101. As mentioned, these plans are usually less expensive than small-group plans because the risk is spread over many people. An employee’s spouse or family members may also be eligible for coverage under a large-group plan.

Self-Insured Program

Large businesses with the necessary resources sometimes offer self-insured programs. In a self-insured program, the company pays for its employees’ medical claims out of its pocket. These employers may work with a third-party administrator to manage the enrollment, claims, and billing. Otherwise, they may handle everything in-house.

Benefits Of Offering Medical Insurance As Part Of A Benefits Package

For Your Employees:

Offering employer-sponsored medical insurance has plenty of crucial benefits for your employees:


  • It can help reduce healthcare costs because employees will only have to pay a portion of their premiums. In some cases, the employer may also subsidize a portion.
  • It can give your employees confidence knowing they have coverage in case of an unexpected illness or injury.
  • It can be a great incentive to stay working with an employer, as it’s one less thing to worry about when changing jobs.

For Your Business

Offering medical insurance to your employees can also be beneficial for your business:


  • It can be a great way to attract and retain good employees. In today’s competitive job market, a good salary isn’t enough for most prospective employees, so offering a comprehensive benefits package is essential.
  • It can help boost employee productivity and morale. When employees have access to quality healthcare, they’re more likely to stay healthy and motivated, improving the business’ bottom line.
  • Finally, it can help you build a good reputation with your customers, leading to more business.

Employer-Sponsored Vs. Private Medical Insurance

Below are some of the main differences between employer-sponsored medical insurance and private medical insurance:


  • Cost: Employer-sponsored medical insurance is usually less expensive than private medical insurance. In addition, employers often work with insurance companies to negotiate lower rates for their employees.


  • Coverage: Employer-sponsored medical insurance plans typically have better coverage than private plans. These plans are required to meet the government’s specific minimum standards under the Affordable Care Act (ACA).


  • Choice: With employer-sponsored medical insurance, employees can save time and hassle by not having to shop around for different plans, compare rates, and choose the best option. Employers will decide based on numerous factors, including their employees’ needs.


  • Eligibility: Employer-sponsored medical insurance plans are only available to employees and their families. On the other hand, anyone can purchase a private medical insurance plan, regardless of their employment status.

The Cost Of Employer-Sponsored Medical Insurance – Is It Worth The Investment?

The cost of employer-sponsored medical insurance varies depending on several factors, such as the business’ size, plan type, location, and the employees’ age and health status. For example, large companies with healthy employees will pay less than small businesses with older or sicker employees.


While the cost of employer-sponsored medical insurance can be high, it’s important to remember that it’s an investment in your employees’ health and well-being. When balancing the costs and benefits, most businesses find that offering medical insurance is worth the investment and a smart business decision.

Is Medical Insurance Required For Businesses?

In general, businesses with 50 or more full-time equivalent employees must offer medical insurance to their employees under the ACA. The ACA aims to provide quality, accessible health insurance for all Americans. If you don’t offer medical insurance and meet the eligibility requirements, you may be subject to fines and penalties at the end of the tax year.


Even though small businesses (under 50 employees) aren’t required to offer medical insurance, it’s still a good idea to consider it for all the reasons mentioned above. Thanks to the ACA’s SHOP program, small businesses can access quality healthcare plans at an accessible price.

Tips To Start Offering Employees Health Benefits

If you’re thinking about offering medical insurance to your employees, there are a few things you need to do to get started:


  • Communicate With Your Employees: After comparing different options and deciding on a medical plan, communicate the details to your employees. Let them know what’s covered and what’s not, and what the costs will be.


  • Make Someone Responsible For Administering The Plan: Once you’ve communicated the details to your employees, someone in your organization will need to be responsible for administering the plan. Some tasks they will need to take care of include enrolling employees, handling claims, and answering questions about the plan.


  • Review Your Plan Regularly: Review your plan regularly to ensure it’s still the best option for your business and employees. Circumstances can change over time, so keeping your plan up-to-date with the latest changes is essential. You can survey your employees to get their feedback on the plan and make changes accordingly.

Nesso Benefits – Gain A Team Of Benefits Experts

Offering medical insurance to your employees as part of a health and benefits package is a big decision, but it doesn’t have to be complicated. At Nesso Benefits, we can help you navigate the process and find the best plan for your business. We’ll take care of all the paperwork and administrative tasks so you can focus on running your business. Our goal is to find solutions that work for everyone.


As part of the Nesso Group, we’re committed to providing integrated insurance and financial solutions that protect and promote the well-being of our clients. We have what it takes to put you and your business on the right track for your future. Get in touch with us today; we look forward to helping you grow and thrive!



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